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Next year will mark some firsts for California’s climate disclosure laws — specifically, reporting deadlines.
Jan. 1, 2026, is the first reporting deadline under SB 261, the Climate-Related Financial Act. SB 261 requires companies to disclose risks and mitigation efforts related to climate change.
And, while it’s not official, we anticipate that June 2026 will be the first reporting deadline under SB 253, the Climate Corporate Data Accountability Act. SB 253 requires large companies to disclose their greenhouse gas (GHG) emissions.
Despite these rapidly approaching deadlines, the California Air Resources Board (CARB) has not yet completed rulemaking that, in theory, would provide essential details for entities to understand if they have a reporting obligation under either statute. Nonetheless, on Sept. 24, CARB released a list of over 4,000 entities that it believes are potentially liable under the climate-change laws.
Keeping in mind that there is still some uncertainty surrounding these reporting requirements, including an understanding of who must report, this client alert defines the organizations likely covered by the two statutes, outlines the reporting requirements, details the applicable deadlines and provides recommendations for preparing reports.
Passed in 2023, SB 253 and SB 261 require large companies “doing business in California” to make certain climate-related disclosures:
CARB, the agency tasked with enforcing SB 261 and SB 253, has not yet published regulations for them. Accordingly, there are no regulatory definitions to clarify how certain statutory requirements should be interpreted; for example, how “annual revenue” should be calculated or what “doing business in California” means. This has caused much confusion in the regulated (and potentially regulated) community regarding who is liable.
As noted above, CARB published a list on Sept. 24 identifying 4,160 entities that potentially have a reporting obligation under SB 261 and/or SB 253. CARB’s first pass at identifying parties liable under the climate laws appears to be both incomplete and contains somewhat obvious errors (i.e., the inclusion of insurance companies).
The list also reflects CARB’s evolving interpretation of “doing business in California.” CARB’s current thinking, revealed during an August 2025 workshop, defines “doing business in California” to mean an entity is registered with the California Secretary of State. Without published regulations, it is unclear – but doubtful – if this “criteria” comports with the statutory language. Nonetheless, the list reflects the “who” CARB expects an SB 261 report from on January 1, 2026, and an SB 253 report from next June.
CARB is holding fast to a January 1, 2026, reporting deadline for SB 261. Accordingly, “covered entities,” defined by statute to be entities doing business in California with revenue in excess of $500 million (with limited exceptions), will need to be prepared to report at the first of the year. After January 1, 2026, covered entities must submit reports on a biennial basis.
Reporting under SB 261 requires disclosures of: (1) “Climate-related financial risks” and (2) mitigation measures to address potential climate-related financial risk. While the statute itself does not define “climate-related financial risks,” the bill’s declaration broadly identifies “wildfires, sea level rise, extreme weather events, extreme droughts and associated impacts to the global economy.”
Climate-related financial risks must be reported in accordance with the recommended framework and disclosures contained in the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (TFCFD) or an equivalent, such as the IFRS S2 (standards developed by the International Accounting Standards Board).
Regardless of the framework, reporting should include discussion of the following:
It should be noted that a covered entity may be able to meet SB 261’s requirements if it already produces a report that discloses such risks in compliance with the laws of another jurisdiction, such as the European Union’s CSRD (Corporate Sustainability Reporting Directive).
The report must be made public on the covered entity’s website in addition to being linked to a centralized web page managed by CARB.
Both the statutory language and CARB’s various guidance documents state that the initial reporting should reflect a good-faith effort to report. In some cases, this may result in an entity stating that it does not have the necessary information or that information is incomplete, with the understanding that the report will also identify steps to report fully by the next biennial report. CARB has also stated that it will not require GHG reporting in the initial SB 261 report – but will require it in connection with SB 253 reporting obligations or the first biennial report under SB 261 in 2027.
Failure to report may be punishable by administrative penalties that may not exceed $50,000 per year. Any penalty must take into consideration past and present compliance efforts, as well as good-faith efforts to comply.
An annual fee must be paid to CARB to administer and implement the statute.
By statute, CARB is required to prepare regulations that will set forth how reporting entities report their GHG emission and the date upon which the first SB 253 report will be due. And while it is anticipated that the regulations may come by year’s end, they are not available yet. It is expected that the forthcoming regulations will set an SB 253 reporting deadline for June 2026.
Under SB 253, “reporting entities” are defined as businesses with annual revenues exceeding $1 billion that conduct business in California. Both of these concepts, “annual revenue” and “doing business in California,” are yet to be defined. As will be established in forthcoming regulations, “reporting entities” will need to disclose Scope 1 and 2 emissions in 2026 and Scope 3 emissions in 2027:
Reporting must conform to Greenhouse Gas Protocol standards and be reviewed by a qualified third-party assurance provider.
Similar to SB 261, failure to report may result in administrative penalties not exceeding $500,000 per year; however, good faith efforts to comply are taken into consideration in any enforcement.
An annual fee must be paid to CARB to administer and implement the statute.
Both SB 261 and SB 253 have been challenged in the United States District Court for the Central District of California in United States, et al. v. California Air Resources Board, et al. It is possible that further litigation could delay the Jan. 1, 2026, SB 261 reporting deadline; however, affected organizations should proceed as if that date remains unchanged.
Any large company operating or selling products in California should conduct an independent assessment of its liability under California’s climate reporting laws — irrespective of its inclusion on or exclusion from CARB’s Sept. 24 list noted above. Entities that meet the annual SB 261 and SB 253 revenue thresholds of $500 million and $1 billion, respectively, via gross revenue and/or through subsidiary companies, should consider undertaking a ground-up evaluation. Businesses with even a nominal presence in California should assess their liability under both of these statutes, if any, with the assistance of counsel.
Reporting under both SB 253 and SB 261 will require a team. Potentially regulated entities should be assembling their “dream team” of consultants, financial auditors and counsel to assist with reporting.
CARB has stressed, on several occasions, that a “good faith effort” associated with initial reporting should detail (1) a proposed reporting framework (e.g., the recommendations by the TFCFD) and (2) an organization’s assessment of information in hand and a roadmap to full disclosures as recommended by the chosen framework.
To that end, a company’s initial assessment for the Jan. 1 SB 261 reporting deadline should include examining what information related to climate-related financial risks is currently available to the company, where there may be gaps, and the identification of specific steps to fill those gaps for the next reporting period.
Finally, to the extent that climate-related risks, or potential risks, are identified, companies will need to examine their risk management and governance structures to ensure that climate-related risks can be addressed through existing corporate infrastructure.
Reporting under SB 253 is likely to be a far more involved effort. Paramount to this work will be identifying the correct consultant to help model GHG emissions.
If you have questions about SB 261 and SB 253 reporting requirements or would like assistance preparing to meet the Jan. 1 deadline, please reach out to your RJO attorney contact or shareholder Jon-Erik Magnus at jmagnus@rjo.com or (415) 956-2828.
