California’s Climate Disclosure Laws: What’s Changing Under SB 253 and SB 261?

Earlier this year, we explored California’s upcoming climate disclosure laws - SB 253 and SB 261 - which require large companies doing business in the state to report their greenhouse gas emissions and climate-related financial risks. In late August 2025, the California Air Resources Board (CARB) proposed important updates, with implications for which companies are in scope and what they’ll need to do to comply.

Refining the Scope

CARB’s latest proposals, released on 21 August 2025, aim to clarify two key definitions:

• “Revenue” will now be defined as the “the total global amount of money or sales a company receives from its business activities, such as selling products or providing services”, without deductions for operating costs or other business expenses.

• “Doing business” in California will be determined using the California Secretary of State’s Business Entity database, focusing on entities with a designated agent for service of process in the state. Companies with only remote employees in California may be exempt, along with nonprofits and government entities.

These changes significantly narrow the scope of the regulations. CARB now estimates:

• SB 261 will apply to approximately 4,160 companies (down from 10,000+)

• SB 253 will apply to around 2,596 companies (down from 5,300)

CARB plans to publish a list of entities it believes are covered, but companies will remain responsible for compliance even if they’re not listed.

What Do Companies Need to Do?

SB 253 – Emissions Reporting

• Scope 1 & 2 emissions must be disclosed by 30 June 2026 (covering FY 2025 data).

• Scope 3 emissions reporting is anticipated to begin in 2027.

• Reports must follow the GHG Protocol and have limited assurance undertaken by an independent third-party (shifting to reasonable assurance by 2030).

• CARB is considering accepting assurance aligned with standards such as ISSA 5000, ISO 14060, AA1000, and AICPA.

• Disclosures must be published on a CARB-designated digital platform launching 1 December 2025.

SB 261 – Climate Financial Risk Disclosure

• Companies with greater than $500 million global annual revenues must publish a climate-related financial risk report by 1 January 2026, and every two years thereafter.

• Reports must align with TCFD, IFRS, or another approved framework, and be published on the company’s website and posted to CARB’s digital platform.

• Minimum disclosure requirements include:

• Framework used

• Summary of included and omitted disclosures

• Explanation of gaps and plans to address them

• Scenario analysis and emissions reporting are not required in 2026 submissions.

• CARB will accept good faith efforts, including estimates and phased methodologies. They acknowledge that quantitative climate scenario analysis and Scope 1-3 metrics may not be available for 2026 reporting, in which case reporting may be qualitative.

Subsidiaries and Consolidated Reporting

Under SB 261, subsidiaries are not required to file separate reports if their parent company fulfils the reporting obligations. This allows for consolidated climate risk disclosures at the group level. CARB is considering using commercial databases cross-referenced with the Secretary of State and Franchise Tax Board databases to identify relevant subsidiaries.

Implementation Fees

CARB has proposed an annual fee – calculated as (Annual Program Cost/Number of Covered Entities) – to cover the cost of each program:

• Approximately $3,110 per entity for SB 253

• Approximately $1,400 per entity for SB 261

Companies reporting under both regulations will be required to pay both sets of fees.

Enforcement

Despite the potential for last minute changes, CARB has restated that it may audit reporting and assurance activities as well as information disclosed by companies, and take enforcement action where necessary.

Key Dates to Watch

• 1 December 2025: SB 261 digital platform link made available for companies to post their SB 261 climate-related financial risk reports.

• Mid-December 2025: Public release of implementation guidelines containing the final requirements for companies to report, leaving little time to prepare.

• 1 January 2026: In-scope entities must publish SB 261 climate-related financial risk report on website and file with CA Secretary of State via public link.

• 30 June 2026: Deadline for in-scope entities to publish Scope 1 & 2 emissions under SB 253.

• 2027: Expected deadline for in-scope to publish Scope 3 emissions under SB 253, though this deadline date is still under review.

What Should Companies Do Now?

These last-minute proposed changes generate significant uncertainty for companies that may be in scope. We recommend that companies who may be in scope do the following:

• Begin emissions measurement and assurance planning, if not already done so.

• Conduct climate risk assessments aligned with TCFD or IFRS.

• As there has been no mention of pushing back the deadlines, monitor CARB updates carefully as these proposed changes remain under public consultation and there can be no guarantees of such changes being implemented.

Need Help?

Danesmead Advisory has extensive experience supporting clients with SB 261, SB 253 and TCFD reporting (the framework that SB 253 & SB 261 are based on). We can do this on a fully outsourced basis, or on a review basis. We provide tooling to streamline data gathering and reporting, can provide examples of our work on request.