California Advances Corporate Climate Disclosure Requirements: What Companies Doing Business in California Need to Know

California continues to pioneer climate legislation, with two landmark laws set to establish new requirements for companies to publicly disclose greenhouse gas emissions and climate-related financial risks. Together, SB 253, the Climate Corporate Data Accountability Act^[1] and SB 261, the Greenhouse Gases: Climate-Related Financial Risk Act,^[2] establish comprehensive climate reporting procedures for companies that do business in California above the statutory annual revenue threshold, regardless of where the company is headquartered or conducts its primary operations.  

Background

The California Air Resources Board (CARB), the state agency responsible for climate regulation, was directed under the Global Warming Solutions Act of 2006 to reduce greenhouse gas emissions. Building on that foundation, Governor Gavin Newsom signed SB 253 and SB 261 into law in 2023. SB 253 aims to increase transparency and drive the reduction of greenhouse gas emissions through public reporting requirements. SB 261 is designed to inform investors and consumers of a company’s climate-related financial exposure and associated mitigation strategies.

Key Provisions

SB 253:

• Applies to companies “doing business in California” (entities engaging in any transaction for financial gain within the state) with annual revenue exceeding $1 billion.
• Requires public disclosure and annual reporting of Scope 1 (direct emissions), Scope 2 (indirect emissions from purchased or acquired energy) and Scope 3 (indirect upstream and downstream emissions) greenhouse gas emissions.

SB 261:

• Applies to companies “doing business in California” (as defined above) with annual revenue exceeding $500 million.
• Requires companies to produce a biennial climate-risk report on the company’s website detailing the company’s identified climate-related financial risks and mitigation efforts.

Implementation Timeline

CARB has yet to release specific regulatory guidance on compliance with SB 261 and SB 253, estimating initial rulemaking to occur in Q1 2026. CARB has announced that companies are still expected to comply with the following deadlines:

• January 1, 2026: SB 261 reporting begins. A public docket will be released on December 1, 2025, requiring all covered companies to publish their first climate-related financial risk report on their websites and submit the published link to the public docket.
• June 30, 2026: SB 253 reporting of Scope 1 and 2 emissions from fiscal year 2025 begins. Starting in 2027, companies will be required to report Scope 3 emissions.

What Companies Should Do Now

Even as the rulemaking process continues, companies subject to these laws should begin preparing to meet the reporting and verification requirements. Key steps include:

Assess applicability:

• Determine whether your company meets the $500M or $1B annual revenue thresholds, which will subject it to SB 253 and/or SB 261.
• On September 24, 2025, CARB issued guidance identifying a preliminary list of entities potentially subject to these regulations.^[3] CARB has clarified that a company’s absence from this list does not necessarily mean it is exempt from one or both laws.

Prepare for SB 253 Compliance:

• Establish or refine systems to track and measure Scope 1, Scope 2, and Scope 3 emissions to facilitate and ease future compliance efforts.
• Because Scope 3 emissions are often the largest and most difficult to measure, companies should begin mapping their value chain data and align all protocols with the Greenhouse Gas Protocol’s Scope 3 Guidance,^[4] which is the required standard that CARB will reference in its implementing regulations.
• CARB has released a reporting template^[5] for Scope 1 and Scope 2 emissions to help streamline reporting. Use of the Template is optional for the first 2026 reporting cycle.
• CARB announced that it will not enforce penalties for incomplete reporting for the 2026 reporting cycle, provided that companies make a “good faith effort.” Further, companies may use existing data already within their possession to comply with the 2026 reporting cycle.

Prepare for SB 261 Compliance:

• Begin identifying climate risks, which include potential financial losses or impacts that businesses and investors may face from the effects of climate change.
• Draft the required disclosure using the Task Force on Climate-Related Financial Disclosures framework,^[6] which requires companies to assess these risks in terms of governance, strategy, risk management, metrics and targets.
• CARB has announced that it will exercise enforcement discretion for initial reporting for the 2026 reporting cycle, focusing on a “good-faith effort” to comply for the 2026 reporting cycle. Companies may use the “best available information,” including data from FY 2023-2024 or 2024-2025 for their public report.

Monitor CARB rulemaking: Stay informed as CARB finalizes implementing regulations, which are expected to evolve rapidly throughout the year. For updates, visit the CARB Climate Disclosure page.

Looking Ahead

California’s SB 253 and SB 261 are expected to set the benchmark for corporate climate disclosures nationwide. As noted by the drafters, compliance with SB 253 and SB 261 “is by no means trivial.” With imminent deadlines for compliance approaching, companies will be required to expend substantial time and resources to collect, analyze and report the required data and information—or face increasing monetary penalties for non-compliance. Companies that take early action to align internal reporting systems with the state’s requirements will be better positioned for both state compliance and other emerging state, federal, or global standards.

Buchanan’s Environmental team is here to help you navigate compliance and reporting requirements and to advise on how these laws may affect your company. For any questions or further assistance, please contact Jennifer Oliver in our San Diego Office.