California Climate Disclosure Senate Bills and Laws Advance

The California Climate Accountability Package: What’s Actually in Play

When people say “California climate disclosure,” they’re usually talking about three connected requirements:

• SB 253 (Climate Corporate Data Accountability Act): greenhouse gas (GHG) emissions reporting
  for large companies.
• SB 261 (Climate-Related Financial Risk Act): climate risk reporting (think: how climate change
  could hit revenue, costs, operations, supply chains, and strategy).
• AB 1305 (Voluntary Carbon Market Disclosures Act): “If you’re claiming net zero / carbon
  neutral, show your work,” especially around voluntary carbon offsets.

Together, these laws push companies toward a world where climate information is treated more like financial
information: documented, explainable, and tough to hand-wave away with a glossy sustainability brochure.

The “advance” here isn’t just that the laws exist. It’s the steady progress of implementation: amendments that
tweak deadlines, California Air Resources Board (CARB) workshops and FAQs, draft reporting guidance, and court
decisions that shape what companies must do (and when).

SB 253: Emissions Reporting Goes Big (Scope 1, 2, and 3)

SB 253 targets companies with more than $1 billion in annual revenue that are “doing business
in California.” It applies to both public and private U.S.-based entitiesso this isn’t just a public-company
SEC-style story. If you’re large and you touch California’s economy, this law wants your emissions numbers.

What SB 253 requires

Companies must report their greenhouse gas emissions in line with recognized standards (the Greenhouse Gas
Protocol is the backbone concept). Reporting includes:

• Scope 1: direct emissions (your facilities, your vehicles, your fuel combustion).
• Scope 2: indirect emissions from purchased energy (electricity, steam, heating/cooling).
• Scope 3: indirect upstream and downstream emissions across the value chain (suppliers,
  logistics, business travel, product use, end-of-life, and more).

When reporting starts (and why the date may feel slippery)

Statutorily, companies must report Scope 1 and Scope 2 in 2026 for the prior fiscal year, with
Scope 3 beginning in 2027 for the prior fiscal year. In plain English: 2026 reporting generally
points at 2025 data, and 2027 reporting points at 2026 data.

The catch is that CARB is still finalizing regulations, including the exact submission dates. This is where
many companies get stuck: “We want to comply, but what format, what portal, what deadlines, what definitions,
and who is definitely covered?” Welcome to implementation season.

Assurance: Your emissions data will need to survive an audit

SB 253 doesn’t just want numbers; it wants assured numbers. Scope 1 and Scope 2 disclosures are
tied to independent third-party assurance (limited assurance at first, moving toward reasonable assurance in
later years). That means controls, documentation, methodologies, and evidence trails matternot just the final
totals.

If this feels like your financial audit is getting a climate-themed sequel, that’s not an accident. The law is
building a compliance ecosystem where emissions accounting starts behaving like financial accounting: consistent
definitions, repeatable processes, and outside review.

Penalties and safe harbors (aka: “Good faith” is not a strategy, but it helps)

SB 253 authorizes penalties up to $500,000 per reporting year for violations. But it also
recognizes reality: Scope 3 is hard, data is messy, and value chains don’t magically become transparent because
the calendar changed.

That’s why the law includes a Scope 3 safe harbor for good-faith disclosures with a reasonable basis, and it
limits Scope 3 penalties in early years (with a strong emphasis on non-filing rather than imperfect estimation).
Translation: file something credible, document how you got there, and improve over timedon’t pretend Scope 3 is
optional.

SB 261: Climate Risk Reporting (And Why It’s Not Just “Write a Blog Post About Floods”)

SB 261 applies to U.S.-based entities with more than $500 million in annual revenue doing
business in California. Instead of emissions totals, SB 261 focuses on the business question: how does climate
change affect financial performance, strategy, and resilience?

What the climate risk report should cover

SB 261 expects a report that identifies climate-related financial risk and describes measures
adopted to reduce and adapt to those risks. In practice, that typically includes:

• Physical risks: extreme heat, wildfire, flooding, storms, sea level rise, water stress.
• Transition risks: policy changes, carbon pricing, market shifts, technology disruptions,
  reputational risk, and litigation risk.
• Time horizons: near-, medium-, and long-term risk profiles (because climate risk is not a
  one-quarter problem).
• Governance and strategy: who owns the risk internally, how decisions get made, and how it
  affects capital allocation.

The “shape” of reporting is heavily influenced by well-known frameworks like TCFD-style structure (governance,
strategy, risk management, metrics/targets). The key is that the report needs to be specific enough to be useful
and consistent enough to be comparable.

Timing: Biennial reporting starts in 2026

SB 261 requires covered companies to publish their first climate-related financial risk report by
January 1, 2026, and then every two years after that.

CARB has also planned a public “docket” approach where companies provide the location (link) of their public
report. In other words: this isn’t “send it to the state and forget it.” It’s public-facing disclosure.

The twist: SB 261 enforcement is currently in legal limbo

Here’s where the story gets dramatic. As of late 2025, federal appellate litigation has resulted in a temporary
pause on SB 261 enforcement while the case proceeds. That means companies shouldn’t assume the original
near-term timeline will play out exactly as first imaginedbut they also shouldn’t assume the requirement is
gone.

The safest interpretation for planning is: the risk-reporting expectation is not disappearing. Even if
timing shifts, investors, customers, lenders, and supply chain partners increasingly expect climate risk
transparencyand California has already built the blueprint.

SB 219: The Amendment That Changed the “How Soon” Conversation

After SB 253 and SB 261 were enacted, California passed SB 219 (a follow-on bill) to adjust
implementation detailsespecially regulatory timelines and practical sequencing.

The big headline: SB 219 pushed CARB’s deadline for adopting regulations to July 1, 2025. It
also refined aspects of how reporting can be submitted and how Scope 3 disclosure timing can be set through the
regulatory process.

If SB 253 and SB 261 were the “what,” SB 219 was part of the “how,” acknowledging that building the machinery
(definitions, reporting systems, fees, assurance rules, and more) takes time.

CARB Rulemaking: Workshops, FAQs, Draft Rules, and the Reality of Deadlines

CARB is the agency responsible for turning SB 253 and SB 261 from legislative text into a functioning reporting
program. That includes clarifying big questions such as:

• What does “doing business in California” mean for coverage?
• How are parent/subsidiary relationships handled?
• What reporting formats and portals will be used?
• What assurance standards apply, and when do they ramp up?
• How should Scope 3 timing and practicality be managed?

CARB has held workshops, issued FAQs, and shared early guidance concepts. But it has also missed original
deadlines and adjusted its timelinebecause large-scale disclosure regimes are complicated and stakeholder
feedback is… plentiful.

What companies should take from the rulemaking timeline

Even if you ignore every date on every slide deck (please don’t), two truths remain:

1. The direction of travel is clear: climate disclosure is becoming standardized, assured, and
   harder to treat as a marketing exercise.
2. Implementation details still matter: definitions, deadlines, and mechanics will shape the
   cost and complexity of compliance.

Practical takeaway: treat CARB rulemaking like you treat tax rules. You don’t wait until the final form is
printed to start gathering documents.

Litigation: The Courtroom Has Entered the Chat

Climate disclosure laws were always going to face legal resistance. They impose costs, create potential
liability, and force public-facing statements that some groups argue amount to compelled speech.

What’s happened so far

A federal district court declined to block SB 253 and SB 261 at the preliminary injunction stage in 2025,
allowing the framework to keep moving while the case continued. More recently, the legal fight shifted into a
fast-moving posture on appealespecially around SB 261resulting in a temporary enforcement pause for the risk
reporting requirement.

Exxon’s lawsuit raises the stakes

Adding more fuel to an already hot topic, ExxonMobil filed a separate lawsuit challenging SB 253 and SB 261 on
First Amendment grounds and broader legal theories. Large, high-profile litigation like this tends to do two
things at once:

• It can slow implementation of some requirements (especially deadlines and enforcement posture).
• It can also increase attention and urgencybecause if you’re not in the lawsuit, you still may have to comply
  when the dust settles.

So yes: litigation adds uncertainty. But it doesn’t erase the structural shift toward mandatory climate
transparency.

How California Fits With Federal SEC Rules (and Why “Wait for Washington” Is Risky)

For years, many companies assumed that the Securities and Exchange Commission (SEC) would create one national
climate disclosure standard and everyone would follow it. Reality has been messier.

The SEC adopted climate disclosure rules in 2024, but litigation and policy changes put those rules in a
prolonged holding pattern. In 2025, the SEC voted to end its defense of the climate disclosure rules, and the
consolidated litigation has been paused while the agency’s next steps remain uncertain.

That leaves companies in an awkward spot: federal climate disclosure requirements are not providing a clean,
stable roadmap. Meanwhile, California is movingimperfectly, but persistentlytoward a detailed state-level
regime that applies to both public and private companies.

The smart move is not “pick California or SEC.” The smart move is “build a climate disclosure system that can
flex across regimes.” If you can support SB 253-level emissions reporting and SB 261-style risk narrative, you
can usually map your way into other frameworks with less pain.

Specific Examples: What Compliance Looks Like in the Real World

Climate disclosure can sound abstract until you see how it changes daily operations. Here are a few grounded
examples:

Example 1: A national retailer with thousands of suppliers

A large retailer may already track energy use at stores and warehouses (Scope 1 and Scope 2 are manageable).
Scope 3 is where the headache begins: purchased goods, inbound freight, packaging, and customer product use.
Under SB 253, that retailer will likely request emissions data from suppliers, push for standardized reporting,
and use estimation models where direct data is unavailable.

The ripple effect is huge: even suppliers not directly covered by SB 253 may be pressured to provide emissions
data, because they are part of someone else’s Scope 3 inventory.

Example 2: A manufacturer with complex facilities

Manufacturers often have strong metering and operational data. That’s good news for Scope 1 and Scope 2
reportingbut assurance changes the game. You need consistent methodologies, documented controls, and audit-ready
evidence. If a facility manager changes how fuel consumption is tracked mid-year, that can become a reporting
issue, not just an ops issue.

Example 3: A financial services firm focused on risk

For banks and insurers, SB 261 is especially relevant because climate risk translates into credit risk,
underwriting risk, market risk, and operational exposure. Reporting isn’t only about hurricanes; it’s also about
portfolios, counterparties, stress testing, and how risk governance functions at the board level.

Many financial firms already do elements of this work (scenario analysis, risk committees, disclosures). SB 261
raises the bar on consistency and public accountability.

How to Prepare Without Panicking: A Practical 10-Step Plan

If you’re covered (or might be covered), the best time to prepare was yesterday. The second-best time is after
you finish reading this sentence.

1. Confirm coverage: Work with legal/tax teams to interpret “doing business in California” and
   revenue thresholds, including parent/subsidiary structure.
2. Assign ownership: Create a cross-functional team (finance, sustainability/ESG, legal, risk,
   procurement, operations, IT). No single department can do this alone.
3. Inventory Scope 1 and 2 data: Identify sources (utility bills, fuel purchase records, fleet
   data, facility meters) and gaps.
4. Build a Scope 3 roadmap: Decide which categories are material, where primary data is
   realistic, and where estimation is appropriate.
5. Standardize methods: Choose consistent boundaries, emission factors, and calculation rules.
   Document assumptions like you expect a skeptical auditor to read thembecause one day they will.
6. Start supplier engagement early: Create a supplier data request strategy, templates, and
   escalation paths. This takes time, and suppliers have their own timelines.
7. Design controls for assurance: Treat emissions reporting like a financial process: review
   steps, approvals, change management, and evidence retention.
8. Draft your SB 261 narrative now: Identify top climate risks, governance structure, and
   mitigation/adaptation actions. If you wait, your “risk report” will become a rushed essay.
9. Align external claims with AB 1305 reality: If marketing says “carbon neutral,” make sure you
   can substantiate offset purchases and claims with required disclosures.
10. Run a mock year: Do a dry run on prior-year data. It will reveal gaps fastand finding gaps
    early is cheaper than finding them under deadline pressure.

The theme here is simple: don’t confuse “the rules are still evolving” with “we can ignore this.” Evolving rules
are a reason to build adaptable systems, not a reason to procrastinate.

Conclusion: California Is Building the Playbook (Even When the Timeline Wiggles)

California’s climate disclosure laws are advancing in the way big regulatory shifts usually advance: a bold
legislative move, amendments to smooth implementation, agency rulemaking to define the mechanics, and court
battles to test boundaries.

SB 253 is pulling greenhouse gas reporting into a more standardized, assured, and publicly visible spaceone
that will influence supply chains far beyond California. SB 261 is pushing climate risk into the language of
business strategy and financial exposure, even as litigation temporarily complicates enforcement. AB 1305 adds a
reality check to voluntary “net zero” and offset claims, making public climate statements harder to make
casually.

If you want a clean takeaway: treat climate disclosure like financial reporting. Build processes, assign owners,
document methods, plan for assurance, and write risk narratives that reflect real strategynot wishful thinking.

Friendly reminder: This is educational information, not legal advice. For specific compliance decisions,
talk to counsel and qualified assurance professionals.

Experiences From the Field: What Companies Are Learning as California Climate Disclosure Advances

As California’s climate disclosure rules move from theory to practice, many companies are discovering that the
hardest part isn’t the mathit’s the organization. One of the most common experiences is realizing that emissions
data lives in “too many kitchens.” Facilities teams have fuel and refrigerant details, finance teams have
invoices, procurement teams have supplier lists, travel teams have booking data, and IT teams have systems that
don’t naturally talk to each other. Early efforts often feel like a scavenger hunt where the prize is a
spreadsheet full of questions.

Another recurring experience is the Scope 3 wake-up call. Companies that felt confident about
Scope 1 and Scope 2 reporting frequently hit a wall when they try to model supply chain and downstream product
impacts. The value chain is large, global, and not always eager to cooperate. A practical lesson many teams learn
quickly: you don’t “collect Scope 3” all at onceyou prioritize categories, start with the biggest drivers, and
set a repeatable process that improves year over year. The companies making the fastest progress usually combine
supplier outreach with estimation models, while clearly documenting where primary data is strong and where
proxies are being used.

Assurance readiness creates its own set of experiences. Teams often discover that “we have the number” is not
the same as “we can prove the number.” Under an assurance mindset, you need documented methodologies, consistent
boundaries, change controls, and evidence that can be traced. Many organizations run a pilot assurance exercise
before the first deadlinenot because it’s fun (it isn’t), but because it reveals where internal controls are
weak. The experience is a lot like the first time a company went through SOX controls: uncomfortable at first,
then gradually normalized as roles, reviews, and documentation become routine.

Companies also report a shift in internal conversations. Instead of climate work living only in sustainability
teams, it starts showing up in finance and enterprise risk discussions. Boards and executives begin asking
questions like: “What do we do if this supply chain risk becomes a revenue risk?” or “Are we making public claims
that will be hard to defend?” That’s a meaningful change. Even organizations that initially approached
compliance as a box-checking exercise often end up using the data to inform operational efficiency projects,
procurement decisions, and capital planning.

Finally, many companies experience a reputational reality check: once disclosures are public, they will be read,
compared, and critiqued. That doesn’t mean companies should hide. It means they should explain. The most
effective reports tend to be transparent about what’s known, what’s estimated, how methods will improve, and
what decisions are being made in response. In practice, the organizations that come out strongest are the ones
that treat climate disclosure as a continuous reporting systemsomething that gets better with repetitionrather
than a one-time compliance fire drill.