The California Air Resources Board (CARB) released a list this week identifying which entities the agency believes are subject to the state's climate disclosure laws — SB 253 and SB 261.1 The list can be downloaded here.2 California enacted both the California Corporate Greenhouse Gas Reporting Program (SB 253) and Climate Related Financial Risk Disclosure Program (261) in 2023. SB 253 requires US companies with total annual revenues in excess of $1 billion that do business in California to annually disclose their scope 1, 2 and 3 greenhouse gas (GHG) emissions for the prior fiscal year.3 SB 261 requires US companies with total annual revenues exceeding $500 million that do business in California to publish biennial climate-related financial risk reports.4
As previewed during the most recent Public Workshop, CARB used existing databases of US-based companies including the California Secretary of State Business Entity database, to identify companies "doing business in California" that meet the annual "revenue" threshold requirements.5 While this approach is different than the initial concept proposed by CARB staff based on the Franchise Tax Board's definitions of "doing business in California" and "gross receipts,"6 CARB's goal of covering US companies that (1) do business in California, and (2) meet revenue thresholds triggering SB 253 and/or 261 remains the same.
My Company Is on the List for SB 261 Climate-Related Financial Risk Disclosures: What Does This Mean?
A covered entity must prepare the first SB 261 report by January 1, 2026, and make a copy of the report publicly available on its own internet website.7 Covered entities then must continue to biennially prepare and publicly disclose a report on their climate-related financial risk and the measures adopted to reduce and adapt to climate-related financial risk.8 CARB is creating a public docket on December 1, 2025, for reporting entities to post the location of their public link to their initial climate-related financial risk report under this program.9
SB 261 allows reporting entities to prepare disclosures in conformance with the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017) (published by the TCFD or any successor) or the International Financial Reporting Standards Sustainability Disclosure Standards (IFRS S2) frameworks. Alternatively, reporting entities may use any disclosure/reporting framework that is developed in accordance with any regulated exchange, national government or other governmental entity, including a law or regulation issued by the US government.10
CARB has provided a "draft checklist" serving "as a starting point" for guidance for reporting entities, which includes the following "minimum CARB requirements for disclosure:"11
- Governance: Reports must describe an entity's governance structure, if any, for identifying, assessing and managing climate-related financial risks. This would include any management oversight of climate-related risks and opportunities. If the reporting entity has a board then a description pertaining to board oversight of climate-related risks and opportunities should be included.
- Strategy: Reports must describe the actual and potential impacts of climate-related risks and opportunities on the company's operations, strategy and financial planning. This includes the climate-related risks and opportunities the entity has identified over the short, medium and long term. CARB encourages inclusion of qualitative scenario-based assessment where feasible and relevant for a particular reporting company.
- Risk Management: Reports must provide how the reporting entity identifies, assesses and manages climate-related risks including a description of the process the reporting entity uses for identifying, managing and assessing climate-related risks, and how those considerations and processes are integrated into the organization's overall risk management.
- Metrics and Targets: Reports must 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.
CARB has explained that climate-related financial risk reports may be consolidated at the parent company level. A subsidiary of a parent company that qualifies as a covered entity under SB 261, however, is not required to prepare a separate climate-related financial risk report if the parent company is reporting on its behalf.12
Acknowledging that climate risk-related data is often collected on a fiscal year basis and that it takes time to process climate information into a report, CARB is facilitating a "phase-in period for reporting" by allowing initial climate-related financial risk reports to include information from fiscal years 2023/2024 or 2024/2025.13 In doing so, CARB is supporting use of the best available information, recognizing that data collection methods may change over the course of the year.14 However, CARB still fully expects that covered entities make "good faith" efforts to comply.15
My Company Is on the List for SB 253: What Does This Mean?
CARB has proposed that scope 1 and 2 emissions reporting will be due June 30, 2026, and CARB staff plans to release draft reporting templates for Scope 1 and 2 reporting by the end of September 2025.16 As per the statute, reporting entities will initially be required to obtain an assurance (i.e., verification) engagement performed by an independent third-party assurance provider for Scope 1 and 2 emissions at a limited-assurance level. By 2030, reporting entities must obtain reasonable-assurance engagements.17 CARB has suggested several standards for developing the assurance concept, including ISSA 5000, AA1000, ISO 14060 and AICPA — but remains open to public feedback on this concept.18
CARB does not anticipate requiring Scope 3 emissions reporting until 202719 and the statute provides that initially, the "assurance engagement for scope 3 emissions shall be performed at a limited assurance level beginning in 2030."20
For purposes of SB 253, Scope 1, 2 and 3 emissions are defined as follows21:
- Scope 1 emissions: all direct greenhouse gas emissions that stem from sources that a reporting entity owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities.
- Scope 2 emissions: indirect greenhouse gas emissions from consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity, regardless of location.
- Scope 3 emissions: indirect upstream and downstream greenhouse gas emissions, other than scope 2 emissions, from sources that the reporting entity does not own or directly control and may include, but are not limited to, purchased goods and services, business travel, employee commutes, and processing and use of sold products.
CARB has recognized that some companies will require some lead time to implement new data collection processes to fully report Scope 1 and Scope 2 emissions. To that end, CARB has issued a notice stating that it "will exercise its enforcement discretion such that, for the first report due in 2026, reporting entities may submit scope 1 and scope 2 emissions from 'the reporting entity's prior fiscal year' that can be determined from information the reporting entity already possesses or is already collecting at the time this Notice was issued."22 In other words, "CARB will not take enforcement action for incomplete reporting against entities, as long as the companies make a good faith effort to retain all data relevant to emissions reporting for the entity's prior fiscal year."23 CARB has reiterated that this enforcement discretion applies to the first reporting cycle but does not constitute an interpretation of statutory requirements.24
CARB Continues to Seek Public Comment on SB 261 and SB 253
Whether your entity is on the list published by CARB or not, the agency is seeking stakeholder input "regarding a preliminary list of reporting/covered entities, and welcoming additional business information to help further establish whether entities are subject to the SB 253/261 reporting programs."25 Stakeholders may submit feedback here.26
Footnotes
1. It should be noted that CARB cautions that companies subject to the regulation will be responsible for compliance, even if not initially included on Staff's list or outreach.
2. The list is also posted here: https://ww2.arb.ca.gov/our-work/programs/corporate-ghg-reporting/faqs-and-factsheet.
3. CA Health & Safety Code § 38532.
4. CA Health & Safety Code § 38533.
5. See CARB Public Workshop (Aug. 21, 2025) (slide deck); CARB Public Workshop (Aug. 21, 2025) (recording). CARB explained this change in approach responds to comments received highlighting difficulties and concerns with applying the initial Franchise Tax Board concept.
6. See CARB, California Corporate Greenhouse Gas Reporting and Climate-Related Financial Risk Disclosure Programs: FAQs Related to Regulatory Development and Initial Reports (Jul. 9, 2025); CA Rev & Tax Code § 23101(a); § 25120(f)(2).
7. CA Health & Safety Code § 38533(c)(1).
8. Id.; see also CARB, Climate Related Financial Risk Disclosures: Draft Checklist (Sept. 2, 2025).
9. See CARB, Climate Related Financial Risk Disclosures: Draft Checklist (Sept. 2, 2025).
10. Id.; CA Health & Safety Code § 38533(b)(1)(A)(i), (b)(3).
11. Id.
12. Id.
14. Id.
15. Id. (referencing enforcement discretion in considering penalties for reporting violations).
[16. See CARB Public Workshop (Aug. 21, 2025) (slide deck).
17. See CARB, California Corporate Greenhouse Gas Reporting and Climate-Related Financial Risk Disclosure Programs: FAQs Related to Regulatory Development and Initial Reports (Jul. 9, 2025); CA Health & Safety Code § 38532(c)(2)(F)(ii).
18. See CARB Public Workshop (Aug. 21, 2025) (slide deck).
19. See id.; see also CARB, California Corporate Greenhouse Gas Reporting and Climate-Related Financial Risk Disclosure Programs: FAQs Related to Regulatory Development and Initial Reports (Jul. 9, 2025).
20. CA Health & Safety Code § 38532(c)(2)(F)(iii).
21. CA Health & Safety Code § 38532(b)(3)-(5).
22. CARB, Enforcement Notice (Dec. 5, 2024).
23. Id.
24. Id.
25. CARB: SB 253/261 Stakeholder Survey.
26. The stakeholder survey is also available at https://ww2.arb.ca.gov/our-work/programs/corporate-ghg-reporting/faqs-and-factsheet.
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