Update on the California Climate Disclosure Laws

The California Air Resources Board (CARB) hosted a virtual workshop, which was open to the public, to discuss the state’s climate disclosure laws on May 29, 2025. The two climate disclosure laws are the Corporate Climate Data Accountability Act (commonly known as Senate Bill 253 or SB 253) and the Climate-Related Financial Risk Act (SB 261). These laws were passed in 2023 and compliance deadlines for both laws are rapidly approaching, in 2026. The workshop attendance reflected the level of interest in these laws with more than 3,000 stakeholders participating from several continents and pushed the meeting well beyond the scheduled three-hour duration. 

The purpose of the workshop was for CARB to present an overview of the laws, provide a summary of the process being followed to develop regulations, and to provide an opportunity for public comment. The workshop also included a presentation by Montrose Environmental, summarizing a study performed for CARB to review climate disclosure regulations from other jurisdictions around the world, and a presentation by the University of California, Los Angeles (UCLA) Anderson School of Management summarizing the state of corporate sustainability disclosure. 

As ALL4 has posted previously on the California climate disclosure laws (see the January 6, 2025 article and the February 26, 2025 webinar recording), the Climate Accountability Package is comprised of the following laws: 

• Climate Corporate Data Accountability Act, or SB-253, requires the disclosure of Scopes 1, 2, and 3 of greenhouse gas (GHG) emissions by reporting entities, public or private, doing business in California with $1 billion or more in gross annual revenue. Reporting for Scopes 1 and 2 will be required in 2026, based on 2025 data, and reporting for Scope 3 will be required in 2027, based on 2026 data. The reporting deadline for SB 253 will be set by the pending CARB regulations. 

• Greenhouse Gases: Climate-Related Financial Risk, or SB-261, requires the disclosure of climate-change-associated financial risks by reporting entities, public or private, doing business in California with $500 million or more in gross annual revenue. In addition to the financial risks climate change poses, businesses must also disclose plans to address those risks. The first disclosure must be made available through the company’s website by January 1, 2026, and bi-annually thereafter. This deadline is in the law and cannot be changed by CARB. The disclosure must be prepared following the Task Force for Climate Related Financial Disclosure (TCFD) Guidance or a reporting framework, such as the International Sustainability Standards Board (ISSB) standards, which evolved from the TCFD. 

In 2024, the legislature amended the laws through SB 219, to provide administrative updates, add flexibility for parent-company level reporting, and extend the deadline for CARB’s regulatory development to July 1, 2025. However, according to the presentation during the CARB workshop, CARB will be working through the summer and fall of this year to develop the SB 253 regulations, with a timeline to finalize by the end of the year. CARB indicated in a December 5, 2024, Enforcement Notice that it will not take enforcement action on companies that make a good faith effort to report during the first year. 

One of the key points of the regulations is the definition of “doing business in California.” According to the SB 253 and SB 261 text, reporting or covered entities: 

means a partnership, corporation, limited liability company, or other business entity formed under the laws of this state, the laws of any other state of the United States or the District of Columbia, or under an act of the Congress of the United States with total annual revenues in excess of [one billion dollars ($1,000,000,000) for SB 253 and five hundred million United States dollars ($500,000,000) for SB 261] and that does business in California. Applicability shall be determined based on the reporting entity’s revenue for the prior fiscal year.   

During the workshop, CARB indicated that it is considering using the definition of “doing business” from the California Revenue and Tax Code (CRTC) section 23101. CARB did request comments on this approach.  

CARB also indicated that it is considering using the definition of gross receipts, as set forth in CRTC Section 25120(f)(2) for “total annual revenue.” CARB also requested comments from stakeholders on this approach. 

Next Steps 

Based on the CARB Workshop, companies that may be affected by the legislation and CARB regulations should continue to follow this issue closely. Companies that are potentially affected by the California laws should be making “good-faith” efforts and taking action now to comply with the reporting requirements. This will include collecting GHG and climate risk data for 2025 and beginning the process of performing a climate-related risk analysis, following the TCFD guidance.  

Many companies have already begun or are well on the way to quantifying Scope 1 and 2 GHG emissions as a result of other market pressures. Of the two regulations SB 261 is a heavier lift, with a near term defined due date of January 1, 2026. Therefore, ALL4 recommends focusing on SB261 first, for those companies that qualify. The good news is that while the effort to develop a TCFD compliant Climate Financial Risk Disclosure is not insignificant, the work is critical to business risk and opportunity quantification and planning and can be beneficial. For example, understanding the physical risks to assets, operations, market access, and supply chains posed by climate forces – such as extreme heat, wildfires, hurricanes, water stress, and floods is a critical element of good risk management practices and an obligation of fiduciaries.  

Companies should also familiarize themselves with applicable frameworks such as the GHG Protocol, the TCFD Guidance, and the Climate-Related Disclosure standards of the ISSB. This will help companies prepare for whatever regulations are finalized. Look to ALL4 to keep you updated through our 4 The Record Articles and Insights. 

If your company needs assistance with determining applicability for the California regulations, GHG data collection, performing a climate-related risk analysis, or doesn’t know where to start, we’re here to help. Feel free to reach out to Daryl Whitt at dwhitt@all4inc.com or 864.894.1312, or James Giannantonio at jgiannantonio@all4inc.com.