New Updates on California’s SB 253 & SB 261: Strategies for Businesses to Prepare

California’s SB 253 and SB 261: Strategies for Businesses to Prepare

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Update: On February 26, 2026, the California Air Resources Board (CARB) unanimously voted to approve initial implementing regulations for SB 253 and SB 261, moving California’s climate disclosure laws closer to operational reality. The first Scope 1 and 2 emissions reports are due August 10, 2026. This post reflects the approved regulation and the latest legal and regulatory developments.

In September 2025, CARB released a preliminary list of 3,000+ organizations it believes need to comply. If your company does not appear on the list, you should still review the criteria. Compliance is ultimately the responsibility of each entity.

Download and see if you are on the list.

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What is SB219 (and SB 253 and SB 261)?

California is the first U.S. state to formally adopt corporate climate disclosure regulations. If your company does business in California and exceeds the revenue thresholds ($1 billion for emissions reporting under SB 253, $500 million for climate-related financial risk reporting under SB 261), you are now subject to mandatory reporting requirements with real deadlines and real penalties.

What’s Confirmed

• Scope 1 & 2 reporting deadline: August 10, 2026
• Scope 3 reporting deadline: Deferred to 2027
• Penalties for non-compliance: Up to $500,000 per year (SB 253) or $50,000 per year (SB 261)
• First-year enforcement discretion for good-faith submissions
• Parent companies can file consolidated reports for subsidiaries

What’s Still in Motion

• SB 261 enforcement is paused by a Ninth Circuit injunction, so compliance is currently voluntary
• Scope 3 and assurance requirements are being addressed by separate rulemaking later in 2026‍
• A pending Chamber of Commerce lawsuit could affect timelines.

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What Are SB 253, SB 261, and SB 219?

In October 2023, California enacted two landmark climate disclosure laws: SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-Related Financial Risk Act). In September 2024, Governor Newsom signed SB 219, which amended both laws and gave CARB authority over implementation.

Together, these laws require certain U.S. companies doing business in California to:

• Disclose greenhouse gas emissions (Scope 1, 2, and eventually 3) under SB 253
• Report climate-related financial risks aligned with the TCFD framework under SB 261
• Obtain third-party assurance for their emissions data, phased in over time

This is part of a global convergence in mandatory sustainability reporting that includes the CSRD in Europe and emerging requirements in Canada, Japan, Switzerland, and beyond.

What makes this moment significant is the choice CARB made: by anchoring key definitions (e.g., revenue, “doing business in California”) to existing California tax law, they’ve grounded climate disclosure in the same infrastructure companies already use for financial reporting. Sustainability reporting is being incorporated into the financial reporting paradigm, subject to similar rigor and verification requirements. Companies that recognize this shift early will be better positioned than those treating it as an isolated compliance exercise.

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Who Needs to Comply with California’s Climate Disclosure Laws

These laws apply to U.S. companies “doing business in California” that meet specific revenue thresholds:

SB 253: Emissions Reporting (>$1B Annual Revenue)

Public and private companies must annually disclose Scope 1 and 2 greenhouse gas emissions (starting 2026), with Scope 3 beginning in 2027.

SB 261: Climate-Related Financial Risk (>$500M Annual Revenue)

Public and private companies must prepare biennial reports detailing climate-related financial risks and mitigation measures. (Enforcement is currently paused — see legal section below.)

What “Doing Business in California” Means

CARB has adopted a definition aligned with California Revenue and Taxation Code Section 23101(a). In practical terms, your company is in scope if it actively engages in transactions for financial gain in California and is either commercially domiciled there or exceeds the California inflation-adjusted sales threshold of $757,070 for 2025. That means companies that don’t think of themselves as California-regulated may still need to report.

CARB’s preliminary list includes 3,000+ companies, but compliance is ultimately the responsibility of each entity regardless of list placement.

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What Companies Need to Report Under California’s Carbon Reporting Laws

SB 253: Scope 1, 2, and 3 Emissions

Companies with over $1 billion in annual revenue must report greenhouse gas emissions following GHG Protocol standards:

• Scope 1: Direct emissions from owned or controlled sources (fuel combustion, company vehicles, etc.)
• Scope 2: Indirect emissions from purchased electricity, steam, heating, and cooling
• Scope 3: All other indirect emissions across the value chain. This has been deferred to 2027, with a safe harbor provision through 2030 for good-faith disclosures

All disclosures will be housed on a publicly available digital registry.

SB 261: Climate-Related Financial Risk

Companies with revenues over $500 million must prepare a biennial report aligned with the TCFD framework, detailing climate risks, mitigation strategies, and any data gaps. Reports must be published on the company’s website and a URL submitted to CARB’s public docket.

Third-Party Assurance

CARB is phasing this in. For the first 2026 reporting cycle, CARB has stated it will exercise enforcement discretion and not require limited assurance. Assurance requirements for Scope 1, 2, and 3 will be addressed in CARB’s second rulemaking for 2027 and beyond, with a target of reasonable assurance on Scope 1 and 2 by 2030.

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California Climate Reporting Deadlines and Key Dates

• August 10, 2026 - First Scope 1 & 2 emissions report due (SB 253)
• September 10, 2026 - CARB issues fee determination notices
• 60 days after fee notice - Fee payment due
• 2027 - Scope 3 reporting beins; second rulemaking on assurance and future deadlines

Which fiscal year are you reporting on? If your fiscal year ends after February 1 in a calendar year, you report on the fiscal year ending in 2025. If it ends on or before February 1 in a calendar year, you report on the year ending in 2026. Companies may also choose to report a more recent fiscal year if that data is available.

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The Legal Landscape: SB 253 and SB 261 Litigation Status

These laws are being challenged by the U.S. Chamber of Commerce, the California Chamber of Commerce, and allied business groups, primarily on First Amendment grounds.

Where things stand as of March 2026:

• SB 261 has been enjoined by the Ninth Circuit. CARB cannot enforce it during the appeal. Despite this, more than 120 companies have voluntarily submitted reports to CARB’s public docket.
• SB 253 remains in effect. The Ninth Circuit declined to enjoin it, and during oral arguments on January 9, 2026, Scope 1 and 2 reporting did not appear to be a major concern for the court.
• Scope 3 drew more scrutiny, with one judge raising the possibility of remanding for a severability analysis. No ruling has been issued.
• At the district court level, the Chamber’s Supremacy Clause and Dormant Commerce Clause claims were dismissed (with leave to refile on SB 253 now that regulations are finalized).

The bottom line: companies should prepare to comply with the August 10 deadline. The legal challenges are real, but the regulatory machinery is in motion, and the approved implementing regulations establish the definitions, fees, and deadlines companies need to act on.

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What California’s Climate Reporting Requirements Mean for Your Business

CARB’s approach is pragmatic. Companies are at very different stages of readiness, and the emphasis on good-faith compliance for year one reflects that. At the February 26 hearing, CARB staff noted they expect all in-scope companies to report by August 10, but may provide relief on a case-by-case basis upon request. The goal is to get companies into the practice of measuring, then raise the bar over time.

For companies feeling behind: start with what you have. CARB has explicitly stated that best-available data is sufficient for this first cycle. The bigger risk isn’t imperfect data, but rather no data at all.

The real opportunity most companies miss? The data you’re now required to collect - including energy consumption, fuel use, and emissions across your operations - isn’t just for compliance. Almost all of your Scope 1 and 2 emissions trace directly back to money you’re spending on energy and fuel. Measure it right, and you’re looking at a map of where you can cut costs.

The companies that figure out how to put measurement to work, rather than just getting through the reporting, are the ones that will turn this regulation into a competitive advantage.

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Penalties for Non-Compliance with California Climate Disclosure Laws

• SB 253: Up to $500,000 per entity per year
• SB 261: Up to $50,000 per entity per year
• Late fee payments constitute a separate regulatory violation with per-day penalties

There is a safe harbor for Scope 3 misstatements made in good faith through 2030, but no safe harbor for failing to file at all.

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How Gravity Can Help You Meet the SB 253 Deadline

The August 10 deadline is roughly five months away. That’s a short runway, but it’s enough time if you start now.

Gravity combines world-class software with hands-on support from climate experts. We work with manufacturers, industrial companies, and complex operations, the kinds of businesses where carbon accounting is never straightforward. Here’s how we help:

• Automated data collection: Gravity’s bill scanning and utility API integrations let you process thousands of documents in seconds, without manual error. Our supplier engagement tools make value chain data collection fast, even for companies managing dozens of facilities. One client processed 2,300 utility bills in the first month alone.
• Built-in data assurance: Gravity attaches supporting evidence to every data point, maintains full data logs, and lets you grant auditors direct access. When assurance requirements kick in, you’ll be ready — not scrambling.
• One-click reporting: Our platform formats your data to SB 253 standards automatically. And because the same underlying data feeds multiple frameworks, you can translate it to meet CSRD, CDP, and customer reporting requirements without starting from scratch.
• Expert support: You’ll be paired with a dedicated Climate Strategist who helps you navigate the regulation, compose answers to qualitative and quantitative questions, and review your final submission.

We’ve helped companies like McCarthy, one of the oldest private construction companies in the U.S., save 10,450 hours with automated processing of utility bills so teams can focus on value-creating activities. Lerman Enterprises, one of the largest steel processors and manufacturers in the U.S., saved $281,000+ in annual energy costs from energy project opportunities that Gravity identified in the emissions reporting process. The pattern is the same: automate the data collection, get the reporting done, then put the data to work.
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Frequently Asked Questions About California’s Climate Disclosure Laws

1. Who is affected by California’s climate disclosure laws (SB 253 and SB 261)?

SB 253 applies to U.S. companies doing business in California with over $1 billion in annual revenue. SB 261 applies to those with over $500 million. Both public and private companies are in scope. CARB’s preliminary list identifies 3,000+ companies.

2. What does “doing business in California” mean under SB 253?

CARB adopted a definition aligned with California tax law (Revenue and Taxation Code Section 23101(a)). You’re in scope if you engage in transactions for financial gain in California and are either commercially domiciled there or exceed the sales threshold of approximately $735,019 or 25% of total sales. Full criteria are on the California Franchise Tax Board site.

3. When is the California SB 253 reporting deadline?

August 10, 2026 for Scope 1 and 2. Scope 3 begins in 2027. The SB 261 deadline is paused pending litigation.

4. What are the penalties for not complying with California’s carbon reporting laws?

Up to $500,000/year for SB 253 and $50,000/year for SB 261. There’s a safe harbor for Scope 3 good-faith misstatements through 2030, but not for failing to file.

5. Can parent companies file consolidated California climate reports for subsidiaries?

Yes. The adopted regulation allows consolidated reporting.

6. What if we can’t get perfect emissions data by August 10, 2026?

CARB has stated that best-available data is sufficient for the first cycle, with enforcement discretion for good-faith submissions. CARB staff may also provide relief on a case-by-case basis upon request. Start with what you have: the bigger risk is submitting nothing.

7. Could the SB 253 lawsuits change the August 10 deadline?

SB 253 was not enjoined by the Ninth Circuit, and Scope 1 and 2 reporting appeared to face the least legal scrutiny during January 2026 oral arguments. Prepare as if August 10 holds.

8. Is third-party assurance required for the first California climate report?

Not for 2026. CARB will exercise enforcement discretion. Assurance requirements will be addressed in a separate rulemaking for 2027 and beyond.

9. Are insurance companies exempt from SB 253?

Currently unresolved. CARB’s approved implementing regulations exclude insurers, but there was significant pushback at the hearing. The Board directed CARB staff to coordinate with the California Department of Insurance and potentially revisit in future rulemaking.

10. What role does CARB play in California’s climate disclosure laws?

CARB is the implementing and enforcement agency. It sets deadlines, assesses fees, and will continue issuing guidance, templates, and FAQs throughout 2026.

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