California is leading the United States in climate accountability with two landmark laws: SB 253 and SB 261.
Together, these regulations will require thousands of large companies doing business in California to publicly disclose their greenhouse gas (GHG) emissions, and potentially climate-related financial risks, starting in 2026.
In this post, we provide a concise, up-to-date overview of who’s covered, what’s required, and what steps you can take now.
Want a deeper dive into each law? Explore our detailed breakdowns:
In-depth guide to SB 253 →
In-depth guide to SB 261 →
Who is required to report under SB 253 and SB 261?
To determine whether your company must comply with California’s climate disclosure laws, two factors matter:
- Are you doing business in California?
- Do you meet the revenue threshold set by SB 253 or SB 261?
Let’s break those down.
What does “Doing business in California” mean?
You don’t need to be headquartered in California to be considered “doing business” in the state.
While “doing business” is not explicitly defined in SB 253 or SB 261, the California Franchise Tax Board (FTB) provides a commonly accepted working definition, one that CARB has referenced in its current guidance. According to the FTB’s 2024 tax year thresholds, a company is considered to be doing business in California if any of the following are true:
- California sales exceed $735,019
- Real or tangible property in California exceeds $73,502
- Compensation paid in California exceeds $73,502
These thresholds are adjusted annually for inflation, and CARB is expected to clarify how this definition will be applied under SB 253 and SB 261 during the ongoing rulemaking process.
For the most current definitions, see the Franchise Tax Board’s “Doing Business” criteria.
Revenue thresholds by law
Once you’ve determined you meet the “doing business” criteria, the next step is understanding which law(s) apply based on your annual global revenue.
- SB 261: Applies to companies with over $500 million in total annual global revenue.
- SB 253: Applies to companies with over $1 billion in total annual global revenue.
Some companies may be subject to both laws, depending on their revenue.
At a glance: Who is required to report?
| Requirement | SB 261 | SB 253 |
| Annual global revenue | $500 million+ | $1 billion+ |
| Doing business in CA | Required | Required |
| Approx. companies affected | ~10,000 | ~5,300 |
What is required under SB 253 and SB 261, and when is it due?
While both laws aim to increase transparency around corporate climate impacts, they have different reporting requirements. Here’s a breakdown of what each law mandates for companies that fall within scope.
Note that the California regulatory environment is continually evolving, so the fine details on timing and scope may be subject to change. The below details are up to date as of November 18, 2025.
SB 253: Greenhouse gas emissions reporting
SB253 requires companies to disclose their greenhouse gas (GHG) emissions on an annual basis. Many companies subject to SB 253 will be required to begin this disclosure in 2026. The law includes a phased rollout for different emission scopes and assurance levels. The table below summarizes when each requirement takes effect.
| Reporting year | Data year | Scope 1 & 2 reporting | Assurance (S1 & S2) | Scope 3 reporting | Assurance (S3) |
| 2026 | 2025* | Required** | Not required | Not required | Not required |
| 2027 | 2026 | Required | Limited assurance likely | Required | Not required |
| 2028 | 2027 | Required | Limited assurance | Required | Not required |
| 2029 | 2028 | Required | Limited assurance | Required | Not required |
| 2030 | 2029 | Required | Reasonable assurance | Required | Limited assurance |
*Companies with fiscal years ending before February 1, 2026 will be expected to submit data for FY 2026. All others should plan to submit data for FY 2025.
**For the first reporting year (2026), only entities already collecting or planning to collect this data for their organizations by 2024 will be required to comply. Entities that were not already collecting or planning to collect this data when the Enforcement Notice was published should submit a statement on company letterhead to CARB, stating that they did not submit a report, and indicating that in accordance with the Enforcement Notice, the company was not collecting data or planning to collect data at the time the Notice was issued.
Based on feedback from stakeholders, CARB has proposed to delay initial reporting deadlines for 2026 to August 10, 2026.
Scope 3 emissions will not be required until 2027. CARB has also indicated that third-party assurance requirements will increase gradually, moving from limited assurance in early years to reasonable assurance by 2030.
In October 2025, CARB released a draft Scope 1 and Scope 2 reporting template and accompanying memo outlining the data fields companies will need to complete once reporting begins. The draft provides the clearest view yet of what information CARB plans to collect, including organization details, emissions boundaries, third-party assurance fields, and optional disclosures for renewable energy reductions.
Click here to read our deep-dive on CA SB 253.
SB 261: Climate-related financial risk disclosure
In the original SB 261 timeline, in-scope companies were required to publish a climate-related financial risk report every two years, beginning January 1, 2026.
However, on November 18, 2025, a federal appeals court temporarily paused enforcement of California’s SB 261. The pause came after the U.S. Chamber of Commerce and several business groups challenged the law, arguing that companies should not have to comply while the case is being reviewed.
Because of this challenge, California cannot currently require companies to publish or submit their climate-related financial risk reports, meaning the reporting timelines are now uncertain. However, companies should continue to anchor their planning to the original January 1, 2026 due date, viewing it as unsettled rather than disregarded. CARB may return to the original schedule or introduce a revised, but still near-term, deadline once the legal process concludes.
These reports must identify material risks associated with climate change and describe how those risks could impact the company’s operations, financial performance, and long-term strategy.
While the law allows flexibility in format and structure, companies are encouraged to use established reporting frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) or IFRS S2, the climate-related disclosure standard developed by the International Sustainability Standards Board (ISSB).
CARB’s draft checklist for SB 261 reporting outlines four key areas that companies should address in their climate-related financial risk disclosure. While you can use frameworks like TCFD or IFRS S2, the table below summarizes what’s minimally expected under California’s law and where to focus as you begin preparing your report.
| Area of disclosure | Minimum CARB requirement for disclosure |
| Governance | Describe your organization’s governance structure, if any, for identifying, assessing, and managing climate-related financial risks.
Details should include:
|
| Strategy | Describe the actual and potential impacts of climate-related risks and opportunities on the company’s operations, strategy, and financial planning (where material).
This includes:
The discussion regarding climate scenarios may be qualitative in nature. Where a qualitative scenario-based assessment is feasible and relevant for a particular company, CARB encourages its inclusion. |
| Risk management | Describe how the reporting entity identifies, assesses, and manages climate-related risks, including a description of:
|
| Metrics and targets | Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities adopted to reduce and adapt to climate-related risk, where such information is material.
(Note: GHG emissions disclosure is not required for SB 261 reporting) |
Note: Final reporting requirements for SB 261 are still being developed. The expectations listed above are based on globally recognized disclosure frameworks (TCFD and IFRS S2) and may evolve once CARB completes its formal rulemaking process.
CARB has indicated that reports can be either standalone documents or embedded within broader ESG or annual reports, as long as the climate risk disclosure is clearly accessible and meets content expectations.
Click here to read our deep dive on CA SB 261.
CARB’s guidance: Flexibility and good faith compliance
As of October 2025, CARB is still finalizing the regulations for SB 253 and SB 261, with formal rulemaking expected by the end of 2025. In the meantime, its July 2025 guidance emphasizes a phased and flexible approach, particularly during the first reporting cycle.
This flexibility includes, but is not limited to:
Use of available data:
- For SB 253, companies can use Scope 1 and 2 emissions data from any fiscal year between 2023 and 2025 in their first report.
- For SB 261, companies may base their first risk disclosure on fiscal year 2023/24 or 2024/25, depending on data availability.
Good faith efforts matter. CARB has stated that it will assess early compliance based on reasonable, good-faith efforts rather than strict technical completeness. Companies that begin preparations early, use the best available data, and follow recognized frameworks are unlikely to face penalties in the initial reporting cycle.
Start preparing to meet regulatory requirements today
Optera is actively helping companies prepare for SB 253 and SB 261 reporting, including emissions calculations, data readiness, and climate risk disclosures. See how we can help.
