Last updated: April 11, 2026  |  Reading time: ~9 minutes

California’s two climate disclosure laws now affect ~4,160 entities on CARB’s preliminary list doing business in the state (Harvard Law School Forum on Corporate Governance, 2025). That’s a staggering number, and many companies still aren’t sure whether they’re on the list. With the SEC stepping away from its own climate rule in March 2025, California has become the de facto standard-setter for corporate climate transparency in the United States.

If your company pulls in significant revenue and has even a modest business presence in California, these two laws will change how you measure and report emissions and financial risk. The first hard deadline is August 10, 2026, and it’s closer than most teams realize.

This guide breaks down what SB 253 and SB 261 require, who they apply to, what the penalties look like, and how to start preparing, even with the ongoing litigation.

Related: For a comprehensive overview, see our complete guide to California SB 253.

What Is SB 253?

SB 253, the Climate Corporate Data Accountability Act, is California’s mandatory GHG emissions reporting law. Signed by Governor Newsom in October 2023, it requires companies with over $1 billion in annual revenue to disclose Scope 1, 2, and 3 emissions. CARB estimates annual compliance costs between $135,000 and $152,000 per company (CARB, 2025).

Here’s what makes this law different from anything that came before it. It doesn’t care whether you’re publicly traded. It doesn’t care where you’re headquartered. If you do business in California and cross the revenue threshold, you’re in.

Scope 1 and 2: The Starting Point

Scope 1 covers direct emissions from company-owned sources. Think boilers, fleet vehicles, and manufacturing equipment. Scope 2 covers indirect emissions from purchased electricity, steam, and heating. These are the categories most companies already track, at least partially. The first reports covering Scope 1 and 2 are due August 10, 2026 (CARB, February 2026).

Scope 3: The Big Challenge

Scope 3 is where things get complicated. These are the upstream and downstream emissions across your entire value chain, from raw material extraction to end-of-life product disposal. According to CDP (2024), Scope 3 accounts for 70-90% of total corporate emissions. That’s the vast majority of your carbon footprint, and it sits outside your direct control.

Scope 3 reports won’t be required until 2027, but don’t let that breathing room fool you. Research shows that 83% of companies report difficulty accessing reliable Scope 3 data (TCFD Status Report, cited in WRI/GHG Protocol analysis). Starting now isn’t optional; it’s survival.

In conversations with sustainability teams, we’ve heard the same story repeatedly: 70% of their time goes toward just collecting and cleaning emissions data, leaving almost nothing for actual analysis and strategy.

Related: Learn how to prepare for SB 253 and SB 261 compliance, including Scope 3 data collection strategies.

What Is SB 261?

SB 261, the Greenhouse Gas: Climate-Related Financial Risk Act, takes a different angle. It requires companies with over $500 million in annual revenue to publish climate-related financial risk reports aligned with the TCFD framework. The Ninth Circuit enjoined SB 261 in November 2025, blocking enforcement of the original January 2026 deadline (Jones Day, 2025).

While SB 253 asks “how much are you emitting?”, SB 261 asks “how is climate change going to hurt your business?” It’s a forward-looking exercise that forces companies to assess physical risks (flooding, wildfire, extreme heat) and transition risks (policy changes, market shifts, technology disruption).

Interestingly, SB 261 generates more search interest than its sibling. Monthly search volume for “sb 261” runs at roughly 1,100 searches per month compared to 800 for “sb 253.” That likely reflects the broader applicability, since the lower $500M threshold captures more companies.

Even though enforcement is paused, smart companies aren’t sitting still. The TCFD framework that underpins SB 261 is already embedded in the ISSB standards and the EU’s CSRD. Building that muscle now pays dividends regardless of what the courts decide.

How Are SB 253 and SB 261 Different?

These two laws are often mentioned together, but they serve distinct purposes. About 4,160 entities appear on CARB’s combined preliminary list for both laws (Harvard Law Forum, 2025). Many companies will need to comply with both, so understanding the differences is critical for planning resources and timelines.

The bottom line? If your revenue exceeds $1 billion, you’re likely subject to both. If it falls between $500 million and $1 billion, you’re only on the hook for SB 261, though that obligation is paused for now.

Who Do These Laws Apply To?

Both SB 253 and SB 261 apply to any business entity “doing business in California” that meets the respective revenue thresholds. CARB’s preliminary list identifies approximately 4,160 entities across both laws (Harvard Law Forum, 2025). This includes corporations, partnerships, LLCs, and other business forms.

What catches people off guard is the scope. These aren’t just for California-based companies. A manufacturer headquartered in Ohio or a retailer based in London can be subject to these laws if they generate enough California-sourced revenue. The “doing business” definition follows California’s existing tax nexus standards, which set the bar at roughly $735,000 in state-sourced sales.

And here’s the kicker: unlike the SEC’s now-abandoned climate rule, both SB 253 and SB 261 cover private companies. You don’t need to be publicly listed. If you meet the revenue bar and do business in California, you’re in. CARB has acknowledged the preliminary list may contain errors and has a process for companies to contest their inclusion.

The fact that private companies are included is, frankly, the most underappreciated aspect of these laws. Many private firms have never been subject to mandatory climate disclosure of any kind. Their reporting infrastructure is often nonexistent, which means the ramp-up cost and effort will be significantly higher than for public peers already producing sustainability reports.

What Are the Key Deadlines?

The first firm deadline is August 10, 2026, when SB 253 Scope 1 and 2 reports are due to CARB (CARB, February 2026). Scope 3 reporting follows in 2027. SB 261’s original January 2026 deadline was blocked by the Ninth Circuit injunction, with a full trial now set for October 2026.

SB 253 Timeline

• October 7, 2023: Signed into law by Governor Newsom
• September 2024: SB 219 amendments signed (added Scope 3 safe harbor, adjusted fee structures)
• August 10, 2026: First Scope 1 and 2 reports due
• 2027: First Scope 3 reports due
• 2030: Third-party assurance required for all three scopes

SB 261 Timeline

• October 7, 2023: Signed into law
• November 2025: Ninth Circuit grants injunction, blocking enforcement (Jones Day, 2025)
• January 1, 2026: Original reporting deadline (now suspended)
• January 9, 2026: Oral arguments for both SB 253 and SB 261 (Akin Gump, 2026)
• October 2026: Full trial scheduled

Will these dates shift? Possibly. But compliance teams can’t afford to bet on delays. The August 2026 deadline for SB 253 is real and active.

What Are the Penalties for Non-Compliance?

SB 253 carries penalties of up to $500,000 per reporting year for non-compliance, making it one of the most punitive state-level climate disclosure mandates. SB 261 penalties cap at $50,000 per reporting year. Both laws also include filing fee requirements that fund CARB’s administration of the programs.

For context, the SEC’s abandoned federal climate rule would have relied on existing securities law enforcement, a framework that’s now moot. So California stands alone as the enforcement authority here.

The financial penalties are meaningful, but the reputational risk may be worse. Once CARB’s reporting platform is public, missing filings will be visible to investors, customers, and competitors. Nobody wants to be the company that didn’t show up.

What About the Lawsuits?

Both SB 253 and SB 261 face active legal challenges. The Ninth Circuit enjoined SB 261 in November 2025 on First Amendment grounds, blocking the January 2026 deadline (Jones Day, 2025). Oral arguments for both laws were heard on January 9, 2026 (Akin Gump, 2026).

The core legal argument is that these laws constitute “compelled speech” under the First Amendment. Business groups argue that forcing companies to disclose climate data violates their constitutional rights. California counters that the laws regulate commercial conduct, not protected speech.

Adding another wrinkle: the SEC abandoned defense of its own climate disclosure rule on March 27, 2025 (SEC.gov, 2025). That move effectively killed the federal approach and left California’s laws as the only game in town. But it also emboldened the challengers, who point to the SEC’s retreat as evidence that mandatory climate disclosure lacks legal standing.

So What Should Companies Do?

Don’t wait for the courts. SB 253 has not been enjoined, and its August 2026 deadline stands. Even if SB 261 remains paused, the underlying TCFD framework is becoming a global baseline. Companies that build reporting capacity now are protected regardless of how the litigation plays out.

We’ve seen companies freeze their compliance efforts because of the litigation, only to scramble when they realize the SB 253 deadline was never paused. The legal uncertainty around SB 261 does not apply to SB 253’s emissions reporting requirements.

How Should Companies Prepare?

Preparation doesn’t need to be overwhelming, but it does need to start now. With CARB estimating annual compliance costs between $135,000 and $152,000 (CARB, 2025) and 83% of companies struggling with Scope 3 data access (TCFD Status Report, cited in WRI/GHG Protocol analysis), the earlier you begin, the lower your total cost will be.

Five Practical Steps

1. Confirm your applicability. Check CARB’s preliminary list. Verify your revenue threshold and California business nexus. Don’t assume you’re exempt just because you’re headquartered elsewhere.
2. Start with Scope 1 and 2. These are due first and are the most straightforward. Lock down your facility-level energy consumption data, fleet emissions, and direct process emissions. If your data still lives in chaotic spreadsheets, that’s your first problem to solve.
3. Map your Scope 3 categories. You don’t need perfect data right away, but you need to know which of the 15 Scope 3 categories are material to your business. Purchased goods, transportation, and employee commuting are common starting points.
4. Build your assurance timeline. SB 253 requires third-party verification. Limited assurance is required initially, with reasonable assurance phasing in by 2030. Start conversations with assurance providers now, because capacity is limited.
5. Align with TCFD for SB 261 readiness. Even with the injunction, building a climate risk assessment process protects you. The TCFD framework overlaps significantly with ISSB and CSRD requirements, so the work translates globally.

Related: See our step-by-step SB 253 compliance preparation guide for practical implementation advice.

How Credibl ESG Helps with SB 253 and SB 261 Compliance

Credibl ESG’s platform is built to handle exactly the kind of multi-framework, multi-scope reporting that California’s climate laws demand. The platform automates data collection across Scope 1, 2, and 3 categories, replaces manual spreadsheet workflows with audit-ready calculations, and generates disclosure-ready reports aligned with CARB’s requirements. For companies also preparing for SB 261, the platform supports TCFD-aligned climate risk assessments, scenario analysis, and financial impact modeling. Teams that previously spent 70% of their time on data collection can redirect that effort toward strategy and stakeholder engagement.

Frequently Asked Questions

Conclusion

California’s SB 253 and SB 261 represent the most ambitious climate disclosure requirements in the United States. Together, they affect ~4,160 entities on CARB’s preliminary list, span public and private entities, and carry penalties that make non-compliance a real financial risk. The first SB 253 deadline, August 10, 2026, is active and approaching fast.

The legal landscape is still shifting. SB 261 is paused, SB 253 is not, and the courts will have more to say in late 2026. But the direction is clear: corporate climate transparency is becoming the baseline expectation, not the exception. Companies that invest in emissions tracking and risk assessment today will be better positioned no matter how the litigation resolves.

Start with your Scope 1 and 2 data. Map your Scope 3 exposure. Build toward TCFD readiness. The work you do now serves every framework that’s coming next.

Continue reading: Complete guide to SB 253 compliance | SB 253 and SB 261 reporting timeline