What Are California's Climate Disclosures?
California's climate disclosures are a pair of state laws that require large companies doing business in California to publish climate data on the same footing as financial data. SB 253, the Climate Corporate Data Accountability Act, covers greenhouse gas emissions. SB 261, the Climate-Related Financial Risk Act, covers climate risk to the business. Both were signed in 2023 and amended in 2024, and both are administered by the California Air Resources Board (CARB).
Together they represent the most demanding corporate climate disclosure requirement in the United States. They are also part of a global shift toward mandatory sustainability reporting that includes the CSRD in Europe and IFRS S2 adoption in more than 20 jurisdictions. CARB has said explicitly that it designed its rules to interoperate with IFRS S2 and the CSRD so companies can build one emissions inventory and report it in several places.
What Changed in 2026
Four main things changed in 2026.
- CARB's implementing regulation is board-approved but still not final. The Board approved the initial regulation on February 26, 2026. CARB submitted the package to the Office of Administrative Law in May, then withdrew it on June 24, 2026 to make clarifications and moved the reporting deadline back. A 15-day comment period on the modified text closed August 11, 2026, and the package is being resubmitted.
- The first SB 253 deadline moved to November 10, 2026, from August 10, 2026.
- SB 261's January 1, 2026 deadline was never enforced. The Ninth Circuit enjoined the law on November 18, 2025, and CARB issued a non-enforcement advisory on December 1, 2025.
- Scope is now assessed entity by entity, not on a consolidated basis. This narrows real coverage meaningfully, and it means a parent company is not automatically covered because a subsidiary is.
The substantive rules for 2027 and beyond, including scope 3 and assurance, sit in a second rulemaking that has not happened yet. CARB previewed its approach at a July 2026 workshop and expects to publish draft regulation text later in 2026, followed by a 45-day comment period.
Who Has to Comply with California's Climate Disclosures?
You are in scope if you meet two tests: you exceed the revenue threshold, and you do business in California.
The Revenue Test
- SB 253: more than $1 billion in total annual revenue.
- SB 261: more than $500 million in total annual revenue.
Revenue means total global revenue, not California revenue. CARB's final regulation order defines it as "gross receipts" under section 25120(f)(2) of the California Revenue and Taxation Code, which is the gross amount realized on sales and exchanges of property before any deduction for cost of goods sold. That is a broader figure than net revenue, and it pulls some companies into scope that would not qualify on a profit-and-loss reading.
Two clarifications from the July 2026 modified text matter here. Revenue is measured at the individual legal entity level rather than aggregated across a corporate family, and intercompany transactions within the same combined reporting group are excluded.
The "Doing Business in California" Test
CARB defines this by reference to section 23101(b)(1) or 23101(b)(2) of the California Revenue and Taxation Code. In practice you are doing business in California if you are organized or commercially domiciled in the state, or your California sales exceed the threshold the Franchise Tax Board sets annually, which was $735,019 for 2024. The bar is low, and the test is applied to each legal entity separately.
How Many Companies Are Covered?
California's climate disclosures are expected to reach more than 10,000 companies headquartered across the United States. The bar for "doing business in California" is low, and the revenue thresholds are measured on total global revenue, so the reach extends well beyond companies that think of themselves as California businesses.
CARB published a preliminary list of covered entities on September 24, 2025. That list has not been superseded, and it is still the only list CARB has published.
Do not treat the list as an answer, and do not treat it as the full universe. CARB is explicit that it is "not a definitive determination" and that entities must independently assess whether the statutes apply to them. The list was assembled from Secretary of State registrations cross-referenced against third-party revenue data, so it is substantially narrower than the population the laws actually reach. It also sweeps in some subsidiaries that do not independently clear the thresholds, a problem the July 2026 entity-level clarification makes larger.
If you are not on the list, that tells you very little. Compliance is the entity's own responsibility.
Download the list and check whether you are on it.
Who Is Exempt?
CARB's final regulation order exempts tax-exempt nonprofits, insurance companies regulated by the California Department of Insurance, and government entities or businesses more than 50% government-owned. SB 253 additionally exempts entities whose only California activity is wholesale electricity transactions in interstate commerce, and entities whose only California business is employee compensation or payroll expense.
The insurance carve-out looks temporary. At its July 2026 workshop CARB said reporting to the Department of Insurance does not satisfy SB 253, particularly on scope 3 and assurance, and proposed bringing insurers into SB 253 from 2027.
What Is the SB 253 Deadline in 2026?
November 10, 2026. CARB moved the date from August 10, 2026 when it withdrew the regulation in June, in order to give companies clarity on the final rule before reporting came due. CARB's July 2026 workshop materials confirm the new date and set the recurring pattern as on or before November 10 each reporting year.
One caveat: the date lives in regulation text that has not yet cleared the Office of Administrative Law. CARB has committed to it publicly, and it is the date to plan against, but it is not yet law.
What You Report in 2026
Scope 1 and scope 2 emissions only. Most companies report fiscal year 2025 data. Companies whose fiscal year ends between January 1 and February 1, 2026 report fiscal year 2026 instead, because the rule requires a minimum six-month gap between fiscal year end and the deadline.
Scope 2 must be reported both market-based and location-based, broken out by source type across electricity, steam, heating, and cooling. Reporting follows the Greenhouse Gas Protocol, including the Corporate Standard, the Scope 2 Guidance, and the Scope 3 Standard.
First-year Relief Is Unusually Generous
The July 2026 modified text formalizes a significant concession. For the 2026 report, an entity may submit either the scope 1 and 2 data it actually possessed as of December 5, 2024, or a statement on company letterhead confirming that no such data was collected. CARB has also said it will exercise enforcement discretion for good-faith first-year submissions, and it invites companies to describe gaps, limitations, and assumptions alongside their numbers.
In practice, that means a company that has not started cannot be penalized into oblivion this year. It also means the companies treating 2026 as a real dry run are the ones who will not be scrambling in 2027, when assurance arrives.
When Does Scope 3 Reporting Start?
Reports submitted in 2027, covering fiscal year 2026. CARB has proposed narrowing the first year to five of the fifteen scope 3 categories:
- Category 1, purchased goods and services
- Category 3, fuel- and energy-related activities
- Category 5, waste generated in operations
- Category 6, business travel
- Category 7, employee commuting
The remaining ten categories would be voluntary at first and phased in later. This is a proposal in the forthcoming second rulemaking, not adopted rule text. Our scope 3 guide covers all fifteen categories and how to sequence them.
Why Is SB 261 Not Being Enforced?
Because a federal appeals court paused it. Here's what happened.
- August 13, 2025. The Central District of California denied a preliminary injunction in the U.S. Chamber of Commerce's challenge, which had narrowed to a single First Amendment compelled-speech claim.
- November 18, 2025. The Ninth Circuit granted an injunction pending appeal as to SB 261 only and denied it as to SB 253. The order was two sentences and contained no reasoning, so there is no judicial explanation on the record for why one law was paused and the other was not.
- December 1, 2025. CARB advised that it "will not enforce Health and Safety Code section 38533 against covered entities for failing to post and submit reports by the January 1, 2026, statutory deadline."
- January 9, 2026. The Ninth Circuit heard oral argument. As of August 21, 2026 there is no merits ruling, and the injunction remains in effect.
A second case, Exxon Mobil Corp. v. Sanchez, is pending in the Eastern District of California. It raises a First Amendment claim plus a preemption theory, and attacks the reliability of Greenhouse Gas Protocol scope 3 methodology. Briefing closed in January 2026 with no ruling yet. CARB tracks both on its current litigation page.
What this means. SB 253 carries no injunction and is enforceable, so the November 10 deadline is live. SB 261 is paused. Either could change quickly, and a Ninth Circuit decision could land before November 10 in a way that lifts the SB 261 pause or reaches SB 253. Companies planning on the assumption that SB 261 has gone away are taking a position on litigation, not on compliance.
Should You File an SB 261 Report Anyway?
CARB has kept a voluntary docket open through December 31, 2026. More than 170 companies had submitted voluntarily as of June 2026, a small fraction of the population the law reaches.
The mechanics are simple. Post the full report on your own public website, then submit the link in the docket's message field along with a statement on company letterhead naming any subsidiaries covered. CARB takes three to four weeks to review and release a submission.
For a company that already publishes TCFD-aligned or IFRS S2-aligned disclosure, filing is close to free and removes the risk of a compressed timeline if the injunction lifts. For a company starting from nothing, the better use of this window is building the underlying risk assessment rather than rushing a document.
What Framework Does SB 261 Require?
Three options, all acceptable per CARB's checklist:
- The 2017 final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)
- IFRS Sustainability Disclosure Standards issued by the ISSB, meaning IFRS S2
- A report developed under the rules of a regulated exchange, national government, or other governmental entity
Content tracks the four TCFD pillars: governance, strategy, risk management, and metrics and targets. An existing TCFD-aligned report not written for SB 261 can satisfy the requirement, which is why companies already reporting to the CSRD or IFRS S2 are largely covered here.
What Are the Assurance Requirements?
Lighter than the statute implies, at least at first.
| Report year | Scope 1 and 2 | Scope 3 |
|---|---|---|
| 2026 | No assurance required | Not reported |
| 2027 | Limited assurance | No assurance |
| 2030 onward | Reasonable assurance | Limited assurance |
The statute contemplated limited assurance for scope 1 and 2 beginning in 2026. CARB has effectively deferred that to reports submitted in 2027. The 2030 dates for reasonable assurance on scope 1 and 2, and limited assurance on scope 3, are statutory and unchanged.
CARB's July 2026 materials list five acceptable assurance standards: AA1000AS v3, AICPA AT-C Section 210, ISAE 3410 read with ISAE 3000 for engagements beginning before December 15, 2026, ISSA 5000 for engagements beginning on or after December 15, 2026, and ISO 14064-3:2019. Reasonable assurance satisfies a limited assurance requirement. These 2027 rules are proposed, not adopted.
The ISSA 5000 cutover is the detail most likely to catch people out. If you are scoping an assurance engagement for your 2027 report, the standard your provider works to depends on when the engagement starts.
What Are the Penalties for Non-compliance?
Unchanged from the statutes, and narrower than the headline numbers suggest.
- SB 253: administrative penalties may not exceed $500,000 in a reporting year.
- SB 261: administrative penalties may not exceed $50,000 in a reporting year, and CARB must weigh compliance history and good-faith efforts.
Two protections matter for scope 3. A company is not subject to penalty for scope 3 misstatements "made with a reasonable basis and disclosed in good faith." And between 2027 and 2030, scope 3 penalties may only be assessed for non-filing, not for the quality of what is filed. The practical message is that filing something defensible beats filing nothing, by a wide margin.
What Will This Cost?
Beyond the internal cost of building the data, CARB's initial regulation creates an annual flat fee for each covered entity, calculated as annual program cost divided by the number of regulated entities. Two new funds pay for administration.
CARB's staff report puts program cost at roughly $14 million a year ongoing, peaking near $20.8 million in fiscal years 2026-27 through 2028-29. Published estimates of the per-entity fee land in the low thousands of dollars annually, but the figure is not firmly established and earlier workshop estimates have already been superseded.
The standing schedule is a fee notice on or by September 10 each year, with payment due within 60 days. For the first year, independent legal analyses of the July 2026 modified text report that the fee determination notice moves to December 10, 2026, again with payment due within 60 days. Parent entities may pay consolidated fees on behalf of subsidiaries.
The modified text also adds a record retention requirement. Companies must keep the California tax records substantiating their revenue and doing-business determinations.
How to Prepare
1. Settle Your Scope Question in Writing
Because the test now runs entity by entity, this is a legal and tax exercise before it is a carbon exercise. Pull gross receipts as reported to the Franchise Tax Board for each entity, apply the section 23101(b) test to each, and document the conclusion. Keep the records. If you land close to a threshold, you will need this again next year.
2. Close Your Scope 1 and 2 Data Gaps First
The November 10 report is scope 1 and 2 only, and utility and fuel data is where most companies lose weeks. Get every site's electricity, gas, and fuel data into one place with the source document attached. You need both market-based and location-based scope 2, split by source type, which trips up companies that have only ever calculated one.
3. Use 2026 as Your Assurance Dress Rehearsal
No assurance is required this year. Limited assurance arrives next year. The gap between those two facts is your window to find out where your evidence trail breaks before an assurance provider finds it for you. Every number should carry its source document, emission factor, factor version, and change history.
4. Start Scope 3 on the Five Named Categories
Purchased goods and services, fuel- and energy-related activities, waste, business travel, and employee commuting. Procurement spend gets you a defensible first pass on category 1, and supplier-specific data improves it over time. Starting now means 2027 is a refinement rather than a standing start.
5. Decide Your SB 261 Position Deliberately
Not by default. Either file voluntarily before December 31, 2026, or make a documented decision to wait on the Ninth Circuit and build the risk assessment in the meantime. Both are defensible. Drifting is not.
6. Build the Inventory Once
If you also face the CSRD, CDP, or IFRS S2, the emissions inventory underneath all of them is the same. Our climate disclosure framework guide maps the overlaps.
How Gravity Helps You Meet the November 10 Deadline
California's climate disclosures are the highest bar for corporate climate disclosure in the United States, and the timeline is short. There are several ways to meet it, whether that is managing it in house, hiring a consulting firm, or onboarding software.
Gravity offers the best of both worlds: world-class software and personalized support from Climate Experts. We'll work with you every step of the way, from data collection to final reports, to ensure you meet your deadline with the highest level of accuracy.
- Automated data collection. Collecting scope 1, 2, and 3 data is the most time-consuming part of reporting. Gravity's bill scanning and utility APIs process thousands of documents in seconds, without manual error. Supplier engagement and surveys make it possible to collect value chain data in record time.
- Data assurance. Assurance readiness should be built into every step, not bolted on. Gravity's platform keeps data logs, attaches supporting evidence to every data point, and speeds up review by keeping everything in one place with view access for your assurance provider. We can also introduce you to trusted providers.
- Simplified reporting. Our platform formats your data to CARB's requirements, including market-based and location-based scope 2 by source type. You can also translate the same underlying data to any other disclosure you need to meet, including the CSRD.
- World-class assistance. You'll be partnered with an expert Climate Strategist who will help you navigate the regulation as it applies to your company, compose answers to qualitative and quantitative questions, and offer final reviews and submission reports.
Talk to an expert about your November 10 deadline.