In 2023, California’s legislature passed two landmark disclosure laws, SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Disclosure), to require large companies that “do business in California” to publish standardized information on greenhouse-gas (GHG) emissions and climate-related financial risk. The California Air Resources Board (CARB) is responsible for developing and implementing regulations, establishing a public digital platform, and overseeing the enforcement of these programs.
At the August 21, 2025, CARB workshop, the agency clarified a few key elements of SB 253 and SB 261. Subsequently, CARB collected public comments and published a draft guidance and checklist for SB 261, including clarifications on definitions and the agency’s minimum expectations. However, uncertainties remain regarding the requirements, as outlined below.
SB 253 – Climate Corporate Data Accountability Act
Recent Clarifications
CARB confirmed that consolidated parent-level reporting is allowed, an important clarification from SB 219. CARB has also signaled its intent to build upon existing marketplace assurance frameworks rather than creating a unique CARB-only accreditation, though more details about assurance provider qualifications will be issued later.
Remaining Uncertainties
Uncertainties remain, particularly around assurance timelines and methodologies. While the legislation requires limited assurance for Scope 1 and 2 emissions initially, escalating to reasonable assurance later, the specifics of verification deadlines relative to reporting dates are still under discussion. There is also ongoing debate over the treatment of Scope 3 emissions, such as materiality thresholds, data quality expectations, and whether flexibility will be granted for companies with complex value chains. Additionally, business entities with layered ownership, such as joint ventures, partnerships, or holding structures, face uncertainty in determining whether they or their parent must report, especially when multiple entities “do business in California” through intertwined operations.
Public Concerns
Public comments have flagged several concerns. Businesses argue that the proposed timelines are too aggressive, particularly for Scope 3 emissions reporting. Others caution duplicative efforts if companies are already reporting under other regimes like the EU’s Corporate Sustainability Reporting Directive (CSRD) or other regulatory regimes. Calls for global alignment and reduced compliance burdens are common themes.
SB 261 – Climate-Related Financial Risk Disclosure
Recent Clarifications
CARB has clarified that reports can be prepared at the consolidated parent level, similar to SB 253, and that companies may leverage existing disclosures made for other jurisdictions, provided they meet California’s requirements. CARB states that covered entities should use the most recent/best available data for the first report, either based on Calendar Year or Fiscal Year. CARB allows the use of qualitative assessments for climate scenarios and does not require GHG emissions disclosure in the first report under SB 261.
Remaining Uncertainties
The level of prescriptiveness CARB expects for this report remains uncertain. For instance, while TCFD alignment is expected, the exact reporting format and interaction with SEC or international requirements are not fully defined as yet. While the CARB draft SB 261 checklist provides guidance on a qualitative, scenario-based assessment as a starting point for the first report, some commenters have raised questions about whether climate risk disclosures should remain high-level or be supported by detailed quantitative scenario analysis in subsequent years.
Public Concerns
Public comments highlight concerns about overlap with global reporting requirements and the potential legal risks of disclosing forward-looking information. Commenters also urge CARB to refine definitions of “doing business in California” and “revenue” to avoid overreach or confusion.
A summary of key requirements, including recent updates and clarifications, is provided in the table below.
Updated Summary: SB 253 and SB 261 (with Recent CARB Clarifications)
| Feature | SB 253 – Emissions Reporting | SB 261 – Climate-Related Financial Risk Reporting |
| Focus | Quantitative emissions disclosure: Scope 1, Scope 2, and Scope 3 GHG emissions | Qualitative financial risk disclosure: Climate-related financial risks and mitigation strategies |
| Who Must Report | U.S. business entities with ≥ $1 billion in revenue and doing business in California. CARB continues to request stakeholder input on definitions of “doing business” and “revenue.” | U.S. business entities with ≥ $500 million in revenue and doing business in California. CARB continues to request stakeholder input on precise definitions of “doing business” and “revenue.” |
| Reporting Frequency / Timing | Annual reports, Scope 1 & 2 emissions from prior fiscal year (e.g., FY 2025) proposed to be reported by June 30, 2026. Scope 3 emissions from prior fiscal year (e.g., FY 2026) to be reported in 2027. Exact due date for Scope 3 is to be determined. | Biennial reports, first due January 1, 2026. *CARB will open a public docket (December 1, 2025-July 1, 2026), where entities must post links to their reports. |
| Publication Platform | Reports posted on a CARB-managed platform | Reports are to be posted on the respective company website and the public docket, along with a link |
| Data Year Base (Calendar Year vs Fiscal year) | Fiscal year basis is confirmed: reporting will use “prior fiscal year” data. | The statute is silent on the distinction between fiscal and calendar years; CARB allows entities to use the most recent or best available data in the first report, regardless of whether it is for a fiscal or calendar year. |
| Fees (Estimated) | Approximately $3,106 Per Reporting Entity | Approximately $1,403 Per Covered Entity |
| Framework / Standard | GHG Protocol (or CARB-approved equivalent); assurance required | TCFD framework or equivalent (e.g., ISSB IFRS S2) |
| Assurance / Verification | Independent third-party assurance: - Scopes 1 & 2 – Limited assurance, starting 2026 through 2029
- Scopes 1 & 2 – Reasonable assurance, starting 2030 and after
- Scope 3 – Limited assurance, starting 2030 and after
CARB is not limiting assurance to its own accreditation programs; instead, it plans to leverage existing marketplace mechanisms for qualified assurance providers. Further details on specific provider qualifications are to be provided
by CARB. | No third-party assurance required under SB 261 |
| Disclosure / Public Access | Consolidated (parent-level) reporting is allowed. Reporting Entities to report to CARB using CARB reporting templates. CARB proposes to release draft report templates for Scope 1 and 2 emissions by Q4 2025. | Consolidated (parent-level) reporting is allowed. Reports must be published on the company’s website. Entities must also submit a link to their report to CARB via the public docket. (Docket open period: Dec. 1, 2025, through Jul. 1, 2026) |
| Penalties / Enforcement | CARB clarified in its Enforcement Notice that for the first SB 253 reporting cycle, entities acting in good faith and retaining relevant data will not be penalized for incomplete reporting. Penalties and enforcement approaches are still
under development for the years to come. | CARB also expects good-faith disclosure efforts. Penalties are a possibility for non-compliance with disclosure obligations. Enforcement standards for “inadequate” reports are still under development. |
For more information or support with your emissions reporting, reach out to our Principal Consultant Charles C. Lee, PhD, CM and/or Director, Sustainability Divya Agarwal.
