US: California’s climate disclosure laws – what businesses need to know
State-level mandatory climate reporting creates compliance obligations for public and private companies doing business in California
August 28, 2026
Why should I read this?
In October 2023, California enacted SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-Related Financial Risk Act), which were amended by SB 219 in 2024. Together, these laws require large public and private companies doing business in California to report greenhouse gas emissions and climate-related financial risks.
However, significant uncertainty remains. Enforcement of SB 261 is currently stayed by a Ninth Circuit injunction, while SB 253 has not been stayed and its first reporting deadline is approaching. CARB's implementing regulations are also still being finalized, meaning businesses should approach compliance planning with potential risks in mind.
The laws apply to US entities doing business in California. SB 253 covers entities with annual revenue exceeding $1 billion, while SB 261 applies to those with annual revenue over $500 million. Companies headquartered outside California, including those with no physical office in the state, may still be covered depending on the evolving definition of "doing business in California".
What are some key requirements?
- Scope 1 and 2 emissions reporting is approaching. In the modified initial regulations released on July 27, 2026, CARB confirmed that the first SB 253 Scope 1 and Scope 2 report for the 2025 reporting year is due on November 10, 2026.
- Scope 3 is coming and will be burdensome. Scope 3 emissions, which cover indirect emissions across a company’s value chain, including those from suppliers, customers and business travel, must be reported from the 2027 reporting year. This is likely to be the most challenging aspect of SB 253. Scope 3 reporting often depends on estimates and information provided by third parties, which companies do not control. This raises concerns about accuracy, legal liability and the practicalities of obtaining meaningful assurance.
- SB 261 is currently subject to a court-ordered enforcement suspension. On November 18, 2025, the Ninth Circuit Court of Appeals issued a temporary injunction halting enforcement of SB 261 while an appeal is pending. The case challenges both SB 253 and SB 261 on First Amendment compelled speech grounds and federal Clean Air Act pre-emption grounds. If successful, these arguments could limit or invalidate parts of California's climate disclosure framework. CARB has confirmed that it will not enforce SB 261 unless and until the injunction is lifted. As a result, the outcome of the litigation remains an important factor for businesses planning their compliance approach.
- CARB rulemaking is moving but remains incomplete. CARB is still developing detailed reporting methodologies, third-party verification requirements and its digital reporting platform. On July 27, 2026, CARB released modifications to its initial regulations and opened a public comment period that closed on August 11, 2026. CARB expects to issue supplemental 2026 reporting guidance by September 1, 2026, including a voluntary online reporting platform and instructional materials. The July 21 workshop previewed requirements effective from 2027, but those concepts are not yet final.
- Penalties are significant. SB 253 penalties can reach $500,000 per reporting year. SB 261 penalties can reach up to $50,000. Regulated entities will also pay annual fees.
Why does this matter for businesses?
These laws extend mandatory climate reporting obligations to private companies, unlike the stalled SEC rule. As a result, companies that have not previously reported emissions in the US may now face reporting requirements, even if they have only a limited connection to California.
Because coverage depends on whether a company is considered to be doing business in California, businesses with even a limited presence in the state should assess their exposure. While the ongoing litigation and incomplete rulemaking create uncertainty, they do not remove SB 253's near-term compliance obligations.
Boards and general counsel should assess whether they meet the revenue and "doing business" thresholds. If SB 253 is likely to apply, companies should begin organizing their Scope 1 and 2 emissions data now. They should also monitor CARB's expected September 1 guidance and work towards the November 10 reporting deadline.
Looking ahead, businesses should prepare for Scope 3 reporting, review any gaps in their ESG reporting processes and consider the implications of CSRD, ISSB and any future SEC requirements. They should also make sure that management understands the likely timelines and resources needed for compliance.
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