Navigating California's Climate Disclosure Laws: Your Complete Guide To SB 253 And SB 261

California's Climate Accountability Package, consisting of SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act), marks a significant development in climate-related corporate reporting. These laws set forth disclosure obligations on thousands of companies "doing business in California," with implications that extend nationwide. California Air Resources Board ("CARB"), the state agency responsible for climate programs and air quality regulation, administers these two laws. This article consolidates the latest compliance developments and litigation updates into a single resource for businesses seeking clarity.

CARB has twice delayed the release of draft regulations intended to provide guidance on SB 253 and SB 261 —first in July 2025 and again in October 2025. The latest anticipated release date is Q1 2026. Despite these delays, CARB has maintained SB 261's compliance deadline and extended SB 253's deadline by two months:

• SB 261's compliance deadline is currently paused (subject to a temporary injunction in the United States Court of Appeals for the Ninth Circuit and CARB's December 1, 2025 Enforcement Advisory, confirming a pause in its implementation)
• SB 253's compliance deadline is August 10, 2026 (extended from its initial date of June 30, 2026)

Brief Overview of SB 261 (Health and Safety Code, § 38533 et seq.)

SB 261 requires biennial public reports beginning January 1, 2026 on climate-related financial risks and mitigation strategies. SB 261 applies to any "covered entity" that:

1. Does business in California, and
2. Has more than $500 million in annual total global revenue (as determined in the previous fiscal year).

This biennial report must contain minimum disclosure requirements that align with existing voluntary reporting frameworks. In its November 18, 2025 workshop, CARB stated the following frameworks are acceptable:

• The Task Force on Climate-Related Financial Disclosure's 2017 Recommendations (or subsequent iterations);
• The International Sustainability Standards Board's IFRS S2 framework.
• Another framework required by "a government (US or other) or exchange."
  • This provision allows companies who may be subject to international disclosure requirements, such as the European Union's Corporate Sustainability Reporting Directive (CSRD), to minimize duplicative efforts.

Additionally, CARB has provided a Climate Related Financial Risk Report Checklist to assist companies in the development of an SB 261 report. Companies subject to SB 261 must publish the report on their website on January 1, 2026 and file a link to their final report on a public docket by July 1, 2026. CARB intends to open this public docket on December 1, 2025.

Brief Overview of SB 253 (Health and Safety Code, § 38532 et seq.)

SB 253 requires public disclosure of an annual report of Scope 1 and Scope 2 greenhouse gas ("GHG") emissions by August 10, 2026 and, additionally, Scope 3 GHG emissions by 2027 (the exact date is not yet specified). SB 253 applies to any "covered entity" that:

1. Does business in California, and
2. Has more than $1 billion in annual total global revenue.

• Entities whose fiscal year ends between January 1 and February 1, 2026 will report data from the fiscal year ending in 2026, while those with fiscal years ending between February 2 and December 31, 2026 will report data from the fiscal year ending in 2025.

Latest CARB Guidance

CARB updated its resource documents on November 17, 2025, including FAQs Regarding California Climate Disclosure Requirements and the Climate Related Financial Risk Report Checklist mentioned above. In October 2025, CARB published a draft Scope 1 and 2 GHG Reporting Template. CARB's third workshop on November 18, 2025 clarified key points:

SB 253 Reporting

Specific to SB 253, CARB clarified that the first reporting deadline for Scope 1 and Scope 2 emissions is now August 10, 2026. Entities whose fiscal year ends between January 1 and February 1, 2026 will report data from the fiscal year ending in 2026, while those with fiscal years ending between February 2 and December 31, 2026 will report data from the fiscal year ending in 2025. CARB also reiterated that entities that were not collecting data or planning to collect data at the time CARB issued its Enforcement Notice on December 5, 2024 are not expected to submit Scope 1 and Scope 2 data in 2026. If applicable, these companies should submit a statement on company letterhead to CARB stating that they did not submit a report and indicating that, in accordance with the Enforcement Notice, the company was not collecting data or planning to collect data at the time the Notice was issued.

CARB's draft reporting template for Scope 1 and Scope 2 emissions is not mandatory for 2026 submissions —companies may prepare their own annual reports. CARB recommended limited assurance from an independent third-party verifier for annual reports from 2026 through 2029, with reasonable assurance beginning in 2030, which will be addressed in subsequent rulemaking.

Applicability Criteria for Both Laws

CARB also clarified several points applicable to both SB 253 and SB 261.

1. "Doing Business in California"

The term "doing business in California" is defined under Revenue and Tax Code section 23101(b)(1)-(2) as actively engaging in any transaction for financial or pecuniary gain. A taxpayer is considered to be doing business in California if it is organized or commercially domiciled in the state, or if its California sales exceed the lesser of $500,000 or 25% of total sales. Sales include those made by agents or independent contractors and are determined using California's apportionment rules under Revenue and Tax Code sections 25135 and 25136.

2. Parent-Subsidiary Relationships

CARB clarified that parent-subsidiary relationships do not automatically determine applicability, and each entity must assess its own compliance obligations. While parent companies may file consolidated reports on behalf of their subsidiaries, inclusion criteria, such as revenue and "doing business in California," should be evaluated on an entity-specific basis. CARB's definition of "subsidiary" aligns with the state's Cap-and-Investment Program and refers to entities under direct corporate association as defined in Title 17, California Code of Regulations section 95833. This "direct corporate association" applies only to U.S. entities fall within the scope of these laws, though foreign parent companies may report on behalf of their U.S. subsidiaries.

Revenue thresholds are based on California Revenue and Tax Code section 25120(f)(2), which defines gross receipts as the total amounts realized from sales, services, or use of property or capital, without deductions for costs or basis. For SB 261, the threshold is $500 million in global revenue; for SB 253, it is $1 billion. These thresholds are verified against California Franchise Tax Board filings and determined by the lesser of the entity's two previous fiscal years of revenue.

3. Annual Fees

CARB is proposing a "flat" fee structure to cover SB 253 and SB 261 implementation costs and intends to use the following calculation to determine this flat fee: (Annual Program Cost / Number of Regulated Entities). As discussed above, each covered subsidiary will be assessed its own fee, although a parent company may pay these fees through one combined payment.

CARB is actively determining the approximate number of "covered entities" that are subject to SB 253 and SB 261 and has proposed utilizing California Franchise Tax Board (FTB) data to determine the scope of coverage for entities registered with the FTB and reviewing California Secretary of State databases to ascertain other entities that may be covered under these laws.

Annual fees will be assessed on September 10, 2026. Entities with revenue between $500 million and $1 billion pay only the SB 261 fee, while those with revenue over $1 billion pay both the SB 253 and the SB 261 fees.

Exclusions and Proposed Exemptions

CARB has outlined several exclusions to the requirements under Health and Safety Code sections 38532 and 38533. Section 38533 excludes business entities regulated by the California Department of Insurance or engaged in the business of insurance in any state, and CARB staff has proposed extending this exclusion to section 38532. CARB also proposes that the disclosure requirements will not apply to federal, state, and local government entities, companies majority-owned by government entities (greater than 50%), nonprofit or charitable organizations that are tax-exempt under the Internal Revenue Code, entities whose only business in California is the presence of teleworking employees, and businesses whose sole activity in California consists of wholesale electricity transactions.

Legal Challenges

Ninth Circuit Temporarily Enjoins SB 261 Following Appeal from the Central District of California

In January 2024, the U.S. Chamber of Commerce and other business organizations ("Plaintiffs") filed a lawsuit challenging SB 253 and SB 261 as unconstitutional "compelled speech" under the First Amendment in the Central District of California.¹ The Court denied the plaintiffs' request for a preliminary injunction while the case is pending.² Plaintiffs appealed this denial to the Ninth Circuit and separately sought an injunction pending appeal.³

On November 18, 2025, the Ninth Circuit granted an injunction only as to SB 261 but not SB 253. Although it did not provide reasoning for this selective injunction, it is likely due to SB 261's imminent January 1, 2026 reporting deadline. As a result, SB 253 remains enforceable. Oral arguments on the appeal of the Central District's denial of the preliminary injunction are scheduled for January 9, 2026. On December 1, 2025, CARB issued an Enforcement Advisory, providing guidance that it will not be enforcing SB 261 pending a decision on the injunction. Rather, CARB will provide further information, including an alternate date for reporting after the appeal is resolved.

Following the Ninth Circuit ruling, the plaintiffs in the Central District of California action withdrew a then-pending petition to the Supreme Court following the Ninth Circuit's injunction.⁴

Parallel Litigation in the Eastern District of California

In addition to the Ninth Circuit case, a similar lawsuit was filed on October 24, 2025 in the Eastern District of California, alleging similar First Amendment challenges.⁵ The Eastern District plaintiff withdrew its request for a preliminary injunction on November 19 following the Ninth Circuit's issuance of the injunction against SB 261. The Court ordered the parties to meet and confer within seven days of any decision by the Ninth Circuit that dissolves the temporary injunction in the Randolph matter.

These developments underscore the uncertainty surrounding SB 261, although SB 253's August 2026 deadline remains firm at this time.

Takeaways

Ultimately, to determine the applicability of SB 253 and SB 261, companies should analyze a given entity's 1.) global annual revenues and 2.) the extent to which that entity "does business in California" against the relevant definitions provided by CARB that were most recently clarified in its November 18, 2025 workshop slides and video presentation. Companies should conduct a thorough assessment to ensure applicability and, if necessary, prepare for compliance with these laws.

While SB 261 is temporarily enjoined, covered entities should monitor litigation closely and continue finalizing their climate-related financial risk reports, as a new compliance deadline will likely be set once the current Ninth Circuit injunction is lifted following the Court's decision. For SB 253, companies should begin preparing for compliance now, given the complexity of documenting Scope 1 and Scope 2 emissions and the lack of any injunction or delay that could affect the anticipated August 10, 2026 deadline. Companies can leverage CARB's resources, including draft templates and workshop materials, to help streamline reporting efforts.

Footnotes

1 See Chamber of Com. of the U.S.A. et al v. Cal. Air Res. Bd. et al., No. 2:24-cv-00801-ODW-PVC (C.D. Cal.).

2 See Chamber of Com. of the U.S.A. et al v. Cal. Air Res. Bd. et al., No. 2:24-cv-00801-ODW-PVC, 2025 WL 2337209 (Aug. 13, 2025).

3 See Chamber of Com. of the U.S.A. et al. v. Randolph et al., No. 25-5327 (9th Cir.).

4 See Chamber of Com. of the U.S.A. et al v. Sanchez, et al., No. 25A561, 2025 WL 3235018 (Nov. 19, 2025).

5 See Exxon Mobil Corp. v. Sanchez, No. 2:25-cv-03104 (E.D. Cal., filed Oct. 24, 2025).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.