On August 21, 2025, the California Air Resources Board (CARB)
held its second virtual public workshop to provide information regarding implementation of
SB 253 (the Climate Corporate Data Accountability Act) and
SB 261 (the Climate‑Related Financial Risk Act), both
as amended by SB 219.

In addition to the August workshop, CARB’s public engagement
on SB 253 and SB 261 has included an initial virtual public
workshop on May 29, 2025, FAQs posted by CARB on July 9, 2025 relating to the regulatory
development of these programs and information regarding submittal
of initial reports, and most recently, a Climate Related Financial
Risk Disclosures Draft Checklist for compliance with SB 261, posted
on September 2, 2025.

Refresher: SB 253 and 261

As previously reported in greater detail (here, here and here), SB
253 (the Climate Corporate Data Accountability
Act) requires U.S.‑based entities doing business in
California with over $1 billion in annual revenue to publicly
disclose their Scope 1, 2 and 3 greenhouse gas (GHG) emissions.
SB 261 (the Climate‑Related Financial Risk
Act) requires U.S.‑based entities doing business in
California with over $500 million in annual revenue to prepare
biennial reports describing their climate‑related financial
risks and the measures taken to mitigate them, in line with global
reporting frameworks. SB 219 amended SB 253 and SB
261 and, among other things, clarified that CARB would set the
schedule for Scope 3 GHG emissions disclosures for some time in
2027 and that disclosures could be consolidated at the parent
company level.

Who is Covered?

The question of which entities are covered under these laws is
still being determined. CARB’s August workshop did not offer
finality on key definitions that would clarify the scope of
applicability:

“Doing Business in California”
‑ CARB is still deciding which definition of
“doing business in California” to adopt. During the May
public workshop, CARB proposed to use the definition of doing
business under Cal. Rev. and Tax Code § 23101:

Actively engaging in any transaction for the purpose of
financial or pecuniary gain or profit
and any of the following
conditions is met during any part of a reporting year:

(1) The entity is organized or commercially domiciled in
this state.

(2) The real property and tangible personal property of the
entity in this state exceed the lesser of $73,502 (2024) or 25% of
the entity’s real property and tangible personal
property.

(3) The amount paid in this state by the entity for
compensation exceeds $73,502 (2024) or 25% percent of the total
compensation paid by the entity.

(4) Sales…of the entity in this state exceed $735,019
(2024).

During the August workshop, CARB proposed a narrower
definition:

Actively engaging in any transaction for the purpose of
financial or pecuniary gain or profit and
any of the following conditions is met during any part of
a reporting year:

(1) The entity is organized or commercially domiciled in
this state.

(2) Sales…of the entity in this state exceed $735,019
(2024).

CARB plans to put out a list by the end of September of
potential companies that would be covered by this definition.
However, CARB noted that non‑inclusion on the list will not
be dispositive of whether an entity is subject to the laws.

Proposed Exemptions – CARB proposed that the
following entities would not be considered to be “doing
business in California”:


Non‑profits

Companies whose only California business is teleworking
employees

Government entities

CA Independent System Operators (CAISO) and entities whose only
California activity is wholesale electricity transactions in
interstate commerce

“Revenue” ‑ At the May
workshop, CARB had proposed defining total annual revenue as
“gross receipts” as defined under the California Revenue and Taxation Code
§25120(f)(2). However, at the August workshop, CARB
proposed the following alternative definition: Revenue is the
total global amount of money or sales a company receives from its
business activities, such as selling products or providing
services.

This narrower definition does not deduct operating costs or
other business expenses and is consistent with metrics used by
major data tracking and reporting industries, like the S&P and
Dunn & Bradstreet.

Parent and Subsidiary

Consistent with the May workshop, CARB proposed defining a
parent and subsidiary relationship (for purposes of determining
when entities can consolidate reporting) based on California’s
existing Cap‑and‑Trade regulation:

[A] [s] ubsidiary is a business in which another company
(the parent or holding company) owns more than 50% of its voting
stock. A subsidiary has a different legal business name than its
parent company. This corporate relationship implies that the parent
company has a controlling interest and can influence the
subsidiary’s operations, management and financial decisions,
even though the subsidiary operates as a separate legal
entity.

CARB clarified that if a subsidiary qualifies as a covered
entity for purposes of SB 261 and the parent company is submitting
a consolidated report, the subsidiary does not need to break out
its own climate‑related financial risk information
separately.

Fees

At the August workshop, CARB recommended a flat fee per
regulated entity, resulting in one fee for compliance with SB 253
and one fee for SB 261. The fee would be calculated based on the
annual program cost divided by the total number of entities covered
by the rule, plus a one‑time start‑up cost.

Based on its preliminary estimate of the total number of covered
entities, CARB calculated the following annual fees:1
$3,106 for SB 253 and $1,403 for SB 261.

Subsidiaries filing consolidated reports with the parent company
would be considered a separate entity and subject to a separate
fee.

CARB’s Draft Timeline


August 21–September 11, 2025: Public
comment period for feedback on the concepts presented at the
workshop

October 14, 2025: CARB will issue notice of
proposed rulemaking

October 17–November 30, 2025:
45‑day comment period pursuant to California’s
Administrative Procedures Act

December 11–12, 2025: CARB Board Hearing
to consider adoption of the proposed rulemaking

Compliance Deadlines and Logistics

Despite the lack of final rulemaking, the current deadlines
under the laws remain in effect. Specifically:

SB 253 (GHG Emissions Reporting)

Companies must submit Scope 1 and Scope 2 GHG emissions data to
CARB by June 30, 2026. CARB will
release draft reporting templates for public comment by the end of
September 2025, providing a preview of the required format and
content.

Data Assurance Data submitted to
comply with SB 253 is required to undergo independent, systematic,
and documented assurance. “Limited Assurance” — the
lowest level of assurance — is the assurance level required
for Scope 1 and 2 GHG reporting due in 2026. This means the
assurance provider must not find any material misstatements but is
not required to perform exhaustive checks. It is still unclear
whether the limited assurance is required to be submitted at the
same time the initial GHG emissions report is submitted.

Of note, The Climate Corporate Data Accountability Act
Enforcement Notice Dec 2024 published by CARB on December 5,
2024, made clear that CARB will not take enforcement action for
incomplete reporting under SB 253 for the first reporting cycle, so
long as the entities demonstrate a good faith effort to comply.

SB 261 (Climate Risk Reporting)

Companies must post climate risk reports on their websites by
January 1, 2026, and every two years thereafter.
However, the official CARB “docket” for submissions and
notifications will remain open until July 1, 2026,
with the submission window opening December 1, 2025.

These reports can use one of a number of frameworks, including:
the 2017 Final Report of Recommendations of the Task Force on
Climate‑related Financial Disclosures (TCFD); the
International Financial Reporting Standards (IFRS) Disclosure
Standards issued by the International Sustainability Standards
Board (IFRS S2); or a report developed in accordance with any
regulated exchange, national government, or other governmental
entity.

Regardless of the format, the report submitted to CARB must
include a statement specifying the framework used, identify which
recommendations and disclosures have been addressed, briefly
explain any omissions and discuss any plans for future
disclosures.

Of note, while the language of SB 261 only requires reporting on
material climate‑related financial risks (corresponding to
the strategy pillar of TCFD), CARB appears to be expecting covered
entities to report on all of the principles of TCFD and IFRS 2,
including governance, risk management and the metrics and targets
used to assess and manage climate‑related risks and
opportunities.

Federal Litigation Update

Litigation brought by the Chamber of Commerce of the United
States and others challenging the constitutionality of SB 253 and
SB 261 remains ongoing. Notably, on August 13, 2025, the federal
district court for the Central District of California denied
plaintiffs’ motion for a preliminary injunction, which would
have put the enforcement of SB 253 and 261 on hold. The court found
that plaintiffs’ First Amendment challenge was unlikely to
succeed on the merits, stating that the State’s interest in
providing reliable information to investors would likely pass the
level of scrutiny the court would use to examine the laws.
Plaintiffs promptly appealed to the Ninth Circuit, and moved for an
injunction barring the implementation and enforcement of the laws
pending the appeal. In the meantime, the laws are not stayed and
remain in effect.

Recommended Next Steps

With deadlines approaching and regulatory details still
evolving, to ensure compliance with SB 253 and SB 261, entities
should:


Assess whether they are likely to be covered under SB 253
and/or SB 261;

Gather relevant GHG emissions and climate risk data required to
be reported based on fiscal year 2025, or, if not available, from
prior years, using the most recent and best available data for the
first report;

Select a reporting framework and limited assurance
provider;

Provide public comment where appropriate during the open
comment periods; and

Continue to monitor developments concerning CARB’s final
rulemaking.

We will continue to update you on material developments as they
unfold.

Footnote

1. Annual fees would be adjusted for inflation and fund
deficit/surplus in future years.

Navigating Compliance with California’s
Climate Disclosure Laws

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.