California has enacted the most far-reaching state-level climate disclosure laws in the United States. Two bills signed into law in October 2023, SB 253 and SB 261, require thousands of companies doing business in California to report greenhouse gas emissions and climate-related financial risks. With the SEC stepping back from federal climate disclosure rules in March 2025, California’s laws now set the de facto standard for corporate climate reporting in the US.
This guide breaks down what each law requires, who must comply, key deadlines, current litigation status, and practical steps for preparation.
What Are California’s Climate Disclosure Laws?
California’s Climate Accountability Package consists of two primary laws and one set of amendments:
SB 253, the Climate Corporate Data Accountability Act (CCDAA), requires large companies to report their greenhouse gas emissions annually, including Scope 1, 2, and 3 emissions. SB 261, the Climate-Related Financial Risk Act (CRFRA), requires companies to publish biennial reports on climate-related financial risks aligned with the TCFD framework. SB 219, signed in September 2024, amended both laws to adjust timelines and give the California Air Resources Board (CARB) more flexibility in implementation.
Together, these California climate disclosure laws affect an estimated 5,000+ public and private companies. Unlike federal securities regulations that apply only to publicly traded companies, California’s laws reach any entity doing business in the state above certain revenue thresholds, regardless of where it is headquartered or whether it is publicly listed.
SB 253: Climate Corporate Data Accountability Act
SB 253 creates the first mandatory greenhouse gas emissions reporting requirement at the state level in the US. The Climate Corporate Data Accountability Act requires qualifying companies to publicly disclose their annual GHG emissions following the Greenhouse Gas Protocol methodology.
Who Must Report Under SB 253?
SB 253 applies to US business entities, including partnerships, corporations, LLCs, and other forms of business, with total annual revenues exceeding $1 billion that do business in California. “Doing business” follows the California Franchise Tax Board definition and includes companies that are organized in California, have sales exceeding specific thresholds in the state, or have property or payroll in California.
This captures many large companies that are not headquartered in California but have significant operations, customers, or employees there. An estimated 5,300+ entities fall within scope.
SB 253 Reporting Timeline
CARB is developing the detailed reporting regulations, with the following key deadlines:
- 2026: First disclosure of Scope 1 and Scope 2 emissions (for calendar year 2025)
- 2027: First disclosure of Scope 3 emissions (for calendar year 2026)
- 2030: Limited assurance required for Scope 1 and 2; limited assurance for Scope 3
- 2030+: Reasonable assurance required for Scope 1 and 2 (phased in)
Penalties for non-compliance can reach $500,000 per year, though SB 219 added a safe harbor provision for Scope 3 emissions, recognizing the difficulty of supply chain data collection. Companies making good-faith efforts to report Scope 3 data will not face penalties for inaccuracies during the initial reporting periods.
SB 261: Climate-Related Financial Risk Act
SB 261 takes a different approach from SB 253. Rather than focusing on emissions data, it requires companies to assess and disclose the financial risks they face from climate change. Reports must follow the TCFD framework, covering governance, strategy, risk management, and metrics across physical and transition risks.
Who Is in Scope for SB 261?
SB 261 applies to US business entities with total annual revenues exceeding $500 million that do business in California. The lower revenue threshold means SB 261 captures a broader set of companies than SB 253. Many mid-size enterprises that fall below SB 253’s $1 billion threshold will still need to comply with SB 261’s climate risk reporting requirements.
What SB 261 Requires
Covered companies must publish a biennial report describing their climate-related financial risks and the measures they have adopted to reduce and adapt to those risks. Reports must align with the TCFD framework’s four pillars:
- Governance: How the board and management oversee climate-related risks
- Strategy: How climate risks affect business model and planning
- Risk management: Processes for identifying and managing climate risks
- Metrics and targets: Data used to assess climate risk exposure
SB 261 does not require third-party assurance, but reports must be posted on the company’s website. Penalties for non-compliance can reach $50,000 per reporting year.
SB 253 vs SB 261: Key Differences
While both laws fall under California’s Climate Accountability Package, they address different aspects of climate disclosure. The following table summarizes the key differences.
| Aspect | SB 253 (CCDAA) | SB 261 (CRFRA) |
|---|---|---|
| Focus | Greenhouse gas emissions | Climate-related financial risk |
| Revenue threshold | $1 billion+ | $500 million+ |
| Reporting frequency | Annual | Biennial |
| What’s reported | Scope 1, 2, and 3 GHG emissions | TCFD-aligned climate risk report |
| Assurance required | Yes (phased: limited then reasonable) | No |
| Maximum penalty | $500,000/year | $50,000/year |
| Methodology | GHG Protocol | TCFD four pillars |
| First reporting year | 2026 (Scope 1 & 2) | 2026 |
| Regulator | CARB | CARB |
Companies with revenues above $1 billion that do business in California will need to comply with both laws. This means preparing two distinct types of reports: emissions inventories for SB 253 and financial risk assessments for SB 261.
Are SB 253 and SB 261 Delayed?
Both laws face legal challenges, and their implementation timelines have been adjusted since the original signing.
SB 219 amendments (September 2024) pushed back the deadline for CARB to finalize regulations and gave the board more flexibility on implementation. However, the core compliance deadlines for companies remain 2026.
SB 261 injunction (November 2025): The U.S. Court of Appeals for the Ninth Circuit paused enforcement of SB 261’s first reporting deadline (originally January 1, 2026) while legal challenges proceed. The case centers on First Amendment and Commerce Clause arguments. The injunction means companies are not immediately required to file SB 261 reports, but the law has not been struck down.
SB 253 litigation is also pending, with industry groups challenging the law’s constitutionality. CARB is continuing to develop regulations despite the litigation.
Despite these legal proceedings, most compliance advisors recommend that companies prepare as though the laws will take effect. The regulatory infrastructure is being built, and companies that wait for final court rulings risk compressed preparation timelines. Building the data collection processes now, whether for GHG inventories or climate risk assessments, positions organizations to comply quickly once enforcement begins.
How to Prepare for California Climate Disclosure
Companies can take concrete steps now to prepare for compliance, regardless of the litigation outcome.
1. Determine if you are in scope. Calculate your total annual revenue and assess whether you “do business” in California under the Franchise Tax Board definition. Companies with $500M+ revenue and any California nexus should assume SB 261 applies. Those above $1B should prepare for both laws.
2. Start your GHG inventory (SB 253). Begin collecting Scope 1 and Scope 2 emissions data following the GHG Protocol. Scope 3 can follow, but start mapping your supply chain data sources early. Companies already reporting to CDP will have much of this data in place.
3. Conduct a climate risk assessment (SB 261). SB 261 requires TCFD-aligned reporting on how climate change creates financial risk for your business. This starts with understanding the physical climate hazards at your operating locations: flood risk, heat stress, wildfire exposure, and water stress across current and future time horizons. Continuuiti’s climate risk assessment provides location-level physical risk data across 12 hazards and multiple climate scenarios, formatted for TCFD reporting.
4. Align reporting with TCFD. If you already produce a TCFD report (many large companies do for investor relations or climate-related financial disclosure requirements), you are well positioned for SB 261. Review your existing report against CARB’s emerging guidance to identify gaps.
5. Engage an assurance provider (SB 253). SB 253 will require third-party assurance on emissions data. Begin conversations with assurance providers now to understand their data requirements and timelines. Assurance capacity is limited, and early engagement avoids bottlenecks.
6. Consider related frameworks. Companies preparing for California climate disclosure should also evaluate their exposure to the EU’s Corporate Sustainability Reporting Directive (CSRD) and the TNFD framework for nature-related risks. Data collected for SB 253 and SB 261 compliance can serve multiple reporting obligations.
California vs SEC Climate Disclosure Rules
The SEC finalized its own climate disclosure rule in March 2024, but the agency voted to stop defending the rule in court in March 2025. This effectively shelved the federal requirement, leaving California’s laws as the primary climate disclosure mandate for US companies.
| Aspect | California (SB 253/261) | SEC Climate Rule |
|---|---|---|
| Status | Active (litigation pending) | Abandoned by SEC (March 2025) |
| Applies to | Public and private companies | SEC registrants only |
| Scope 3 emissions | Required (SB 253) | Not required |
| Materiality threshold | No materiality qualifier | Material emissions only |
| Revenue threshold | $500M (SB 261) / $1B (SB 253) | All SEC registrants |
For companies operating nationally, California’s broader scope (private companies, Scope 3, no materiality qualifier) makes it the more demanding standard. Companies that prepare for California’s requirements will be well positioned for any future federal rules as well.
Frequently Asked Questions
What is SB 253 California?
SB 253, the Climate Corporate Data Accountability Act, is a California law requiring US companies with over $1 billion in annual revenue that do business in California to publicly disclose their greenhouse gas emissions, including Scope 1, 2, and 3. Reports must follow the GHG Protocol methodology and are overseen by the California Air Resources Board (CARB).
What is the revenue limit for SB 253?
SB 253 applies to US business entities with total annual revenues exceeding $1 billion that do business in California. This threshold covers an estimated 5,300+ companies, including both public and private entities regardless of where they are headquartered.
What is the penalty for SB 253 in California?
Penalties for non-compliance with SB 253 can reach up to $500,000 per reporting year. However, SB 219 added a safe harbor provision for Scope 3 emissions, meaning companies making good-faith efforts to report Scope 3 data will not face penalties for inaccuracies during initial reporting periods.
Is SB 261 delayed in California?
SB 261 enforcement has been paused by a Ninth Circuit Court of Appeals injunction issued in November 2025. The first reporting deadline, originally January 1, 2026, is on hold while legal challenges proceed. The law has not been struck down, and most advisors recommend companies continue preparing for compliance.
Who is in scope for SB 261?
SB 261 applies to US business entities with total annual revenues exceeding $500 million that do business in California. The lower threshold compared to SB 253 means a broader set of companies must comply. “Doing business” follows the California Franchise Tax Board definition, covering entities with sales, property, or payroll in California.
What is the threshold for SB 261?
The revenue threshold for SB 261 is $500 million in total annual revenue. Companies above this threshold that do business in California must publish biennial climate-related financial risk reports aligned with the TCFD framework. This is lower than SB 253’s $1 billion threshold.
Conclusion
California’s climate disclosure laws change how US companies report on emissions and climate risk. With the SEC stepping back, SB 253 and SB 261 set the standard. Companies above the revenue thresholds should start building their GHG inventories and conducting location-level climate risk assessments now, even while litigation plays out. The organizations that prepare early will face lower costs and shorter timelines when enforcement begins.
