Author’s Note: On November 18, 2025, the Ninth Circuit Court of Appeals granted an injunction pending appeal, temporarily stopping enforcement of SB 261 ahead of the January 1, 2026 reporting start date. A hearing is scheduled for January 9, 2026. While SB 253 remains in effect, the limited assurance requirement has been removed for first year reporting. We will continue to monitor changes to these regulations and their implications for the private markets.
The global landscape for sustainability reporting has been anything but static this year, and California’s regulatory environment is no exception. Implementation of the state’s climate accountability regulations continues to move forward, with the California Air Resources Board (CARB) recently sharing updated details and guidelines for reporting entities. The state first passed its landmark duo climate regulations dubbed the “California Climate Accountability Package” in 2023, comprising the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261).
As reporting deadlines loom, CARB held its second public workshop this past August to provide clarity around implementation details and recently released a draft checklist for SB 261 disclosures. Read on for more on the regulations, the latest updates from CARB, and what they mean for businesses operating in California’s jurisdiction.
Recap of Timeline
California’s climate regulations have faced challenges since they were passed, and in late 2024, the state introduced and passed an amendment bill, SB 219. This consolidated bill encompasses the original intent of the two bills and codifies its enforcement and core objectives. Though superseded by SB 219, SB 253 and SB 261 are still used colloquially to refer to the dual regulations—CARB collectively refers to these three bills as “the 200s.” A quick refresher of the climate regulations are below:
- SB 253 requires companies to annually report direct and indirect emissions from their operations and energy use, or their Scope 1 and Scope 2 emissions, with Scope 3 requirements starting in 2027. In addition to reporting on their entire scope inventory, organizations must obtain limited assurance on their greenhouse gas emissions disclosures, beginning with Scope 1 and 2, starting in 2026 based on 2025 data.
- SB 261 requires companies to biennially disclose their climate-related financial risks and mitigation strategies starting in 2026 based on 2025 data.
SB 219 largely maintains the original intent of the duo regulations, but also clarifies important areas, including:
- Authorizes but does not require CARB to contract with an external organization to manage public disclosures. It allows for CARB to determine the management of disclosures in-house.
- Allows for in-scope parent companies to report on subsidiary companies in one consolidated report.
- Introduces a phased approach for Scope 3 reporting, with flexibility determined by CARB every year after 2027 (previously, companies had to report Scope 3 emissions within 180 days of Scopes 1 and 2)
- Granted CARB an additional six months (until July 1, 2025) to publish full disclosure rules for the California regulations.
Summarizing California’s Climate Regulation
| Climate Corporate Accountability Act (SB 253) | Climate-Related Financial Risk Act (SB 261) | |
|---|---|---|
| Businesses in Scope | At least $1 billion in annual revenue that do business in California | At least $500 million in annual revenue that do business in California |
| Scope 1 | January 1, 2026 (limited assurance to start; reasonable assurance by 2030) | N/A |
| Scope 2 | January 1, 2026 (limited assurance to start; reasonable assurance by 2030) | N/A |
| Scope 3 | January 1, 2027 (limited assurance by 2030) | N/A |
| TCFD-aligned Climate-related Financial Risk Report | N/A | Publicly published by January 1, 2026 |
| Reporting Schedule | Annual | Biennially (every two years) |
*GHG inventory (Scopes 1, 2, and 3) is a recommended disclosure under the Metrics & Targets Pillar of TCFD.
What Are the Recent Updates to the Climate Disclosure Laws?
May Public Workshop
On May 29, CARB hosted its first public workshop on its progress for implementing “the 200s,” including announcing proposed initial staff concepts defining key areas of scope and eligibility:
- Doing Business in California
- Initial staff concept includes thresholds outlined in CA Revenue and Tax Code section 23101, defined as a company with the following:
- Sales: Over $735,019 in California sales, or 25% of total global sales.
- Property: Over $73,502 in California property, or 25% of total global property.
- Payroll: Over $73,502 in California payroll, or 25% of total global payroll.
- Initial staff concept includes thresholds outlined in CA Revenue and Tax Code section 23101, defined as a company with the following:
- Revenue
- Initial staff concept includes definition outlined in CA Revenue and Tax Code, which defines revenue as “gross receipts” as set forth in California Revenue and Taxation Code (RTC) § 25120(f)(2).
- Parent and Subsidiary Relationships
- Initial staff concept mirrors existing definition in the California Cap-and-Trade regulation, which defines a “parent company” as an entity with a level of ownership or control of 50% or more of another company (“subsidiary”).
In addition, CARB suggested that the deadline to adopt implementation rules be pushed from July 1, 2025 to January 1, 2026. The agency also clarified that it will open a public docket for companies to submit the public link to their first climate-related financial risk report from December 1, 2025 until July 1, 2026.
August Public Workshop
With the deadline of the first California Climate Disclosure reports looming, CARB is still hammering out details with regards to implementation. In a second public workshop on August 21, CARB shared proposed updates on the direction of important key definitions and timelines:
- Staff are exploring existing databases of US-based companies that could be used to establish “doing business in CA.” Consultations found limitations with the initial staff concept definition (aligning with CA Revenue and Tax Code section 23101).
- Proposed alternative working definition for revenue as “the total global amount of money or sales a company receives from its business activities, such as selling products or providing services.”
- Alternative working definition for parent/subsidiary relationships to be identified through evaluation of commercial databases, cross-referenced with the Secretary of State database and/or the Franchise Tax Board databases. CARB also noted that companies may choose to self-identify their corporate relationships.
- Proposed entity exemptions include: non-profits, companies whose only business in California is of teleworking employees, government entities, and a California Independent System Operator (CAISO) or a business whose only activity relates to wholesale electricity transactions.
- Deadline of January 1, 2026 to remain for SB 261, with a proposed June 30, 2026 deadline for SB 253 Scope 1 and 2 reporting.
In addition to the transparent updates on definitions and scopes, CARB proposed fees that would cover the costs of implementation and administration, estimated at $3,106 (for SB253) and $1,403 (for SB261) per entity.
SB 261 Draft Checklist
The most recent update for “the 200s” occurred last week, with CARB releasing a draft checklist for entities in-scope for publishing a climate-related financial risk disclosure under SB 261, with clear minimum requirements for disclosure. The draft checklist heavily references Task Force on Climate-Related Financial Disclosures (TCFD) and International Financial Reporting Standards (IFRS) S2 frameworks.
At the time of writing, this is what we know for sure:
- Definitions and scopes are still pending; we can expect to see the final definitions for “doing business in California,” “revenue,” and clarity on corporate relationships in the draft regulation at the end of the year.
- The deadline for climate-related financial risk reports on January 1, 2026 for SB 261 remains intact, with CARB’s public docket opening on December 1, 2025.
- Draft checklist to support SB 261 contains the minimum requirements for those who are in-scope.
What Can Companies Do Now?
As we await additional details from CARB, companies in scope can begin to take action now to set up for success.
- Determine if California’s climate disclosure laws apply to you, both initial staff concepts, and the definitions explained in the regulation itself
- Build reliable data collection and reporting processes
- Familiarize yourself with the TCFD framework
- Get as much information/data as you can across departments (e.g., risk, legal, finance, sustainability, relevant partners) to ease reporting burdens down the line
- Begin assessing climate risks across your business operations. Consider transition risks and physical risks and conduct scenario analysis, if applicable
How Can Novata Help?
Rather than softening or delaying, California is holding firm on its ambitious climate disclosure agenda, setting the stage for a significant shift in how companies prepare for and report on their environmental impact. Novata’s breadth of sustainability tools can support you to streamline data collection processes and climate risk assessments so that you and your company can stay proactive and ahead of regulatory requirements. Learn how Novata can help you navigate regulatory compliance.
