California climate disclosure laws (SB 253 and SB 261): compliance roadmap for businesses

California's twin climate disclosure laws will affect more than 10,000 public and private companies doing business in the state, creating the most expansive mandatory emissions reporting regime in the United States. SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-Related Financial Risk Act), both signed by Governor Gavin Newsom in October 2023, require large entities to report greenhouse gas emissions across all three scopes and to disclose climate-related financial risks. By 2026, the California Air Resources Board (CARB) had finalized its initial rulemaking framework, setting the stage for the first compliance deadlines beginning in 2026 and extending through 2030. With an estimated $1 billion in aggregate annual compliance costs across affected firms, according to the California Legislative Analyst's Office, these laws represent a watershed moment for U.S. corporate climate accountability.

Why It Matters

Before SB 253 and SB 261, no U.S. state had enacted mandatory greenhouse gas disclosure requirements at this scale. The SEC's federal climate disclosure rule, finalized in March 2024, was immediately challenged in court and ultimately scaled back by the agency in early 2025, leaving California's laws as the de facto national standard for comprehensive emissions reporting. Unlike the SEC rule, which applies only to publicly traded companies, SB 253 captures both public and private entities with total annual revenues exceeding $1 billion that "do business" in California. SB 261 reaches even further, covering entities with revenues above $500 million.

The laws effectively extend California's regulatory reach far beyond its borders. Because the threshold is based on total entity revenue rather than California-specific revenue, multinational corporations headquartered in Texas, New York, or London may fall under the mandate simply by having sales, employees, or operations in the state. A 2024 analysis by Ceres estimated that roughly 5,300 companies would be subject to SB 253, while approximately 10,400 would trigger SB 261 obligations. Many of these entities have never before been required to measure or report their carbon footprints.

For founders and business leaders, the implications extend beyond compliance itself. Investors, customers, and supply chain partners are increasingly using disclosure data to make procurement and capital allocation decisions. Companies that establish robust emissions measurement systems now will gain a competitive advantage as disclosure expectations tighten globally.

Key Concepts

SB 253 (Climate Corporate Data Accountability Act) requires reporting entities to publicly disclose their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions annually. The law mandates third-party assurance of reported data, with limited assurance required initially and reasonable assurance phased in for Scope 1 and Scope 2 emissions. Reporting must follow the Greenhouse Gas Protocol, the most widely adopted global standard for emissions accounting.

SB 261 (Climate-Related Financial Risk Act) requires covered entities to publish biennial reports describing their climate-related financial risks and the measures adopted to reduce and adapt to those risks. The disclosure framework aligns with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, which were consolidated into the IFRS Sustainability Disclosure Standards (ISSB S2) in 2024.

Scope 1 emissions are direct emissions from owned or controlled sources, such as on-site fuel combustion and company fleet vehicles. Scope 2 emissions result from purchased electricity, steam, heating, and cooling. Scope 3 emissions encompass all indirect emissions across a company's value chain, including upstream supply chain activities, employee commuting, business travel, and downstream use of sold products. Scope 3 typically represents 70% to 90% of a company's total carbon footprint.

Third-party assurance involves an independent auditor verifying the accuracy and completeness of reported emissions data. Limited assurance provides moderate confidence that the data is free from material misstatement, while reasonable assurance (similar to a financial audit) provides a higher level of confidence.

Regulatory Timeline

Milestone	Date	Requirement
Laws signed by Governor Newsom	October 2023	SB 253 and SB 261 enacted
SB 261 amendments (SB 219)	September 2024	Reporting start date delayed; penalties capped
SB 253 amendments (AB 1305 clarifications)	2024	Safe harbor for Scope 3 added
CARB initial rulemaking framework	2025	Draft regulations for SB 253 published
First SB 261 reports due	January 1, 2026	Climate risk disclosures for entities > $500M revenue
First SB 253 Scope 1 and Scope 2 reports due	2026 (reporting on 2025 data)	GHG emissions for entities > $1B revenue
First SB 253 Scope 3 reports due	2027 (reporting on 2026 data)	Value chain emissions for entities > $1B revenue
Limited assurance required (Scope 1 and 2)	2026	Third-party verification at limited level
Reasonable assurance required (Scope 1 and 2)	2030	Third-party verification at reasonable level

Who Must Comply

SB 253 applies to any entity, whether a partnership, corporation, LLC, or other business form, that meets two conditions: (1) total annual revenues exceeding $1 billion, and (2) "doing business" in California as defined under existing tax law. California's Franchise Tax Board defines "doing business" broadly to include having sales in the state exceeding $735,019 (indexed to inflation for 2025), holding property or paying compensation in the state above certain thresholds, or being organized or commercially domiciled in California.

SB 261 applies to entities with total annual revenues exceeding $500 million that do business in California. This lower threshold captures significantly more mid-market companies, including many private firms and subsidiaries of larger conglomerates.

Both laws apply regardless of where an entity is incorporated or headquartered. A European or Asian company with sufficient California revenue triggers the same obligations as a company based in San Francisco. The laws do not apply to entities already reporting under comparable federal mandates, though this exemption remains narrowly defined pending CARB rulemaking.

Compliance Requirements

SB 253 Reporting Obligations

Covered entities must annually disclose Scope 1, Scope 2, and Scope 3 GHG emissions to CARB using reporting standards consistent with the Greenhouse Gas Protocol Corporate Standard and Corporate Value Chain (Scope 3) Standard. The reports must be made publicly available on a CARB-administered digital platform.

KPI	Requirement	Notes
Scope 1 emissions	Annual disclosure in CO2 equivalent	Direct emissions from owned sources
Scope 2 emissions	Annual disclosure in CO2 equivalent	Purchased energy emissions
Scope 3 emissions	Annual disclosure in CO2 equivalent	Value chain emissions; begins 2027
Third-party assurance (limited)	Required from 2026	Applies to Scope 1 and 2
Third-party assurance (reasonable)	Required from 2030	Applies to Scope 1 and 2
Reporting frequency	Annual	Data published on CARB platform

A key provision added through 2024 amendments is the Scope 3 safe harbor: companies making good-faith efforts to calculate Scope 3 emissions cannot be penalized solely for inaccuracies in those estimates, provided they use reasonable methodologies and disclose underlying assumptions. This reflects the widely acknowledged difficulty of measuring upstream and downstream value chain emissions.

SB 261 Reporting Obligations

Covered entities must publish biennial reports describing climate-related financial risks and the strategies they employ to mitigate or adapt to those risks. Reports must be prepared in accordance with the TCFD framework, covering governance, strategy, risk management, and metrics and targets.

Administrative penalties for noncompliance are capped at $50,000 per reporting year under the 2024 amendments (SB 219), down from the original uncapped penalty structure.

Step-by-Step Implementation

Step 1: Determine applicability. Calculate your entity's total annual revenue across all geographies to assess whether you exceed the $1 billion (SB 253) or $500 million (SB 261) thresholds. Review your California nexus by checking sales, property, and payroll in the state.

Step 2: Conduct a GHG inventory baseline. Begin measuring Scope 1 and Scope 2 emissions using the GHG Protocol Corporate Standard. For Scope 1, inventory all direct combustion sources, process emissions, and fugitive emissions. For Scope 2, obtain utility-specific emission factors or use EPA eGRID data for location-based accounting. Companies like Persefoni and Watershed offer carbon accounting platforms that automate data collection across facilities.

Step 3: Map Scope 3 categories. Identify which of the 15 GHG Protocol Scope 3 categories are material to your business. Prioritize the largest emission sources first. Category 1 (purchased goods and services) and Category 11 (use of sold products) together account for the majority of Scope 3 emissions in most industries.

Step 4: Select an assurance provider. Engage an accredited third-party verifier early. Firms such as ERM CVS, Bureau Veritas, and Deloitte have expanded their GHG assurance practices to serve companies preparing for California mandates. Limited assurance engagements typically cost $50,000 to $200,000 for large enterprises, depending on operational complexity.

Step 5: Establish internal governance. Designate a cross-functional team spanning sustainability, finance, legal, and operations to own the reporting process. Assign executive-level accountability, ideally to the CFO or Chief Sustainability Officer, to ensure adequate resourcing.

Step 6: Build data infrastructure. Invest in systems that can collect, aggregate, and audit emissions data from across your value chain. Integrate energy consumption data from building management systems, fleet telematics, procurement records, and supplier surveys into a centralized platform.

Step 7: File and publish. Submit reports through the CARB digital platform by applicable deadlines. Ensure reports are publicly accessible and archived for future reference.

Common Pitfalls

Underestimating Scope 3 complexity. Many companies discover that Scope 3 emissions comprise 80% or more of their total footprint, yet data from suppliers is sparse or unreliable. A 2025 CDP survey found that only 38% of supplier companies globally provide emissions data to their customers, forcing many reporting entities to rely on spend-based estimates or industry-average emission factors. Starting supplier engagement early is critical.

Confusing "doing business" thresholds. Some companies assume they are exempt because they lack a physical presence in California. However, California's broad definition of "doing business" captures companies with relatively modest sales in the state. Legal counsel familiar with California tax law should review nexus questions.

Waiting for final CARB regulations. Although CARB's detailed rulemaking was still being finalized through 2025, companies that delayed preparation risked insufficient time to build data systems and secure assurance providers. The first reporting deadlines are hard, and CARB has signaled limited tolerance for late submissions.

Neglecting alignment with other frameworks. Companies subject to the EU's Corporate Sustainability Reporting Directive (CSRD), the SEC climate rule, or ISSB standards should harmonize their California reporting with these overlapping mandates. Duplicating efforts across incompatible frameworks wastes resources and increases inconsistency risk.

Treating compliance as a one-time exercise. SB 253 requires annual reporting, and the assurance standard escalates from limited to reasonable over time. Companies must build repeatable, auditable processes rather than producing ad hoc reports each cycle.

Key Players

Regulators and Standard-Setters

• California Air Resources Board (CARB) — Primary regulatory body responsible for implementing SB 253 and SB 261, including rulemaking, platform development, and enforcement.
• Greenhouse Gas Protocol (WRI/WBCSD) — Sets the Scope 1, 2, and 3 accounting standards that SB 253 mandates as the reporting framework.
• Task Force on Climate-related Financial Disclosures (TCFD) — Provides the risk disclosure framework required under SB 261; recommendations now integrated into ISSB standards.

Carbon Accounting Platforms

• Persefoni — AI-driven carbon accounting platform serving enterprise clients; raised $101 million in Series B funding as of 2024.
• Watershed — Climate platform used by companies including Stripe, Airbnb, and Sweetgreen for Scope 1 through 3 measurement.
• Salesforce Net Zero Cloud — Enterprise-grade emissions tracking integrated with Salesforce's CRM ecosystem.

Assurance and Advisory Firms

• ERM Certification and Verification Services (ERM CVS) — One of the largest independent GHG verification bodies globally.
• Bureau Veritas — Multinational testing and certification company providing third-party GHG assurance services.
• Deloitte — Expanded its sustainability assurance practice to serve companies preparing for California and SEC disclosure mandates.

Advocacy and Research

• Ceres — Nonprofit that led investor advocacy for SB 253 passage and published detailed applicability analyses.
• As You Sow — Shareholder advocacy organization pushing companies toward robust climate disclosure.

Real-World Examples

Apple Inc.

Apple, headquartered in Cupertino, California, has reported Scope 1, Scope 2, and partial Scope 3 emissions voluntarily since 2015 through its annual Environmental Progress Report. In its fiscal 2024 report, Apple disclosed total Scope 3 emissions of approximately 20.8 million metric tons of CO2 equivalent, with manufacturing and product use representing the largest categories. Under SB 253, Apple will need to expand its Scope 3 reporting to cover all material categories and obtain third-party assurance, a meaningful step beyond its current voluntary disclosures. Apple's experience illustrates that even companies with mature sustainability programs will need to enhance their processes to meet the law's assurance and completeness requirements.

Chevron Corporation

Chevron, one of California's largest headquartered companies with $196 billion in 2024 revenue, faces significant SB 253 obligations. The oil major already reports Scope 1 (47 million metric tons CO2e in 2024) and Scope 2 emissions through CDP and its sustainability report. However, Chevron's Scope 3 emissions from the combustion of its sold products dwarf its operational footprint, estimated at over 500 million metric tons annually. Chevron has publicly opposed aspects of SB 253, arguing that Scope 3 mandates hold producers responsible for consumer behavior. The company joined a legal challenge through the U.S. Chamber of Commerce, though California courts upheld the law's constitutionality in preliminary rulings in 2025. Chevron's compliance journey will be closely watched as a bellwether for the fossil fuel sector.

Cargill, Inc.

Cargill, a privately held agricultural commodities company with approximately $160 billion in annual revenue, exemplifies how SB 253 reaches beyond publicly traded firms. As one of the world's largest agribusiness companies with extensive California operations, Cargill must report emissions across a supply chain spanning grain farming, livestock feed, food processing, and global logistics. In 2024, Cargill disclosed Scope 1 and 2 emissions of 11.5 million metric tons CO2e and estimated partial Scope 3 at 8.4 million metric tons through its ESG report, though independent analyses suggest its full agricultural Scope 3 footprint is substantially larger. For Cargill, SB 253 will require deeper supplier engagement and more granular data collection from tens of thousands of farms and facilities worldwide.

Action Checklist

• Determine whether your entity exceeds the $1 billion (SB 253) or $500 million (SB 261) revenue thresholds and assess your California "doing business" nexus
• Conduct or update a complete Scope 1 and Scope 2 GHG inventory following the GHG Protocol Corporate Standard
• Map and prioritize material Scope 3 categories using screening assessments and the GHG Protocol Corporate Value Chain Standard
• Engage an accredited third-party assurance provider and schedule limited assurance for Scope 1 and 2 data
• Publish a TCFD-aligned climate risk report (SB 261) covering governance, strategy, risk management, and metrics
• Establish internal data systems and governance structures for repeatable, auditable annual reporting
• Monitor CARB rulemaking updates and adjust compliance timelines as final regulations are published
• Coordinate California reporting with overlapping obligations under CSRD, SEC, or ISSB frameworks to avoid duplication
• Brief the board and executive leadership on disclosure obligations, resource requirements, and litigation risks
• Engage suppliers early on Scope 3 data collection to improve data quality ahead of the 2027 Scope 3 deadline

FAQ

Q: Does SB 253 apply to private companies? A: Yes. Unlike the SEC climate disclosure rule, SB 253 applies to any entity doing business in California with total annual revenues exceeding $1 billion, regardless of whether the entity is publicly traded. Private companies, partnerships, and LLCs are all potentially subject to the law.

Q: What happens if my company cannot accurately measure Scope 3 emissions? A: The 2024 amendments added a safe harbor provision for Scope 3 reporting. Companies that use reasonable methodologies and make good-faith efforts to estimate Scope 3 emissions will not face penalties solely for data inaccuracies. However, companies must document their assumptions and methodologies transparently.

Q: Are there penalties for noncompliance? A: Yes. SB 253 authorizes administrative penalties of up to $500,000 per year for noncompliance. SB 261 penalties are capped at $50,000 per reporting year following the 2024 amendments. CARB also has authority to require corrective filings.

Q: How does SB 253 interact with the SEC climate disclosure rule? A: The two regimes are separate but partially overlapping. SB 253 is broader in scope (covering private companies and requiring Scope 3 reporting), while the SEC rule applies only to public registrants and was scaled back in 2025. Companies subject to both should coordinate reporting to ensure consistency while meeting each regime's specific requirements.

Q: Will California accept reports filed under other frameworks like CSRD or ISSB? A: CARB has not yet finalized reciprocity provisions. However, the law's requirement to use GHG Protocol standards means that companies already reporting under CSRD's European Sustainability Reporting Standards (ESRS) or ISSB S1/S2 will find significant overlap. Cross-mapping between frameworks can reduce incremental reporting effort, though California-specific filing on CARB's platform will still be required.

Sources

• California State Legislature. (2023). SB 253, Climate Corporate Data Accountability Act. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB253
• California State Legislature. (2023). SB 261, Greenhouse Gases: Climate-Related Financial Risk. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB261
• California Air Resources Board. (2025). SB 253 Rulemaking Framework and Initial Statement of Reasons. https://ww2.arb.ca.gov/our-work/programs/climate-corporate-data-accountability-act
• Ceres. (2024). "SB 253 and SB 261: Analysis of Applicability and Covered Entities." https://www.ceres.org/resources/reports/california-climate-disclosure-analysis
• CDP. (2025). "Global Supply Chain Report: Measuring and Disclosing Environmental Impacts." https://www.cdp.net/en/research/global-reports/global-supply-chain-report-2025
• Greenhouse Gas Protocol. (2024). "Corporate Value Chain (Scope 3) Accounting and Reporting Standard." https://ghgprotocol.org/standards/scope-3-standard
• U.S. Chamber of Commerce v. California Air Resources Board. (2025). Preliminary ruling on constitutionality of SB 253. Superior Court of California, Sacramento County.
• Apple Inc. (2024). Environmental Progress Report, Fiscal Year 2024. https://www.apple.com/environment/
• Chevron Corporation. (2024). Climate Change Resilience Report. https://www.chevron.com/sustainability/environment/climate-change