California Climate Disclosure Rules: What SB 253 and SB 261 Mean for Your Business

California has long been at the forefront of climate policy, often setting the standard for other states and even federal regulations. In October 2023, the state cemented its leadership by enacting SB 253, the Climate Corporate Data Accountability Act, and SB 261, the Climate-Related Financial Risk Act. These two laws represent a major shift in how businesses are required to measure, manage, and disclose their environmental and financial impacts.

For businesses operating in California—or even those with indirect ties to its economy—these laws introduce a new level of accountability. SB 253 and SB 261 focus on transparency, requiring companies to disclose greenhouse gas (GHG) emissions and climate-related financial risks. Beyond compliance, these laws present an opportunity for companies to align with global climate goals, strengthen stakeholder trust, and future-proof their operations.

This blog provides a detailed breakdown of the requirements, implications, and steps businesses can take to ensure compliance.

What is SB 253?

The Climate Corporate Data Accountability Act, or SB 253, mandates annual GHG emissions disclosure for companies that meet specific criteria. What makes this rule particularly significant is its requirement for reporting emissions across all three GHG scopes–a comprehensive approach that goes beyond most existing standards.

SB 253 requirements

Under SB 253, corporations must adhere to detailed requirements for their annual greenhouse gas emissions reporting. These standards ensure consistency, transparency, and accountability across all reporting entities. Key requirements include:

1. Alignment with the GHG Protocol - Corporations are required to measure and disclose Scope 1, 2, and 3 emissions in accordance with the Greenhouse Gas Protocol standards. For Scope 3 emissions, the protocol allows for the use of a mix of data types, including:

• Primary data (directly collected from suppliers or processes),
• Secondary data (industry averages or proxy data), and
• Generic data where more specific sources are unavailable.

This ensures that businesses follow a standardized methodology for emissions calculations, particularly for the more complex Scope 3 reporting.

2. Public accessibility - Annual disclosures must be easily accessible and understandable to consumers, investors, and stakeholders. To meet this requirement, businesses will need to publish their GHG data—including emissions across all three scopes—on a centralized digital platform developed by the state board’s contracted emissions reporting organization.

3. Parent company consolidation - Subsidiaries are not required to file separate reports if their parent company meets the reporting requirements. Emissions reporting can be consolidated at the parent company level, streamlining compliance for corporate groups. This provision was introduced under SB 219 (more details below).

4. Assurance requirements - To ensure the credibility of emissions data, a phased approach will initially require limited assurance for Scope 1 and 2 emissions, then in 2030 introduce reasonable assurance for Scope 1 and 2, while requiring limited assurance for Scope 3.

This phased assurance process provides businesses with time to build accurate reporting systems while maintaining accountability.

5. Penalties for non-compliance - Non-compliance with reporting requirements—including late filings, incomplete reports, or failure to meet assurance standards—may result in administrative penalties of up to $500,000 per reporting year. These penalties will be regulated and enforced by the California Air Resources Board (CARB), underscoring the importance of timely and accurate reporting.

Is SB 253 reporting delayed?

While there was some discussion about delaying the implementation of SB 253, the reporting requirements remain on track. During the 2024 California legislative session, Governor Newsom proposed a two-year delay; however, the original deadlines remain unchanged.

What is SB 261?

The Climate’Related Financial Risk Act, or SB 261, requires companies to assess and disclose how climate change might affect their operations, assets, and supply chains. 

SB 261 requirements

SB 261 requires companies to prepare a climate-related financial risk report starting January 1, 2026 then again every two years, ensuring that businesses identify and disclose how climate risks could impact their operations, assets, and supply chains. The report must adhere to specific standards to maintain consistency and transparency:

1. Alignment with TCFD framework: Companies must follow the framework outlined in the Task Force on Climate-related Financial Disclosures (TCFD) Final Report (June 2017) or an equivalent standard, such as the International Sustainability Standards Board (ISSB) Standards. This alignment ensures that the disclosures cover key elements such as governance, strategy, risk management, and metrics related to climate-related financial risks.

2. Disclosure of climate risk mitigation efforts: Entities must include detailed descriptions of the measures they are taking—or plan to take—to address and adapt to the climate-related risks identified in the report. This includes both mitigation and adaptation strategies to reduce exposure to these risks.

3. Explanation of missing data: If there are gaps in the report, companies are required to provide a detailed explanation of the missing data. This explanation should also outline the steps the company is taking to address these gaps in future disclosures.

4. Public accessibility: To ensure transparency, companies must publish their climate-related financial risk reports on their own websites, making them accessible to investors, stakeholders, and the public.

5. Parent company consolidation: Subsidiaries are not required to file separate reports if their parent company fulfills the reporting obligations. Climate risk reports can be consolidated at the parent company level, simplifying compliance for corporate groups.

6. Penalties for insufficient reporting: A contracted climate reporting organization will review submitted reports to identify any inadequacies or insufficient disclosures. If deficiencies are found, companies may face administrative penalties of up to $50,000, emphasizing the need for thorough and accurate reporting.

To ensure consistency and comparability, SB 261 encourages alignment with globally recognized frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB). The first reports are due by January 1, 2026, and must be publicly accessible.

What is SB 219?

Introduced in September 2024, SB 219, titled “Greenhouse Gases: Climate Corporate Accountability: Climate-Related Financial Risk,” amends SB 253 and SB 261 to streamline reporting requirements while maintaining transparency. The bill addresses logistical challenges raised by businesses, providing additional flexibility and clarity without compromising the ambitious goals of California’s climate laws.

Why was SB 219 introduced?

SB 219 was designed to make compliance more practical by:

• Extending deadlines for CARB to finalize regulations.
• Adjusting Scope 3 disclosure timelines to account for its complexity.
• Allowing consolidated reporting at the parent company level.
• Eliminating filing fees at the time of emissions disclosures.

Key provisions of SB 219

1. CARB Deadline Extension: The CARB now has until July 1, 2025, to finalize reporting regulations.
2. Scope 3 Flexibility: Companies no longer need to disclose Scope 3 emissions within 180 days of Scope 1 and 2 reporting; CARB will be responsible for setting a new timeline, although general Scope 3 reporting is still expected to begin in 2027.
3. Consolidated Reporting: Parent companies can file single reports for their subsidiaries.‍
4. Fee Adjustments: Filing fees have been removed, though annual fees remain.

‍Which companies need to comply with SB 253 and SB 261?

The California Climate Disclosure Rules set clear thresholds for compliance, targeting large corporations with substantial revenue and operations in the state:

Under SB 253, companies that generate annual revenues of at least $1 billion and conduct business within California must disclose their greenhouse gas emissions. This applies regardless of where the company is headquartered, meaning any large corporation with a presence in the state must adhere to the law’s mandates.

SB 261, on the other hand, expands its reach to companies with annual revenues of $500 million or more, focusing on climate-related financial risk disclosures. This law also applies to any qualifying company with operations in California, regardless of their headquarters’ location. 

Although smaller companies are exempt from direct compliance, they may still feel indirect impact, particularly if they are part of the supply chain for larger organizations subject to these requirements. As larger companies work to comply with Scope 3 emissions reporting under SB 253, they may increasingly require emissions data from suppliers and partners, creating a ripple effect across industries.

When do companies need to report?

The reporting timelines for SB 253 and SB 261 begin in 2026 and follow a phased approach to ensure businesses have time to prepare for the requirements.

SB 253: GHG Emissions Reporting

• 2026: Companies must begin reporting Scope 1 and Scope 2 emissions using FY2025 data. These reports must align with the GHG Protocol, and limited third-party assurance is required.
• 2027: Reporting expands to include Scope 3 emissions using FY2026 data. The California Air Resources Board (CARB) will determine the exact timeline for these disclosures.
• 2030: Companies must obtain reasonable third-party assurance for Scope 1 and 2 emissions using FY2029 data.

SB 261: Climate Risk Reporting

• 2026: Companies must submit their first biennial climate-related financial risk report by January 1, 2026, covering risks and mitigation strategies using FY2025 data.
• Subsequent reports will be due every two years.

How to prepare your business

Complying with SB 253 and SB 261 requires a proactive, well-structured approach. Businesses that invest in preparation now can turn compliance into an opportunity to lead in sustainability. Here are steps you can take to get started:

1. Build a robust data infrastructure

Accurate emissions reporting starts with reliable data collection. Invest in systems to accurately measure emissions across all three scopes, ensuring consistency and precision. Leveraging a carbon management platform can streamline this process, enabling businesses to seamlessly integrate emissions tracking into their operations.

2. Engage your value chain

Scope 3 reporting hinges on effective collaboration with suppliers, distributors, and even customers. Engage with stakeholders early to establish data-sharing processes and foster transparency. Businesses that build strong supply chain relationships will not only improve their reporting but also uncover opportunities for joint decarbonization initiatives.

3. Develop a climate risk strategy

Under SB 261, companies must assess and address how climate risks—both physical and transitional—could affect their operations. Developing a comprehensive strategy requires cross-functional collaboration, with input from finance, operations, and sustainability teams. Aligning these efforts with global frameworks like TCFD ensures that your reports resonate with investors and regulators alike.

4. Seek expert guidance

The complexity of these laws makes external expertise invaluable. Partnering with the right carbon accounting platform or consulting team can help you navigate emissions calculations, prepare for third-party assurance, and set science-based targets that align with your broader decarbonization goals.

5. Monitor regulatory updates

Stay informed about guidance from the California Air Resources Board to ensure that your compliance efforts remain aligned with evolving requirements.

Turning compliance into climate leadership

The California Climate Disclosure Rules present more than a regulatory challenge—they offer businesses the opportunity to lead in sustainability, align with investor expectations, and drive meaningful action toward net-zero goals. Companies that embrace these laws not only demonstrate transparency but also build resilience in a rapidly changing business environment.

At Zevero, we empower organizations to turn compliance into a competitive advantage. Whether it’s emissions tracking, climate risk analysis, or decarbonization strategy, we provide the tools and expertise you need to succeed. Contact us today to learn how we can support your journey.