As California's groundbreaking climate disclosure laws approach their first reporting deadlines, sustainability professionals across enterprises are scrambling to understand compliance requirements and avoid potentially severe penalties. The California Air Resources Board (CARB) affirmed the statutory deadlines for disclosures under SB-253 (the Climate Corporate Data Accountability Act) and SB-261 (the Climate-related Financial Risk Act), marking a pivotal moment for corporate climate accountability.
These California climate disclosure laws represent the most comprehensive state-led climate mandates in the United States, setting precedents that will likely influence corporate sustainability reporting nationwide. For sustainability professionals, understanding these requirements isn't just about compliance—it's about positioning your organization for success in an increasingly transparent climate landscape.
Understanding the foundations: California SB-253 and SB-261 explained
The Climate Corporate Data Accountability Act (SB-253)
SB-253 requires large businesses to publicly disclose their greenhouse gas emissions annually. SB 253, as amended by SB 219, directs CARB to adopt regulations by July 1, 2025, requiring "reporting entities" — businesses with total annual revenues over $1 billion that are formed under state or federal law and do business in California — to annually disclose their Scope 1, Scope 2 and eventually Scope 3 emissions.
The reporting framework for SB-253 follows the widely-adopted GHG Protocol standards, ensuring consistency with existing sustainability reporting practices. Covered entities must begin with Scope 1 and Scope 2 emissions reporting in 2026, covering their 2025 fiscal year data. Scope 3 emissions disclosures will follow, starting with reports covering 2026 data due in 2027.
The Climate-Related Financial Risk Act (SB-261)
SB 261 mandates biennial public reporting on climate-related financial risks and mitigation strategies by companies with over $500 million in annual revenue, beginning January 1, 2026 based on 2025 data. This law aligns with the Task Force on Climate-Related Financial Disclosures (TCFD) framework, requiring companies to assess and disclose how climate change might impact their business activities and value chains.
The climate-related financial risk disclosure requirements under SB-261 cover both physical and transitional risks, requiring companies to develop comprehensive mitigation strategies and report on their climate-related financial risk management approaches.
Who must comply: Understanding revenue thresholds and applicability
SB-253 covered entities
Any business entity with total annual revenues exceeding $1 billion that conducts business in California falls under SB-253's jurisdiction. This includes parent companies and their subsidiaries, partnerships, and any business structure organized under state or federal law. CARB estimates that 2,596 entities are subject to SB 253.
The revenue thresholds apply to gross receipts calculated according to California's taxation code, ensuring consistency with existing tax reporting frameworks. Non-profits and certain exemptions may apply, but most large enterprises operating in California will find themselves subject to these disclosure requirements.
SB-261 reporting entities
SB-261 casts a wider net, applying to companies with annual revenues exceeding $500 million. 4,160 are subject to SB 261, reflecting the law's broader scope for climate-related financial risk disclosure. This lower threshold means many more companies must prepare for biennially reporting on climate risks and their financial implications.
Critical compliance deadlines for CA SB-253 and SB-261
Initial reporting timeline
The first year of compliance brings several key dates that sustainability professionals must mark on their calendars:
December 1, 2025: CARB will post a public docket on December 1 for a company to register for SB-261 climate-related financial risk reports.
January 1, 2026: First climate-related financial risk reports under SB-261 become due. A company's first climate risk report – due by January 1, 2026 – may cover either fiscal year 2024 or fiscal year 2025 depending on what is reasonable for the organization.
June 30, 2026: First emissions disclosures under SB-253 are due, covering Scope 1 and Scope 2 emissions for the 2025 fiscal year.
2027: Scope 3 emissions reporting begins under SB-253, covering 2026 emissions data.
Ongoing reporting requirements
After the initial reporting period, companies must maintain annual emissions reporting under SB-253 and biennial climate risk disclosure under SB-261. These reporting deadlines create an ongoing compliance framework that requires sustained attention from sustainability teams and stakeholder engagement across the organization.
Penalties and enforcement: Understanding the financial stakes
SB-253 penalties for emissions reporting
Non-compliance with SB-253 carries significant financial consequences.
Non-compliance with the reporting requirements can result in administrative penalties, with fines reaching up to $500,000 per reporting year based on the violator's compliance history. However, there's important relief for the initial reporting period.
CARB has clarified that no penalties will be imposed in 2026 for SB 253 as long as companies demonstrate a "good faith effort" in preparing their disclosures. This grace period recognizes the complexity of implementing comprehensive emissions data collection and reporting systems.
SB-261 penalties for climate risk disclosure
Penalties relating to the financial risk report under SB 261 can be up to $50,000 per year. While lower than SB-253 penalties, these fines still represent significant financial exposure for non-compliance with climate-related financial risk disclosure requirements.
Good-faith efforts and safe harbor provisions
The concept of good faith efforts provides crucial protection and an enforcement notice for companies working toward compliance.
CARB has indicated that leniency will be granted until 2026 for organizations that make good-faith efforts to comply. Additionally, there is a safe harbor for scope 3 emissions disclosures; companies are not subject to administrative penalties for misstatements about scope 3 emissions made with a reasonable basis and disclosed in their reports.
These provisions recognize that supply chain emissions data can be challenging to obtain and verify, particularly for complex value chains spanning multiple tiers of suppliers and business partners.
Assurance requirements: Building credible reporting systems
Third-party assurance mandates
Both laws require third-party assurance to ensure the credibility of emissions data and climate risk disclosures. For SB-253, companies must obtain limited assurance for their emissions reporting starting in 2026, with reasonable assurance required beginning in 2030.
The assurance requirements follow established auditing standards, requiring companies to work with qualified providers who can verify the accuracy and completeness of their GHG emissions calculations and climate-related financial risk assessments.
Implementing robust controls
Successful compliance requires implementing strong internal controls and data management systems. Companies should establish clear processes for emissions data collection, verification procedures for supply chain information, and documentation systems that can support third-party assurance engagements.
ESG professionals should work closely with their finance and operations teams to ensure that climate disclosure processes integrate effectively with existing financial reporting and operational data systems.
Regulatory developments and implementation updates
CARB's rulemaking process
The California Air Resources Board (CARB) issued new FAQs on July 10, 2025, providing long-awaited clarity on the state's landmark climate disclosure laws: SB 253 and SB 261. These implementing regulations provide critical guidance on technical requirements, reporting frameworks, and compliance expectations.
The rulemaking process has included multiple public workshops where stakeholders have provided input on technical requirements, implementation timelines, and practical compliance challenges. The public docket will be open until September 11, 2025 for written feedback, allowing continued stakeholder engagement as regulations are finalized.
Legal challenges and regulatory stability
While some legal challenges have emerged around these California climate disclosure laws, the regulatory framework continues to advance toward implementation. Companies should monitor ongoing legal developments but should proceed with compliance planning to avoid penalties and ensure readiness for the approaching deadlines.
Strategic preparation: Key takeaways for sustainability professionals
Sustainability teams should focus on several critical preparation areas most immediately:
Data systems assessment
Evaluate current emissions data collection capabilities, particularly for Scope 1 and Scope 2 emissions. Identify gaps in data quality, completeness, and verification processes.
Supply chain engagement
Begin engaging with key suppliers and value chain partners to understand their emissions reporting capabilities and prepare for future Scope 3 emissions disclosure requirements.
Climate risk assessment
Develop or enhance climate-related financial risk assessment capabilities, focusing on both physical and transitional risks that could impact business operations and financial performance.
Cross-functional coordination
Build strong working relationships between sustainability, finance, legal, and operations teams to ensure coordinated compliance efforts.
Building long-term capabilities
Beyond initial compliance, companies should view these requirements as opportunities to strengthen their overall corporate sustainability programs. The disclosure requirements create valuable frameworks for improving climate risk management, enhancing stakeholder engagement, and building competitive advantages through transparent sustainability reporting.
Companies that excel in meeting these disclosure requirements may find themselves better positioned for capital markets access, stakeholder trust, and operational resilience in a climate-constrained economy.
Preparing for success: Next steps for your organization
Compliance planning timeline
With reporting deadlines approaching rapidly, companies should establish clear project timelines that account for data collection, system implementation, stakeholder coordination, and assurance provider selection. The complexity of these requirements means that successful compliance requires sustained effort over many months.
Resource allocation and team-building
Effective compliance often requires additional resources, whether through hiring sustainability professionals, engaging external consultants, or investing in new technology systems. Companies should assess their current capabilities and identify resource gaps early in the preparation process.
Stakeholder communication strategy
These disclosure requirements create new opportunities for stakeholder engagement around climate issues. Companies should develop communication strategies that help stakeholders understand their climate risks, mitigation strategies, and progress toward emissions reduction goals.
The future of corporate climate disclosure
California's leadership in climate disclosure is influencing similar initiatives across other states and at the federal level. The Securities and Exchange Commission's climate disclosure rules, though currently facing legal challenges, reflect similar principles of transparency and accountability.
For sustainability professionals, these California climate disclosure laws represent both a compliance challenge and a strategic opportunity. Companies that approach these requirements thoughtfully — building robust data systems, engaging meaningfully with stakeholders, and integrating climate considerations into business strategy — will be better positioned for success in an increasingly climate-conscious business environment.
Avoid penalties and achieve compliance with Pulsora
Checking every box on a compliance checklist for SB-253 and SB-261 requires more than good intentions — it demands reliable data systems, seamless supplier engagement, rigorous risk assessments, and audit-ready assurance.
Pulsora is built to help you get there.
Our platform centralizes emissions data collection, streamlines Scope 3 supplier requests, aligns financial risk disclosures with leading frameworks, and integrates third-party assurance to ensure accuracy and credibility. With Pulsora, you can move from uncertainty to confidence, knowing every step of your compliance journey is supported — and every item on your checklist is accounted for.
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