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California Air Resources Board (CARB) Updates: Ongoing Guidance for CA SB 253 and 261

By Chad Spitler, Founder and CEO, September 2025

UPDATE: Includes information provided by the August 21, 2025 CARB Workshop, September 2, 2025 Draft Checklist, and July 9, 2025 FAQs.

 

The California Air Resources Board ("CARB") continues to host workshops and release information documents, to guide companies on the upcoming regulatory process for the state's climate-related disclosure requirements. The guidance is meant to help companies prepare for initial reporting under SB 253 and SB 261 and to understand the evolving regulatory framework.

To help companies with the agency's updated guidances, we have pulled forward some key themes and continue to update this page based upon new resources. 

Definition of "Doing Business in California"

One of the key questions from the regulatory text was what it means to "do business" in the state. CARB clarified some key questions in its release, noted below. 

A) CARB is developing regulations to define "doing business in California" based on the California Corporations Code definition.

This replaces the earlier decision to define revenue through the CA Franchise Tax Code. Under the revised concept, an entity is considered to be doing business in California if:

  • It is registered as ‘active’ on the California Secretary of State Business Entity database (which lists any entity with a designated agent for service of process in CA)
  • It is listed within Dun and Bradstreet's data on entities’ revenues

Exempt companies include non-profits, companies whose only business in California is the presence of teleworking employees, government entities, and certain wholesale electricity entities.

CARB will be sending out a list of all businesses that it deems eligible in September 2025. Companies should also plan to independently assess the applicability of the laws with their own legal counsel.

B) Revenue Thresholds and Applicability

The two California climate disclosure laws apply to different revenue thresholds:

  • CA SB 261 (Climate-Related Financial Risk Disclosure): Companies with over $500 million in annual revenue doing business in California (Health and Safety Code 38533)
  • CA SB 253 (Corporate GHG Reporting): Companies with over $1 billion in total annual revenue doing business in California (Health and Safety Code 38532)

Companies may be subject to both laws or only one, depending on their revenue levels. 

As of 8/21, Due to the lack of consensus, CARB is now considering defining revenue as “the total global amount of money or sales a company receives from its business activities, such as selling products or providing services.”

C) Out-of-State Business Considerations

Companies exceeding revenue thresholds must report even if the majority of their business is outside California, provided they meet the "doing business in California" criteria. 

Initial Reporting Timeline and Considerations

In its role as the enforcing agency of environmental regulations, CARB has the final say on rule-making timelines, non-compliance penalties, and process for new laws. We've noted out some key details from the release on reporting considerations and confirmation of timing.  

A) CA SB 253 (Corporate GHG Reporting) ($1BN+)

Reporting Timeline:

  • June 30, 2026: First reports due covering Scope 1 and 2 emissions covering fiscal year 2025 (or earlier data, if limited availability prior to 6/30/26)
  • Calendar Year 2027: Scope 3 emissions reporting begins for prior fiscal year

Verification Requirements:

  • Limited-assurance level verification required beginning 2026 (assurance meeting certain third-party standards like ISSA 5000 (IAASB), AA1000, ISO 14060 and AICPA would be acceptable)
  • Reasonable-assurance level verification required beginning 2030

Enforcement Notice: CARB issued an Enforcement Notice in December 2024 allowing reporting entities to submit emissions data based on information they already possess or collect, recognizing the need for lead time to implement new data collection processes.

B) CA SB 261 (Climate-Related Financial Risk Disclosure) ($500MM+)

Reporting Timeline:

  • January 1, 2026: First climate-related financial risk reports due
    • December 1, 2025: CARB posts public docket for entities to submit links to their reports
    • Docket remains open until July 1, 2026
  • Biennial reporting thereafter

Reporting Frameworks and Key Details:

  • CARB expects entities to excerpt data from popular reporting frameworks such as TCFD (Task Force on Climate-related Financial Disclosures) for their CA reports
    • CARB's updated draft checklist for SB 261 includes further detail on the “minimum CARB requirements for disclosure”, tracking against each of TCFD’s four “pillars”
    • For initial reporting, CARB will not insist on full TCFD compliance, allowing companies to report on the most recent or best available data
  • Companies must focus on "material risk of harm to immediate and long-term financial outcomes"
    • I.e. risks to operations, supply chains, employee safety, investments, shareholder value, consumer demand, and financial markets etc. 

C) Good Faith Efforts

  • CARB recognizes data quality and sources may evolve as new collection methods are implemented
  • Penalties consider whether violators took "good faith measures to comply"
  • Initial reports may be based on best available information from fiscal years 2023/2024 or 2024/2025

Why This Matters?

California’s climate disclosure laws will impose compliance costs and resource demands for companies across the spectrum – and even small companies will need to invest in new data collection systems, specialized staff, and third-party verification services. The mandatory nature means that non-compliance carries enforcement penalties, while also enhancing public scrutiny of your business. Companies should be aware that newly public disclosures will give investors, competitors, and stakeholders unprecedented visibility into how companies assess climate risks across their operations and be prepared for new questions. 

CARB continues to be in information-gathering stage and will open up public comment again on September 11, 2025. The rulemaking entity plans to finalize regulations by end of 2025. 

 

We are here to help when you and your company when you are ready to get started. For more information on these rules, check out our past insights. 

 

Disclaimer: The information provided does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available are for general informational purposes only.