California’s Climate Disclosure Laws Continue to Roll Forward

In 2023, California passed two landmark laws—SB 253, the Climate Corporate Data Accountability Act; and SB 261, the Climate-Related Financial Risk Act—that will require large public and privately-held entities doing business in California to comply with sweeping disclosure requirements regarding their direct and indirect greenhouse gas emissions and their climate-related financial risks. California subsequently passed SB 219, which updated certain deadlines and requirements of the laws (collectively, the “Climate Disclosure Laws”).

Federal Court Refuses to Halt Implementation of California’s Climate Disclosure Laws

The U.S. Chamber of Commerce, the California Chamber of Commerce, and other business trade associations sued CARB last year alleging that the laws unlawfully compel speech in violation of companies’ First Amendment rights. On August 13, 2025, Judge Otis Wright II of the U.S. District Court for the Central District of California declined to grant a preliminary injunction which would have suspended the requirement to comply with the laws pending the outcome of the litigation.^[2]As such, unless there is a successful appeal of the decision, in-scope entities should prepare to comply with the reporting deadlines that start to kick in as soon as this upcoming January.

CARB Is Still Crafting Regulations to Implement the Climate Disclosure Laws, Offering Additional Details in a Recent Hearing

With reporting deadlines under the Climate Disclosure Laws fast approaching, companies are still waiting for compliance guidance and regulations from CARB, which was directed to publish regulations by July 2025. CARB hasn’t met this statutory deadline; in July, CARB stated it “is committed to developing a regulation by the end of the year.” The regulations are expected to provide guidance on compliance, future deadlines, and enforcement standards.

On August 21, 2025, CARB held a virtual public workshop to provide additional guidance regarding the Climate Disclosure Laws. Of note, CARB outlined its regulatory process, including providing expected timelines. It also offered clarifications with respect to certain of the Climate Disclosure Laws’ definitions and how entities can disclose climate-related risks.

Importantly, for the first round of reporting due January 1, 2026 for entities covered by SB 261, CARB said at the workshop that it will accept “good faith efforts.” In other words, CARB will accept reports that companies prepared to the best of their knowledge and from the use of the best available data. With respect to SB 253 reports, which CARB proposes to be due on June 30, 2026, CARB expects reporting entities to obtain assurance (or verification) from an independent third-party provider for their Scope 1 and 2 emissions at a “limited-assurance” level.

California’s SB 253 (as amended by SB 219)^[3]

SB 253 applies to private and public U.S. companies doing business in California and generating over $1 billion in annual revenues.

Reporting Deadlines

• Reporting of Scope 1 and 2 (direct GHG emissions and GHG emissions from purchased energy) is proposed to be due June 30, 2026 for 2025 data.
  • • • CARB has requested and is welcoming public feedback on the proposed date. For example, one commenter during the Q&A suggested aligning the SB 253 deadline with the existing mandatory Greenhouse Gas Reporting Regulation (MRR) deadline pursuant to 17 C.C.R. §§ 95100-95163, given that some companies have facilities reporting under that program, and the verification of MRR data is not due until August 2025.
• Reporting for Scope 3 (indirect supply chain emissions) begins in 2027 for 2026 data.
• Reporting is due annually.

Reporting Standard

• Reporting is required to be in conformance with the Greenhouse Gas Protocol standards and related guidance, which includes information on setting operational and organizational boundaries, identifying and calculating emissions, and accounting for reductions.
  • • • CARB plans to post draft reporting templates for Scope 1 and 2 reporting by the end of September 2025 for public feedback. CARB welcomes input as to what data fields should be included for the initial round of Scope 1 and 2 emissions reporting.
      • CARB has also requested feedback on the scope of reporting for Scope 1, 2, and 3 emissions, in that reporting entities should comment on what reporting would be feasible, e.g., data of emissions only in the state of California or data of emissions across its entire U.S. operations.
• CARB will also require a verification process like MRR. CARB is considering requirements for assurance providers and welcomes feedback on how CARB can leverage its existing MRR verification program for the SB 253 assurance program.
  • • • Scope 1 and Scope 2 reporting require limited assurance in 2026 and move to reasonable assurance in 2030. Scope 3 reporting requires limited assurance in 2030.

Enforcement

• Penalties of up to $500,000 per year.
• In CARB’s December 5, 2024 Enforcement Notice, CARB indicated with respect to SB 253, it “will exercise enforcement discretion for the first reporting cycle, on the condition that entities demonstrate good faith efforts to comply with the requirements of the law.”
• There is a safe harbor for Scope 3 emissions disclosures, if disclosures are made in good faith with reasonable basis.

California’s SB 261 (as amended by SB 219)

SB 261 applies to private and public U.S. companies doing business in California generating over $500 million in annual revenues.

Reporting Deadline

• SB 261 climate-related financial risk reports must be posted to the reporting entity’s website, with a corresponding link to that website posted to a public docket CARB will be opening, by January 1, 2026, containing most recent available data, and every two years thereafter.

Reporting Standard

• Report climate-related financial risk in accordance with the recommended framework and disclosures contained in the Task Force on Climate-related Financial Disclosures (TCFD), International Financial Reporting Standards (IFRS), or a report developed in accordance with any regulated exchange, national government, or other governmental entity.
• CARB outlined its draft guidance for implementation, which included a checklist of what each financial risk report should contain, such as a statement on the reporting framework being used, an explanation of what recommendations and disclosures the company has or has not complied with or included in its report, and any plans for future disclosures.  

Enforcement

• Penalties of up to $50,000 per year.
• CARB stated it will accept “good faith efforts” for the first round of reporting under SB 261.

Other Key Considerations for SB 253/261

Exempted Entities

• CARB has proposed exempting the following types of entities from reporting pursuant to Climate Disclosure Laws: non-profits and government entities, companies whose only business in California is the presence of teleworking employees, and California Independent System Operators (CAISO) or business entities whose only activity within California consists of wholesale electricity transactions that occur in interstate commerce.
• CARB is soliciting additional feedback on exempted entities and asks entities that believe they are exempt to provide a detailed rationale of why they should receive an exemption in their written comments.

Scoping Definitions

• CARB is soliciting feedback from the public on its alternative definition of revenue, which is “the total global amount of money or sales a company receives from its primary business activities such as selling products or providing services,” as opposed to the definition already found in the California Revenue and Taxation Code (RTC) Section 25120(f)(2).
• The same goes for the term “doing business in California,” to which CARB staff had previously proposed relying on the California RTC definition.
  • • • CARB has now proposed an alternative definition, which is a partial definition pulled from California RTC, covering companies organized or domiciled in the state and with sales in the state above approximately $735,000.
      • The staff is exploring the use of existing databases to determine which entities are “doing business in California,” and plans to post a list of entity names that they believe are subject to the regulations in the coming weeks. CARB, however, indicated that any company subject to the regulation will be responsible for compliance, even if it is not initially included on the published list.
      • CARB is soliciting feedback on the “doing business in California” definition and the different scenarios that may apply companies.
• With respect to covered entities, CARB’s preliminary estimate indicates that around 4200 entities are subject to SB 261 and around 2600 entities are subject to SB 253.

Parent/Subsidiary Relationship

• CARB is exploring a process where companies may choose to self-report on parent-subsidiary relationships to avoid reporting for multiple entities under the same parent company.
• Many commenters questioned the practical application of this, and how parents and subsidiaries will be required to report, so this issue is likely to be the subject of many written comments as well.

Next Steps

The requirements and guidance for implementation of California’s Climate Disclosure Laws will continue to evolve in the coming months. Companies tracking these laws should also be aware of significant recent changes to the climate reporting landscape in Europe which are summarized in our recent client alert: Significant Changes Are in the Works for EU Environmental, Social, and Governance (ESG) Laws | Crowell & Moring LLP. Crowell & Moring will continue to track these changes, particularly given ongoing comment and rulemaking processes and proposed future workshops.