Alice Roberts, Ross Beardsley
June 6, 2025
Shaping the future of climate reporting in California: SB 253 and SB 261 CARB regulatory update
On May 29, 2025, the California Air Resources Board (CARB) hosted a public workshop focused on the implementation of California’s landmark climate disclosure laws; SB 253 (the Corporate Climate Data Accountability Act) and SB 261 (the Climate-Related Financial Risk Act). More than 3,000 stakeholders across five continents joined the three-hour session, reflecting the global significance of California’s climate policy leadership.
SB 253 requires both public and private US entities that do business in California and have more than $1 billion in annual global revenue to report annually on global scope 1 and 2 Greenhouse Gas (GHG) emissions starting in 2026 (for 2025 data) and scope 3 GHG emissions beginning in 2027 (for 2026 data).
SB 261 requires both public and private US entities that do business in California and have more than $500 million in annual global revenue to report on their physical climate risks, transition risks, and opportunities biennially beginning January 1, 2026.
The two laws were later amended by SB 219, which introduced key administrative updates, including extending CARB's regulatory deadline to July 1, 2025, and adding flexibility for parent-level consolidation of emissions reporting, while leaving the core climate disclosure requirements intact.
While CARB regulations are expected to be delayed beyond the July 1, 2025 deadline, reporting timelines remain unchanged. Companies must begin collecting 2025 data and developing GHG and climate risk disclosures in preparation for compliance. CARB has indicated it will exercise enforcement discretion during the first reporting cycle for companies that make good-faith efforts to comply.
No delay in reporting obligations
The annual reporting timeline for GHG emissions disclosures remains in effect, with disclosures beginning in 2026 for 2025 data. However, the specific submission dates within each calendar year are still to be determined. Disclosures in 2026 include scope 1 and 2 GHG emissions with limited assurance. Assurance requirements for scope 1 and 2 GHG emissions increase to reasonable assurance by 2030. Scope 3 GHG emissions reporting will start in 2027, initially without an assurance requirement, with limited assurance required starting in 2030. CARB noted that specific reporting deadlines will be clarified during the rulemaking process.
Biennial disclosures of climate-related physical and transition risks are mandatory, starting January 1, 2026. CARB emphasized alignment with International Sustainability Standards Board (ISSB) standards (S1 and S2), indicating a strong preference for consistency with internationally recognized climate disclosure frameworks.
Proposed SB 253 regulations still in progress
Although CARB’s December 5, 2024 Enforcement Notice stated that all regulations would be released by July 1, 2025, the workshop clarified that this deadline will likely be missed. Still, entities meeting the proposed thresholds under either SB 253 or SB 261 are expected to collect and retain 2025 data to prepare for reporting in 2026.
Doing business in California
CARB proposes adopting a modified version of the California Revenue and Tax Code (RTC) definition provided in Section 23101, where an entity is considered to be doing business in California if it engages in transactions for profit and meets one of the following thresholds during a reporting year:
- The entity is organized or commercially domiciled in California
- Sales in California exceed $735,019 or 25% of sales in California
- Real or tangible personal property in California exceeds $73,502 or 25% of total property
- Compensation paid in California exceeds $73,502 or 25% of total compensation.
Definition of revenue
CARB proposes to define total annual revenue for the most recent fiscal year using the gross receipts definition set forth in the California Revenue and Taxation Code 25120(f)(2).
Definition of corporate relationships
CARB’s initial staff concept is to define corporate relationships using the framework from California’s Cap-and-Trade program. Under this approach, a corporate association is established when one entity owns or controls at least 50% of another. However, CARB is still seeking feedback on alternative definitions for parent-subsidiary relationships.
Given that reporting timelines remain in effect despite regulatory delays, companies should act now to prepare for compliance. Engaging directly with CARB’s rulemaking process is strongly encouraged. This includes attending future workshops, monitoring the release of draft regulations, and submitting comments, particularly on key definitions such as corporate relationships, revenue, and the criteria for doing business in California.
At the same time, companies should begin “no-regrets” preparation by collecting and retaining 2025 GHG and climate risk data, aligning with established voluntary frameworks like the GHG Protocol, the Task Force on Climate-related Financial Disclosures (TCFD), and the International Sustainability Standards Board (ISSB) standards. Doing so will not only position companies to meet upcoming reporting requirements but also demonstrate good-faith compliance, in line with CARB’s stated enforcement discretion during the first cycle.
Companies should also assess whether they are subject to these laws by reviewing their California nexus using CARB’s proposed thresholds for sales, property, and compensation. In addition, evaluating how to structure disclosures, whether on a consolidated or subsidiary basis, will be critical, especially given the evolving definition of corporate relationships under consideration.
If your organization is impacted or uncertain about its obligations, we’d be happy to support you in navigating the upcoming requirements and developing a strategy for early compliance. Please reach out to discuss how we can help.
Workshop Materials: SB 253 SB 261 Public Workshop
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Alice Roberts
Senior Managing Consultant
+1 415 530 8564
Ross Beardsley
Senior Managing Consultant
+1 415 899 0753