Effortlessly meet California’s SB 253 and SB 261 regulations

Table of contents

SB 253 and SB 261 overview

California’s landmark climate transparency package — SB 253 (“Climate Corporate Data Accountability Act”) and SB 261 (“Climate-Related Financial Risk Act”) — imposes new state-level greenhouse gas (GHG) and climate-risk reporting obligations on companies doing business in California. 

Enacted in October 2023 and amended in 2024 by SB 219, these laws remain under active CARB rulemaking. Deadlines for disclosures begin in 2026. Penalties may reach up to $500,000 per year for SB 253 violations and $50,000 per year for SB 261 violations.

Who’s affected

Revenue thresholds and entity type

  • Under SB 253, a “reporting entity” is a U.S.-based company (public or private) that does business in California and has total annual revenues > $1 billion.
  • Under existing statutory language, companies “doing business in California” are entities that have sales, property, or payroll in California, or other indicia of in-state operations (akin to state tax nexus tests).
  • Under SB 261, the threshold is annual revenues > $500 million.
  • The business must be formed under California law, another U.S. state, the District of Columbia, or under a U.S. federal statute.
  • SB 219 amended both statutes to permit subsidiaries to rely on the parent’s consolidated report (i.e. no duplicate reporting), simplifying compliance.

Parent / subsidiary reporting rules

SB 219 allows reporting at the parent company level. Subsidiaries that meet thresholds may not file separately if the parent covers their emissions and risk. That said, data collection structures must ensure that emissions and financial risk data from subsidiaries feed into the consolidated report.Companies should map internal group structure, decide joint vs. parent-level aggregation, and monitor CARB guidance for limits or carve-outs.

California climate disclosure requirements

Below is a side-by-side breakdown of SB 253 vs. SB 261 obligations.

Item SB 253: Climate Corporate Data Accountability Act SB 261: Climate-Related Financial Risk Disclosure
Purpose Mandatory public GHG emissions disclosure Biennial public climate financial risk reporting
Threshold > $1 billion annual revenue + doing business in California > $500 million annual revenue + doing business in California
Emission Scopes Scopes 1, 2, and 3 N/A (focus is financial/climate risk)
First reporting year Scope 1 & 2 in 2026 (covering prior fiscal year) First report due January 1, 2026 (covering 2025)
Scope 3 phased Post-2027, as phased by CARB N/A
Assurance
  • Start with limited third-party assurance for scopes 1 and 2 (2026)
  • Transition to reasonable assurance for scopes 1 and 2 by 2030
  • For scope 3, SB 253 permits CARB to require limited assurance starting January 1, 2027, but does not currently impose penalties for misstatements made in good faith between 2027 and 2030.
 SB 261 does not require third-party verification.
Public disclosure Emissions disclosures must be published publicly (e.g. on website) and a public link submitted to CARB or made available via CARB’s digital platform Finance risk report must be published on the entity’s website and submitted (or linked) to CARB’s docket.

Timeline and deadlines

Below is a consolidated timeline from 2023 to 2030 (and beyond) for SB 253, SB 261, and SB 219.

Time Event
January 2023 SB 253 and SB 261 introduced in California Legislature
October 2023 Governor Newsom signs SB 253 and SB 261 into law
January 1, 2025 Original deadline for CARB to adopt implementing regulations for SB 253 (not met).
August 31, 2024 Legislature passes SB 219, amending SB 253 & SB 261 and extending CARB’s regulation deadline to July 1, 2025
December 2024 CARB issues Enforcement Notice, stating that for first SB 253 reporting cycle in 2026, no penalties will be imposed for incomplete reporting if the entity demonstrates a “good faith” effort and retains emissions data
July 1, 2025 Latest date by which CARB must adopt regulations under SB 219.
October 10, 2025 CARB posts S1 and S2 reporting draft template.
January 1, 2026 First SB 261 climate risk reports due (covering 2025). Entities must publish report on their website
June 30, 2026 Scope 3 disclosure begins under SB 253 (CARB to determine schedule). Limited assurance for scope 3 may be required.
2027 Scope 3 disclosure begins under SB 253 (CARB to determine schedule). Limited assurance for scope 3 may be required.
2030 Transition to reasonable assurance for Scopes 1 and 2; limited assurance requirements for Scope 3 may become mandatory.

Penalties and enforcement

  • Under SB 253, CARB may impose administrative penalties of up to $500,000 per year for failures such as non-filing, late filing, or misstatements in scopes 1 and 2.
  • For scope 3 misstatements made in good faith and disclosed, the statute prohibits penalties for misstatements.
  • Under SB 261, penalties may reach $50,000 per year for non-compliance, late filing, or inadequate disclosures.
  • Note: SB 219 removed the requirement that fees be paid upon filing, but annual program fees may still apply.

In the first reporting cycle (2026), CARB announced that it will exercise discretion not to enforce penalties for SB 253 so long as entities demonstrate good faith efforts and retain supporting data. Enforcement beyond the first cycle will depend on CARB’s regulations and policies, including criteria of “good faith,” severity or repeat violations, and data retention practices.

Good faith effort criteria

CARB’s December 2024 Enforcement Notice outlines guidance on “good faith” compliance. Key elements include:

Data retention

  • Maintain raw emissions data, calculations, and underlying assumptions.
  • Retain evidence of internal control, measurement methodology, and supporting documentation.

  • Report all emissions scopes to the extent data is reasonably available.
  • Document gaps, assumptions, and estimations transparently.

  • Show a timeline toward full compliance (e.g. increases in data coverage over subsequent years).

  • Disclose uncertainties, estimations, and constraints encountered.
  • Commit to iterative enhancements in methodology.

  • Participate in public workshops, submit comments, respond to CARB requests.
  • Monitor CARB guidance and adjust practices accordingly.

If an entity fails to meet these criteria or deletes or fails to retain data, CARB may consider imposing penalties in later cycles.

Amendments

SB 219 amendments

  • Extended the CARB regulation adoption deadline from January 1, 2025, to July 1, 2025, without altering statutory reporting deadlines.
  • Removed the requirement for a fee upon filing, but preserved the authority for CARB to impose program fees.
  • Permitted consolidated (parent-level) reporting for subsidiaries under SB 253, enabling group-level roll-ups.
  • Allowed CARB the discretion to contract with a third-party emissions reporting organization (or operate internally) to manage the disclosure system.
  • Changed scope 3 timing: replaced the statutory requirement of 180 days after scopes 1 & 2 with a schedule to be determined by CARB.

Litigation and risk

  • The U.S. Chamber of Commerce filed suit in January 2024 challenging the constitutionality of SB 253 and SB 261.
  • Outcomes in the courts may affect enforceability timelines or aspects of the statutes, but current planning should assume full implementation.
  • CARB’s delay in adopting final regulations increases compliance risk for companies without early preparedness.

FAQ

If my revenue is slightly below $1 billion, am I safe from SB 253?

No — when forming your group consolidation, include affiliate revenue as required by accounting standards. If you cross $1 billion via consolidation, you may be covered.

SB 253 refers to total annual revenues (generally global), consistent with similar reporting regimes.

Under existing statutory language, companies “doing business in California” are entities that have sales, property, or payroll in California, or other indicia of in-state operations (akin to state tax nexus tests).

Possibly — CARB’s forthcoming regulations are expected to define thresholds (e.g. minimum revenue from CA, sales factor). Monitor draft rules closely.

Yes, SB 219 allows consolidated reporting across parent and subsidiaries under SB 253, eliminating duplicate obligations.

For SB 261, yes — SB 219 permits using equivalent disclosures under other jurisdictions if CARB approves equivalency.

For SB 253, substitution is more limited; entities must align with CARB protocol and meet the state’s assurance and disclosure requirements.

Yes — for SB 253, limited assurance is mandatory starting in 2026 for scopes 1 and 2. Reasonable assurance is phased in by 2030.

SB 261 does not currently impose verification, though CARB may later mandate audit or assurance.

Under SB 253, scope 3 disclosure begins in 2027 per statute; SB 219 allows CARB to set schedule rather than strict 180-day rule.

Not for the first cycle: The statute prohibits penalties for misstatements with reasonable basis and good faith disclosure between 2027 and 2030.

While SB 219 extends the regulation deadline to July, statutory reporting deadlines remain firm. Entities should proceed on a “best-reasonable” basis, tracking drafts and attending workshops.

Yes — SB 253 permits penalties for late filing or partial misstatement (scopes 1 & 2). SB 261 allows penalties for late or inadequate reports up to $50,000 per year.

Yes — per CARB’s December 2024 Enforcement Notice, for the first SB 253 cycle in 2026, entities demonstrating good faith effort and data retention will not be penalized for incomplete reporting.

Biennially (every two years) after the initial January 1, 2026 deadline.

Yes, you can present breakdowns (by facility, business line, geography) within the consolidated report, provided overall totals align.

No — SB 253 and SB 261 target private and public corporate entities formed under U.S. statutes or state law. They do not target government or nonprofit bodies.

You can include forward-looking disclosures (e.g. emissions reduction pathways, climate targets) in your public report, but only retrospective measured scopes are mandatory.

The statute requires description of risk types (transition, physical, litigation, regulatory), financial impacts, and mitigation measures. Details will depend on CARB’s implementing requirements.

GHG and financial risk disclosures cover global operations as relevant, but nexus and “doing business in California” will determine coverage.

You should issue corrected disclosures publicly, document the correction rationale, and provide explanations in subsequent reports. Repeat or intentional misstatement increases enforcement risk.

The statute does not prescribe scenario models, but CARB regulations are expected to require scenario disclosure consistent with market practice and ESG standards.

You must report what you have, document gaps and assumptions, and incrementally improve coverage over time under “good faith” criteria.

Use dual reporting processes, maintain mapping between frameworks, and consider CARB’s equivalency rules (for SB 261) or future substitution allowances.

Tools to help your journey

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SB-253

SB 253: Climate Corporate Data Accountability Act

Learn more about this piece of legislation including who it impacts, criteria for compliance, and critical deadlines.

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SB-261

SB 261: Climate-Related Financial Risk Act

Learn more about this piece of legislation including who it impacts, criteria for compliance, and critical deadlines.

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Regulations

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Related Resources

Related Resources

Tools to help your journey

SB 253: Climate Corporate Data Accountability Act

Learn more about this piece of legislation including who it impacts, criteria for compliance, and critical deadlines.

SB 261: Climate-Related Financial Risk Act

Learn more about this piece of legislation including who it impacts, criteria for compliance, and critical deadlines.

Related Resources