As California's groundbreaking climate disclosure laws take effect, they mark a major shift toward standardized, investor-grade climate reporting in the U.S. While implementation timelines differ by statute, covered companies across industries must now prepare for significantly more rigorous emissions disclosure and climate-risk governance expectations.
With SB-253 rulemaking underway and initial reporting proposed for 2026, and SB-261 enforcement temporarily paused pending litigation, understanding how these laws apply by industry has never been more important.
These laws represent the most ambitious climate disclosure requirements at the state level, requiring covered entities to provide unprecedented transparency into their greenhouse gas emissions and climate-related financial risks. The California Air Resources Board (CARB) has been tasked with overseeing implementation, and while final regulations are still being developed, the basic framework is clear: companies must prepare now for comprehensive climate reporting that will reshape corporate accountability.
Understanding the legislative framework
SB-253: Emissions disclosure requirements
California SB 253 requires both global and U.S.-based companies with over $1 billion in annual revenue with business entities in California to report their Scope 1 and 2 greenhouse gas emissions starting in 2026, and Scope 1, 2, and 3 emissions starting in 2027 based on the prior fiscal year emissions. This means companies will need to track and disclose:
- Scope 1 emissions: Direct greenhouse gas emissions from sources owned or controlled by the reporting entity
- Scope 2 emissions: Indirect GHG emissions from purchased electricity, steam, heating, and cooling
- Scope 3 emissions: All other indirect emissions in the value chain, including supply chains and downstream activities
SB-261: Climate risk reporting
Companies subject to California SB-261 (entities with total annual revenues over $500 million that do business in California) are intended to publish biennial climate-related financial risk reports aligned with the TCFD framework.
However, as of December 2025, SB-261 enforcement is stayed pursuant to a Ninth Circuit court order, and CARB has issued an enforcement advisory confirming it will not enforce the statutory January 1, 2026 deadline while litigation is ongoing. Companies may voluntarily prepare or submit reports during this interim period.
The revenue thresholds are significant: SB-253 captures companies with $1 billion or more in total annual revenues, while SB-261 applies to businesses with $500 million or more. Both laws cover private companies and public entities that conduct business in California, creating a broad net of covered entities across multiple industries.
The compliance timeline and enforcement approach
Recent guidance from the California Air Resources Board (CARB) clarifies that SB-253 is proceeding through formal rulemaking, while SB-261 enforcement is currently paused.
For SB-253, CARB has signaled enforcement discretion for initial reporting years where companies demonstrate good-faith efforts to comply, particularly given the complexity of establishing Scope 3 data pipelines. For SB-261, CARB has opened a voluntary submission docket and will issue an updated reporting timeline following resolution of the ongoing appeal.
Companies should use this good faith effort provision strategically while working toward full compliance and net-zero climate action. The Greenhouse Gas Protocol (GHG Protocol )provides the foundational methodology for emissions calculations, and companies already following this framework will be better positioned for the initial reporting period.
Industry-specific impacts and reporting considerations
Technology/software companies
Technology companies face unique challenges under both laws due to their complex global supply chains and energy-intensive data center operations. For SB-253 reporting, tech companies must account for:
Scope 1 and 2 considerations
Data centers, office facilities, and company vehicles represent primary sources. Cloud computing companies will need sophisticated carbon accounting systems to track energy consumption across distributed infrastructure. The shift toward renewable energy procurement strategies becomes not just an environmental initiative but a compliance necessity.
Scope 3 challenges
Supply chains for semiconductors, hardware manufacturing, and software development present significant reporting complexities. Companies will need to work closely with suppliers to obtain emissions data, particularly for manufacturing partners in Asia. Employee commuting, business travel, and end-of-life product disposal also require systematic tracking.
For SB-261 climate risk disclosure, technology companies should focus on physical risks to data center infrastructure from extreme weather events, transition risks from changing energy regulations, and opportunities from growing demand for climate solutions software.
Manufacturing and industrial companies
Manufacturing entities face perhaps the most complex reporting requirements due to energy-intensive operations and multifaceted supply chains. These companies typically have substantial Scope 1 emissions from on-site fuel combustion and industrial processes.
Direct emissions focus
Manufacturing companies must carefully track emissions from production facilities, including process emissions (such as cement production or steel manufacturing), fuel combustion for heating and power generation, and fugitive emissions from equipment leaks.
Supply chain complexity
Scope 3 emissions reporting will require unprecedented collaboration with suppliers across multiple tiers. Raw material extraction, transportation, and waste generated in operations all contribute to the emissions footprint. Companies should prioritize building supplier engagement programs and potentially requiring emissions data sharing in contracts.
Climate risk assessment
Physical risks include potential disruption to operations from extreme weather, water scarcity affecting production processes, and regulatory transition risks as carbon pricing mechanisms expand. Manufacturing companies should also consider opportunities from developing low-carbon products and improving energy efficiency.
Retail and consumer goods
Retail companies face distinctive challenges due to extensive supply chains, numerous physical locations, and product lifecycle considerations. The distributed nature of retail operations creates both reporting complexities and climate risk exposures.
Operational emissions
Retail companies must track emissions from numerous store locations, distribution centers, and transportation fleets. Energy consumption for lighting, heating, cooling, and refrigeration across hundreds or thousands of locations requires sophisticated data collection systems.
Product lifecycle reporting
Scope 3 emissions include upstream manufacturing of sold products, transportation and distribution, and downstream use and disposal by consumers. Fashion retailers face particular challenges given the carbon intensity of textile manufacturing and the global nature of apparel supply chains.
Climate risk implications
Physical risks include supply chain disruptions from extreme weather affecting agricultural commodities or manufacturing regions. Transition risks involve changing consumer preferences toward sustainable products and potential carbon border adjustments affecting imported goods.
While SB-261 enforcement is currently stayed, companies are expected to use this period to identify material physical and transition risks by industry, consistent with TCFD-aligned best practices:
Financial services
Financial institutions covered by these laws face unique reporting requirements that differ significantly from other industries. Banks, insurance companies, and investment firms must consider both their operational emissions and the climate impacts of their portfolios.
Operational focus
Direct emissions primarily come from office buildings, data centers for financial technology infrastructure, and business travel. While generally lower than manufacturing or energy companies, financial institutions must still establish comprehensive tracking systems.
Financed emissions
Scope 3 emissions reporting will likely include financed emissions from lending and investment portfolios. This represents one of the most challenging aspects of climate disclosure for financial services, requiring sophisticated methodologies to assess the emissions impact of various asset classes.
TCFD alignment
SB-261 requirements align closely with Task Force on Climate-related Financial Disclosures (TCFD) recommendations, which many financial institutions have already begun implementing. However, the mandatory nature and specific timing requirements create additional compliance considerations.
Energy and utilities
Energy companies face the most direct impact from California's climate disclosure laws, given their central role in the state's decarbonization objectives. These companies typically have significant Scope 1 emissions and face substantial transition risks from evolving energy policies.
Emissions intensity
Oil and gas companies, electric utilities, and renewable energy developers all have different emissions profiles but face comprehensive reporting requirements. Utilities must track emissions from power generation, transmission losses, and distribution infrastructure.
Transition risk focus
Energy companies face the greatest transition risks from policy changes, carbon pricing, and shifting energy demand. SB-261 reporting should emphasize scenario analysis for different energy transition pathways and the financial implications of stranded assets.
Stakeholder engagement
Energy companies will likely face increased scrutiny from stakeholders using disclosure reports to assess climate performance and transition readiness.
Reporting frameworks and assurance requirements
Both laws reference established reporting frameworks while allowing flexibility in implementation. SB-253 incorporates GHG Protocol methodologies, while SB-261 can draw from TCFD recommendations, the International Sustainability Standards Board (ISSB), or the European Union's Corporate Sustainability Reporting Directive (CSRD) framework.
SB-253 incorporates Greenhouse Gas Protocol methodologies and includes phased third-party assurance requirements, beginning with limited assurance and progressing toward reasonable assurance by 2030, subject to final CARB regulations. Although SB-261 enforcement is currently paused, CARB materials continue to reference TCFD-aligned structure, with ISSB increasingly viewed as a compatible evolution of climate-risk disclosure frameworks.
Strategic preparation and implementation
As SB-253 implementation accelerates and SB-261 timelines remain in flux, companies across all industries should focus on foundational readiness to avoid last-minute compliance risk.
- Data infrastructure development: Establishing systems to collect, validate, and report emissions data across all relevant scopes. This includes working with suppliers to improve data quality and coverage.
- Cross-functional coordination: Climate reporting requires coordination between sustainability, finance, legal, and operational teams. Companies should establish clear governance structures and reporting protocols for all climate-related financial risk disclosures.
- Risk assessment integration: Developing climate-related financial risk assessments that integrate with existing enterprise risk management processes while meeting the specific requirements of SB-261.
- Stakeholder communication: Preparing for increased stakeholder attention to climate disclosures, developing communication strategies, and setting metrics that effectively convey both challenges and progress.
The California climate disclosure laws represent a significant shift toward mandatory, standardized climate reporting.
While implementation challenges remain, companies that proactively address these requirements will be better positioned not only for compliance but also for the broader transition toward a low-carbon economy. As other states and federal regulators consider similar measures, California's approach may well become the national standard for corporate climate accountability.
Success in this new regulatory environment requires understanding both the technical requirements and the strategic implications for different industries. Companies that view these disclosure requirements as opportunities to improve climate risk management and stakeholder communication will find themselves ahead of the curve as climate disclosure becomes increasingly central to corporate reporting and accountability.
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Whether you run hyperscale data centers, globe-spanning factories, a national retail footprint, a diversified financial portfolio, or energy infrastructure, Pulsora gives you a single system to operationalize SB-253 emissions disclosure and SB-261 climate-risk reporting.
With centralized data collection, supplier engagement, climate-risk assessment, and assurance prep, you can publish accurate, defensible disclosures on time, with industry-specific depth.
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