California SB 253 and SB 261: What Businesses Should Know

On May 29, the California Air Resources Board (CARB) held a virtual public workshop to share how it plans to implement two major climate laws: California SB 253 and SB 261. 

Commonly referred to as the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261), these laws represent a turning point for corporate sustainability in the state. 

By the end of 2025, the California Air Resources Board (CARB) will issue regulations that require companies doing business in California to disclose both their greenhouse gas emissions and their exposure to climate-related financial risks.

The implications are wide-reaching. Businesses will no longer be able to report only on their direct operations; they’ll need to produce assurance-ready data that includes scope 3 emissions from suppliers, transportation, and product use. Let’s understand what CA SB 253 and SB 261 mean and how organizations can start planning from now.

California Climate Disclosure Regulations Timeline

To help businesses prepare, it’s critical to understand the sequence of legislative and regulatory milestones shaping California’s climate accountability package.

October 2023

• Governor Gavin Newsom signed California SB 253 and SB 261 into law, officially marking the beginning of the state’s climate accountability package. 
• With this move, the California Air Resources Board (CARB) was assigned the responsibility of drafting and finalizing the detailed rules that will guide corporate disclosures under these two landmark laws.

July 2024

• During the 2024 legislative session, Governor Newsom proposed a two-year delay in the rollout of the disclosure requirements. 
• The proposal sparked debate on whether businesses should be given more time to prepare. 
• However, by the end of the session, lawmakers decided to keep the original schedule intact, leaving the statutory deadlines for SB 253 California and SB 261 unchanged.

September 2024

• California passed SB 219, an amendment bill that introduced important updates. 
• The amendment extended the California Air Resources Board's (CARB) deadline to finalize CA SB 253 regulations by six months, setting a new date of July 1, 2025. 
• It also gave the California Air Resources Board (CARB) the flexibility to either manage disclosures directly or outsource them to a third party. 
• Another key update allowed companies with subsidiaries to consolidate emissions reporting into a single parent-level disclosure. 
• Finally, CA SB 219 confirmed that reporting for scope 3 emissions would be phased in, with requirements beginning in 2027, later than scope 1 and scope 2.

May 2025

In May 2025, the California Air Resources Board (CARB) hosted a public workshop to provide updates on CA SB 253 and 261

• The California Air Resources Board (CARB) reaffirmed that statutory deadlines remain firm: companies must submit their first reports under CA SB 261 by January 1, 2026, while initial disclosures under CA SB 253 will follow later in 2026 (with the specific date still to be determined). 
• The California Air Resources Board (CARB) also announced that draft regulations for CA SB 253 would be published by the end of 2025, meaning finalized rules might not appear until late 2026. 
• While California Climate Corporate Data Accountability Act (SB 253) explicitly requires formal regulations, the California Air Resources Board (CARB) clarified that SB 261 may be implemented with less formal guidance. 

Key Reporting Deadlines

What is California SB 253 and SB 261? 

Here’s everything you should know about the CA SB 253 and SB 261 in a nutshell:

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California SB 253: The Climate Corporate Data Accountability Act

California SB 253, also known as the California Climate Corporate Data Accountability Act, is a landmark regulation that requires large companies to disclose their greenhouse gas emissions. The law applies to U.S.-based public and private organizations with over $1 billion in annual revenue that do business in California, which is estimated to include more than 5,000 corporations across sectors. 

By setting this threshold, CA SB 253 ensures that some of the country’s largest enterprises are directly accountable for their climate impacts.

The requirements under SB 253 California go far beyond basic reporting. Companies must disclose scope 1, scope 2, and scope 3 emissions in alignment with the GHG Protocol. This is significant because scope 3 emissions — often more than 90% of a company’s footprint — cover indirect impacts across supply chains, logistics, and product use. 

Including scope 3 forces businesses to strengthen carbon accounting processes, integrate supplier data, and increase transparency throughout the value chain. Check out this carbon emissions calculation guide for more insight.

According to the California SB 253 Climate Corporate Data Accountability Act summary, disclosures must be submitted to a state-approved digital platform and verified by independent third-party auditors overseen by CARB. Reporting begins with scope 1 and 2 data in 2026, followed by scope 3 in 2027. 

While companies showing a “good faith effort” in 2026 may avoid penalties, failure to comply in subsequent years can lead to fines of up to $500,000 per year.

California SB 261: The Climate-Related Financial Risk Act

California SB 261, commonly known as the California Climate-Related Financial Risk Act, requires large businesses to publish a biannual report assessing the climate-related financial risks they face and the strategies they are implementing to address them. 

These risks include both physical risks (such as extreme weather events, supply chain disruptions, and infrastructure damage) and transition risks (such as policy changes, technological shifts, and evolving consumer demand). 

The law applies to any company with over $500 million in annual revenue that does business in California — a much lower threshold than CA SB 253, which means a broader set of organizations will be impacted.

Reports submitted under CA SB 261 will be reviewed by the Climate-Related Risk Disclosure Advisory Group, which has the authority to evaluate inadequate reports, recommend improvements, and suggest additional policies to strengthen climate risk transparency. 

The framework is modeled on disclosure practices already adopted by the California State Teachers’ Retirement System (CALSTRS) and major global financial institutions, signaling California’s intention to align corporate governance with global best practices. 

By requiring these disclosures, the California Climate-Related Financial Risk Act aims to safeguard investors, employees, and communities from the economic fallout of climate-related disruptions.

With Governor Newsom’s approval of the law, the first round of climate risk disclosure reports will be due on January 1, 2026.

Best Practices For California SB 253 and SB 261

To meet the expectations of the California Air Resources Board (CARB) and stay audit-ready, companies should adopt the following practices:

1. Centralize Emissions Data Collection

To meet California SB 253 requirements, companies must capture Scope 1, 2, and 3 emissions across their entire operations—including indirect activities such as supplier emissions and product use. Building a centralized data repository ensures consistency, transparency, and alignment with the GHG Protocol.

Leveraging AI-powered platforms providing a unified data hub can come handy. For instance, Breathe ESG automatically maps emissions data from across departments and suppliers, performs Scope 1 and 2 calculations, and tracks performance over time using dynamic dashboards—all in one place.

2. Align Reporting with Strategic Planning

To comply with CA SB 261, climate risk disclosures should be tied to the company’s core risk and strategy functions. That means integrating findings into enterprise risk management and highlighting specific mitigation steps. Showing how risks are being addressed—through investments, policy shifts, or supply chain decisions—adds substance to disclosures and shows alignment with business goals.

3. Conduct a Robust Climate Risk Assessment

California SB 261 calls for biannual climate risk disclosures, and that starts with a solid assessment. Businesses should analyze both physical risks like extreme weather and transition risks such as regulatory or market changes. Using frameworks like the Task Force on Climate-Related Financial Disclosures (TCFD) helps ensure consistency and credibility. 

Including both near- and long-term horizons will give regulators and stakeholders a fuller picture. AI-powered GHG monitoring platforms like Breathe ESG provide built-in frameworks for identifying, scoring, and documenting these risks across time horizons.

4. Build a Supplier Engagement Strategy

Because Scope 3 emissions rely heavily on third-party data, California SB 253 compliance hinges on strong supplier coordination. Clear communication of data needs, consistent timelines, and shared templates can reduce errors and delays. Building relationships now and offering training will raise reporting quality and help suppliers adapt. This reduces friction and ensures accuracy as disclosures become more regulated.

5. Invest in Audit-Ready Systems

With third-party assurance coming into play for California SB 253—first as limited assurance, then scaling up to reasonable assurance—companies must maintain traceability, audit logs, and clear documentation.

That means every emission figure should be backed by a defensible source and tracked through version history. GHG reporting platforms like Breathe ESG offer assurance-ready exports, stakeholder tagging, and recordkeeping that align with both early- and long-term assurance demands.

6. Maintain Documentation and Readiness

Since CA SB 261 reports may be reviewed by California’s Climate-Related Risk Disclosure Advisory Group, companies must maintain strong documentation practices. Every assumption, data source, and stakeholder input should be recorded. 

Platforms that track collaboration and store every edit and input along the way create accountability and defensibility. Breathe ESG helps maintain this integrity with collaborative editing tools and audit trails built for transparency.

Get Audit-Ready For California’s Climate Laws

California’s climate disclosure laws signal a new era of corporate accountability. With SB 253 and SB 261, businesses can no longer treat sustainability as a side effort — it must be core to operations and risk planning.

As organizations navigate new disclosure demands, they’ll need to build strong systems for data tracking, supplier coordination, and audit readiness.

This is where smart platforms like Breathe ESG can come handy.

Breathe ESG simplifies greenhouse gas (GHG) reporting by helping companies monitor Scope 1, 2, and 3 emissions in line with GHG Protocol standards.

Its intuitive dashboards offer real-time visibility into emissions with built-in regulatory mapping features, allowing businesses to align their internal processes directly with standards like California SB 253 and SB 261. 

With integrated audit trails, data versioning, and assurance-ready exports, Breathe ESG offers the flexibility and scale required to future-proof your reporting systems.

Book a free demo and get audit-ready for California’s climate laws.

FAQs

1. What is the SB 253 threshold in California?

California SB 253 applies to the public or private companies based in the US with over $1 billion in annual revenue that do business in California. This captures more than 5,000 corporations across sectors, holding them accountable for their full greenhouse gas emissions, including Scope 1, 2, and 3.

2. What is the penalty for SB 253?

Companies that fail to comply with the California Climate Corporate Data Accountability Act aka California SB 253 can face fines of up to $500,000 per reporting year. However, those demonstrating a “good faith effort” in their 2026 disclosures may avoid penalties in the initial year.

3. What organization has been tasked with California Senate Bill 253?

The California Air Resources Board (CARB) has been assigned to draft, finalize, and enforce the regulations under California SB 253. CARB oversees emissions disclosure, assurance requirements, and may delegate some responsibilities to third parties.

‍4. What key change to SB 253 and SB 261 is currently being discussed in the California legislature?

The most recent update came via CA SB 219, which extended the California Air Resources Board (CARB) deadline to finalize CA SB 253 regulations to July 1, 2025, and clarified that Scope 3 disclosures would be phased in starting 2027. It also allowed consolidated reporting at the parent company level and gave CARB flexibility to outsource disclosures.