California’s climate disclosure laws are under scrutiny, with the Ninth Circuit Court of Appeals currently reviewing a legal challenge that temporarily halts the enforcement of one such law. Meanwhile, the California Air Resources Board (CARB) is pushing forward with laying the groundwork for these laws’ implementation. On December 23, 2025, CARB unveiled proposed regulations to operationalize these laws along with a suite of supporting materials. Stakeholders have until February 9, 2026, to submit public comments before a public hearing scheduled for February 26, 2026.
Key Obligations Under SB 253 and SB 261
The Climate Corporate Data Accountability Act, known as SB 253, mandates companies to report their greenhouse gas emissions publicly. Initially, the focus will be on Scope 1 and Scope 2 emissions, with plans to integrate Scope 3 emissions reporting later on.
In contrast, SB 261 requires companies to file a biennial report on climate-related financial risks. These reports should align with either the Task Force on Climate-related Financial Disclosures (TCFD) guidelines or the International Financial Reporting Standards Sustainability Disclosure Standards (IFRS S2). To aid companies, CARB has released a comprehensive checklist that outlines the necessary components of these reports, including governance and metrics, and provides guidance on addressing any reporting gaps.
Defining “Doing Business in California”
These climate laws apply to companies “doing business in California” that meet specific financial criteria. CARB’s proposed regulations align partly with the California Franchise Tax Board’s criteria but include exceptions. An entity is considered to be doing business in California if it is either organized or domiciled in the state or if its California sales exceed a certain threshold or account for at least 25% of its total sales.
Initial Greenhouse Gas Reporting
Regarding SB 253’s greenhouse gas reporting requirements, CARB’s regulations propose an initial deadline of August 10, 2026, for Scope 1 and Scope 2 emission inventories. Although SB 253 calls for limited assurance on these reports, CARB plans to incorporate this requirement in future rulemaking. Scope 3 reporting will commence in 2027.
CARB intends for companies to have at least six months between their fiscal year-end and the reporting deadline. Consequently, entities with fiscal years ending between February 2 and December 31, 2026, will report FY 2025 data, while those ending between January 1 and February 1, 2026, will report FY 2026 data.
CARB has stated it will use enforcement discretion in the first reporting period to ease the transition for companies unfamiliar with these requirements, particularly those not collecting relevant data before the December 2024 Enforcement Notice.
Strategic Considerations
With the “doing business” definition and initial greenhouse gas reporting requirements now clearer, companies can better assess their obligations under these laws. Companies should prioritize verifying their applicability under the updated definition, prepare for the August 10, 2026, deadline by collecting Scope 1 and Scope 2 data, and stay informed about future rulemaking on Scope 3 reporting and assurance. Monitoring the ongoing legal challenges, including the Ninth Circuit appeal, remains crucial for affected entities.
Original Story at www.mondaq.com