Summary
The California Air Resources Board (CARB) recently released a draft list of 4,159 public and private companies that do business in the state and that it believes must comply with California's laws requiring disclosure of climate-related financial risks by January 1, 2026, and Scope 1 and 2 greenhouse gas emissions by June 30, 2026. The list and CARB's accompanying solicitation for feedback mark a continuation of CARB's unconventional approach to developing guidance and regulations for companies that must comply.
The Upshot
- CARB continues to release late-breaking guidance for companies with more than $500 million in annual revenue that must publicly disclose climate-related financial risks by January 1, 2026.
- CARB has released a preliminary list of 4,159 public and private companies that are potentially subject to the climate disclosure laws, although confusion about who is subject to the laws remains widespread.
- CARB is gathering voluntary feedback from companies both on and off the preliminary list of covered entities.
- The list also applies to U.S.-based companies with more than $1 billion in annual revenue operating in California that must report Scope 1 and 2 greenhouse gas emissions by June 30, 2026, and Scope 3 emissions starting in 2027, based on the prior fiscal year.
The Bottom Line
Companies are scrambling to meet impending deadlines for California's two climate disclosure laws, while still awaiting clear guidance from CARB about who must comply and what they must disclose. Our Environment and Natural Resources Group offers strategic legal support to help clients confidently engage with CARB, meet upcoming deadlines, and manage their compliance obligations to align with business goals.
Passed in 2023, the Climate-Related Financial Risk Act (SB261) requires every public and private company in the U.S. (except insurance firms) that "does business" in California and has annual revenues exceeding $500 million to report their climate-related financial risks by January 1, 2026, and biennially thereafter. Early estimates suggested more than 10,000 companies would be affected. In addition, The Climate Corporate Data Accountability Act (SB253) requires such companies with revenues exceeding $1 billion to report their greenhouse gas emissions—including Scope 1 and 2 greenhouse gas (GHG) emissions from the previous fiscal year by June 30, 2026—and begin reporting Scope 3 emissions in 2027.
These laws bring significant compliance obligations, particularly for private companies new to mandatory climate disclosures, necessitating robust internal tracking, third-party verification, and strategic planning. The laws gained greater significance for the regulated community since the Securities and Exchange Commission withdrew its support for its climate disclosure regulations earlier this year.
Considerable questions and uncertainty surround who "does business" in California and therefore must comply with the laws. The issue has been the subject of several public workshops hosted by CARB in recent months. Until CARB adopts a regulation to implement the laws, the question may remain unanswered. CARB has also floated several possible ways to define "total annual revenue."
On September 24, 2025, California released a draft list of more than 4,000 companies potentially subject to SB 253 and SB 261 reporting requirements. With the list, CARB is soliciting voluntary feedback from companies to explain why they believe they are subject to the laws or why they believe they are not, or that they should be exempt. CARB emphasized that every company remains responsible for compliance with statutory requirements regardless of whether it appears on the preliminary list or responds to the survey. This latest outreach to stakeholders underscores the widespread uncertainty and confusion regarding which companies are actually subject to these laws, highlighting the ongoing lack of clarity in how the regulations will be applied.
This list and the survey questions provide companies a critical opportunity to review their inclusion and submit feedback during CARB's ongoing rulemaking process. Early engagement is vital to shaping regulations and addressing compliance challenges.
Separately, CARB plans to release a proposed regulation on October 14, 2025, and accept public comment until November 30, 2025. Companies should urge CARB to allow them to comply by continuing GHG accounting and disclosure practices they might already have in place for other purposes, such as disclosures required by the E.U. or by their customers.
Ballard Spahr is closely tracking CARB's rulemaking and is prepared to assist companies in:
- Determining whether they are subject to the disclosure laws
- Engaging with CARB to influence the rulemaking process and achieve an efficient compliance result
- Aligning climate risk disclosures with the Task Force on Climate-related Financial Disclosures (TCFD) framework under SB 261
- Navigating third-party assurance requirements and developing compliance systems
The advisory was co-written by Law Clerk Sarah Elena De Los Santos Samaniego.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
