California Climate Accountability Laws

California mandates full climate disclosure for large companies, setting a new national and global benchmark.

Uniqus is actively monitoring developments in California’s climate legislation. Please share your contact details to receive the latest updates and insights.

The California climate laws, SB 253 and SB 261, enacted in October 2023 and further clarified by SB 219 in September 2024, impose climate-related disclosure requirements on large companies doing business in California, effective from 2026.

California Air Resources Board (CARB), California’s lead agency for air quality and climate change programs, intends to finalize regulations in early 2026. Uniqus is tracking regulatory updates to the rules closely and will keep this page up-to-date with the latest developments.

Applicability thresholds for entities

(SB 253) Climate Corporate Data Accountability Act

Requires companies with over USD 1 billion in revenue doing business in California to publicly disclose Scope 1, 2, and 3 GHG emissions and mandates third-party assurance for emissions data.

(SB 261) Climate-Related Financial Risk Act

Requires companies with over USD 500 million in revenue doing business in California to disclose climate-related financial risks and mitigation strategies, aligned with TCFD (and potentially other frameworks, such as IFRS S2).

Who?

Companies who

Are non-insurance firms (SB 261),
US-based, and do business in California

Generate USD 500M+ (SB 261) or 1B+
(SB 253) in gross revenue, based on the lesser of the prior two fiscal years

How?

Reporting according to

TCFD recommendations around governance, strategy, risk management, and metrics and targets; other standards to be considered by CARB
GHG Protocol for emissions quantification; other standards to be considered by CARB

Reported to

Both publicly available (e.g., corporate website) and to a nonprofit disclosure organization contracted by CARB

What?

Report climate-related financial risks

Physical risks
Transition risks

Report measures taken or plans around

Climate mitigation
Climate adaptation

Report GHG emissions

Scope 1 and 2 with limited, later reasonable assurance
Scope 3 with limited assurance

When?

Phase in timelines

(SB 253) Climate Corporate Data Accountability Act

2026

First disclosures for Scope 1 & 2 GHG emissions (covering prior fiscal year) due August 10, 2026; annual reporting cadence

2027

- CARB actively considering three regulatory options for Scope 3 GHG emissions (covering prior fiscal year, annual reporting cadence):

- Broad applicability for all entities, all categories, with de minimis exclusions permitted
- Sector phase-in focused on transportation and industrial sectors
- Category phase-in starting with the most commonly reported categories

- Limited assurance required for annual Scope 1 & 2 disclosures

2030

- Assurance requirement would rise to reasonable level for annual Scope 1 & 2 disclosures

- Limited assurance required for annual Scope 3 disclosures

(SB 261) Climate-Related Financial Risk Act

TCFD-aligned climate risk reports likely due on or after January 1st (covering prior fiscal year); biennial reporting cadence

As of November 18, 2025, Ninth Circuit Court of Appeals stayed enforcement of SB 261 while it reviews an appeal to the ongoing litigation challenging California’s climate accountability laws. The Court did not grant an injunction related to SB 253. Given the uncertainty with respect to when and how the Ninth Circuit will rule, CARB released an enforcement advisory confirming that it would not enforce SB 261 against covered entities for failing to post and submit reports by the January 1, 2026, statutory deadline. CARB will provide further information, including an alternate date for reporting, as appropriate, after the appeal is resolved. In the meantime, CARB has released the SB 261 public docket for entities that may choose to voluntarily submit their reports. It is still prudent for in-scope companies to be prepared to comply with the requirements of SB 253 and SB 261 in the near future.

Why?

Corporate perspective

Mandates companies to assess the financial materiality of climate-related risks and consider how they can address them

Stakeholder perspective

Provides investors, policy makers, and consumers with material climate information which may inform financial decisions

Financial penalties

Non-compliance with SB 253 and SB 261 may result in financial penalties of up to $500,000 and $50,000 per year, respectively; CARB has indicated it will exercise enforcement discretion for reporting violations, taking into account whether companies made good faith efforts to comply with the regulations

Applicability of SB 253

The flowchart diagram illustrates whether a business entity is likely to be in scope under the remit of SB 253.

Applicability of SB 261

The flowchart diagram illustrates whether a business entity is likely to be in scope under the remit of SB 261.

Companies within the insurance industry are exempt from SB 261 as they are subject to similar disclosure requirements under the National Association of Insurance Commissioners.

What does ‘doing business in California’ mean?

Uniqus has updated these figures from our original thought leadership piece to reflect updates to California’s Revenue and Taxation Codes and CARB’s proposal to omit property holdings and payroll provisions. These definitions align with current proposals from CARB, as of November 18, 2025.

CARB Public Workshop Updates

Purpose and Context

CARB has held several public workshops to engage stakeholders for implementing California’s corporate climate disclosure regulations (“the 200s”). Most recently, CARB approved the Initial Regulation for the 200s in February and held another public workshop in March 2026.

CARB aims to align the framework with global standards (e.g., ISSB), enhance interoperability, and integrate stakeholder feedback before further formal rulemaking.

CARB Rulemaking Focus Areas and Emerging Stakeholder Issues

Definition of “Doing Business in CA”

CARB Proposal

Based on California Revenue & Tax Code §23101, with refinements to exclude entities with minimal economic nexus. For example, CARB recently proposed omitting §23101 provisions related to property holdings and payroll.
CARB is also exploring existing databases of US-based companies to help establish the definition.

Key Stakeholder Concerns and Questions

Is the proposed definition too broad? Should it include emissions-based or materiality thresholds?
How would CARB address limitations with databases (e.g., Francise Tax Board, CA Secretary of State Business Entity)?

Revenue Definition

CARB Proposal

Gross receipts are verifiable on California Franchise Tax Board (FTB) filing.
Applicability would be determined by the lesser of the entity’s two previous fiscal years of revenue.

Key Stakeholder Concerns and Questions

If based on gross receipts, how would CARB address concerns that the definition is overly expansive and difficult to verify given confidentiality limits?
If revenue is defined without deducting expenses, how will consistency be ensured across industries with different cost structures?

Corporate Structure (Parent/Subsidiary)

CARB Proposal

Cap-and-Trade “operational control” model (i.e., ≥50% control threshold) to define ownership control.
CARB to identify subsidiaries through evaluation of commercial databases and cross reference with existing databases.
Parent-subsidiary relationships do not determine which entities are regulated; a subsidiary may request for a parent to report on its behalf.

Key Stakeholder Concerns and Questions

Should alternative definitions (e.g., legal ownership vs control) be used? How should the rule apply across multinationals?
What process will CARB use to verify self-reported parent–subsidiary?

Exempted Entities

CARB Proposal

Non-profits, companies whose only business in California is the presence of teleworking employees, government entities, and CA Independent System Operator (CAISO) or business entities whose only activity in California consist of wholesale electricity transactions that occur in interstate commerce.

Key Stakeholder Concerns and Questions

Should CARB consider additional exemptions for entities such as financial institutions or other low-footprint entities (e.g., telework-only operations or market-only participants)?

Streamlining & Interoperability

CARB Proposal

Reporting standards to align with GHG Protocol, TCFD/ISSB, and any report developed in accordance with a regulated exchange, national government, or other governmental entity. Discussion of which recommendations and disclosures have been included and which have not, and plans for future disclosure.

Key Stakeholder Concerns and Questions

How will Scope 3 materiality be addressed?

Scope 1 & 2 Reporting Templates

CARB Proposal

While companies are not required to use CARB's draft Scope 1 and 2 templates for 2026 reporting, CARB will develop mandatory templates for 2027 and subsequent years and plans to release draft templates for public comment in summer 2026.

Key Stakeholder Concerns and Questions

Will mandatory templates accommodate diverse business structures, operations, or non-calendar fiscal years, or create undue burdens?

Organizational Boundaries

CARB Proposal

Choice between equity share approach or operational control approach.

GHG Accounting Methods

CARB Proposal

Four flexible choices: spend-based, activity-based, supplier-specific, and hybrid approaches.
Emissions factor datasets: EPA's eGRID, IPCC's EFDB, EPA's Emission Factors Hub, and the USEEIO.

Key Stakeholder Concerns and Questions

How will comparability across disclosures be ensured between companies or reporting years? Will switching methods between reporting years be permitted or require disclosure?

Assurance Criteria

CARB Proposal

Any of the following assurance options:
- AA1000AS v3
- AICPA AT-C Section 210 (limited review) or AT-C Section 205 (reasonable assurance)
- ISAE 3000 and ISAE 3410 (until December 2026), ISSA - 5000 (effective December 2026)
- ISO 14064-3:2019 (with provider qualifications under ISO 14065/14066)

Key Stakeholder Concerns and Questions

Assurance capacity remains a live concern, while market readiness for the 2027 mandatory assurance requirement is tight. Can CARB resolve standardized protocols across multiple accepted frameworks? Will the 2030 reasonable assurance requirement enter formal rulemaking?

Enforcement Approach

CARB Proposal

Grace period in 2026 with no penalties from CARB for demonstrated good-faith efforts in the initial reporting year. CARB will provide forthcoming guidance on extension requests for the August 10, 2026, Scope 1 & 2 reporting deadline, as well as updates on the 2026 reporting intake process.

Key Stakeholder Concerns and Questions

With extension guidance still forthcoming, how much lead time will CARB provide before August 10? What information will constitute a good-faith submission?

Scope 3 Disclosure Challenges

CARB Proposal

Three regulatory options:

Option 1: Broad applicability (all entities, all categories, with de minimis exclusions permitted).

Option 2: Sector phase-in focused on transportation and industrial sectors.

Option 3: Category phase-in, starting with the most commonly reported categories (Business Travel, Purchased Goods & Services, Fuel & Energy Related Activities, Employee Commuting, and Waste Generated in Operations).

Key Stakeholder Concerns and Questions

Which phase-in option best balances rigor with feasibility? Will the de minimis exclusion under broad applicability be defined by quantity, materiality, or sector relevance? Will companies in non-transportation, non-industrial sectors face Scope 3 obligations beyond 2027?

Next Steps and Stakeholder Input

CARB approved its Initial Regulation on February 26, 2026, establishing the fee structure for the 200s, key definitions of applicability, and the August 10, 2026, deadline for initial Scope 1 and 2 reporting under SB 253. The regulation is virtually identical to the draft proposed in December 2025 and is pending review by California's Office of Administrative Law before taking effect. That review is expected to take several months, with no substantive changes anticipated.

CARB reaffirmed its December 2024 Enforcement Notice,and guidance from its November 2025 FAQ document, stating that companies that were not collecting GHG data as of that date are not required to report in 2026, and that assurance will not be required for first-year submissions. CARB plans to publish forthcoming guidance addressing extension requests, though it indicated this will apply to limited situations, and will provide updates on when the CARB reporting portal will open for submissions.

On March 23, 2026, CARB held its fourth public workshop, the first following adoption of the Initial Regulation, focused on pre-rulemaking concepts for 2027 and beyond. Key topics included three Scope 3 phase-in options, organizational boundary approaches, four GHG accounting methodologies, mandatory Scope 1 and 2 reporting templates for 2027 (following up on draft templates posted to CARB’s website), and a proposed list of acceptable assurance standards. Following this input, CARB will prepare a formal Notice of Proposed Rulemaking with draft regulatory text and a 45-day public comment period before board consideration.

For SB 261, enforcement remains paused pending the Ninth Circuit's resolution of the ongoing litigation. CARB has indicated it will set a new SB 261 reporting deadline once the appeal is resolved. More than 120 reports have already been posted voluntarily to CARB's public docket. CARB has previously provided a detailed reporting checklist and preliminary list of covered entities (note: not every in-scope entity is included in this list) on its website.

CARB has presented estimated average annual compliance costs per reporting entity at the March workshop, based in part on the SEC's 2024 federal climate disclosure rulemaking analysis adjusted to 2025 dollars, ranging from approximately $167,000 to $191,000 in the first year, depending on the Scope 3 option adopted. Program administration fees are estimated at $2,000 to $7,000 per in-scope entity, depending on the applicable program.

Companies are encouraged to submit feedback to climatedisclosure@arb.ca.gov and take no-regret steps to prepare, regardless of the status of legal challenges.

Uniqus POV: Strategic Insights and Implications

California is setting a de facto national standard

With broad applicability and interoperability ambitions given the scope of firms operating in California, these rules may shape how large companies report globally, especially in the absence of federal mandates. Additional states are following suit, having introduced or proposed climate-related financial risk disclosure regulations, such as Minnesota (SF 2744), New York (SB 3697), and Washington (SB 6092).

Scope 3 is a regulatory frontier in the US

The phased implementation approach reflects the complexity of Scope 3 reporting, but CARB is moving toward mandating deep value chain transparency. This precedent will impact supply chains.

Global alignment is intentional

CARB’s coordination with ISSB and monitoring of EU, UK, and APAC disclosure frameworks signals an intent to design a globally interoperable and enforceable framework.

CARB is firm on timelines but will exercise enforcement discretion in the first year of reporting

Companies demonstrating “good faith efforts” to achieve full compliance using existing data will not face penalties in 2026. While stakeholder feedback is welcome, CARB appears to remain firm on timelines and legal durability of the rules.

How to Prepare for CA Climate Laws

If your company is in scope for SB 253 or SB 261, here are key questions you should consider now:

Are your internal teams prepared to manage evolving climate disclosure requirements, or do you need additional support from external consultants?

Do you have strong controls to ensure disclosure accuracy, completeness, and timeliness?

Have you identified the right technology for GHG data management and assurance readiness?

Are you engaging with the right internal and external stakeholders to proactively prepare?

How long will it take to implement the technology and prepare for external disclosure, and is your roadmap in place?

Actions businesses can take now:

Climate Risk Assessment Scope 1 & 2 GHG Accounting Scope 3 GHG Accounting

Identify and assess physical and transition climate risks and their financial impact on operations and assets, mapping them to facilities and organizational boundaries
Determine feasibility for incorporating climate risk considerations into strategic planning and decision-making processes, if necessary
Evaluate and enhance existing climate risk management and integration into strategic planning, benchmarking against peer companies’ climate risk disclosures
Compile the necessary information and analysis to support compliance with California SB 261 disclosure requirements and evaluate climate risk mitigation initiatives

Calculate Scope 1 and 2 GHG emissions for a defined period (e.g., CY 2024) following the Greenhouse Gas Protocol, identifying reporting gaps versus requirements
Establish a document with a consistent methodology for ongoing emissions tracking and calculation, assessing data quality management systems
Prepare an emissions inventory report with methodology, data sources, and reporting processes with future attestation in mind
Benchmark emissions performance against industry peers
Engage with third-party consultants or assurance providers for GHG emissions inventory to receive early feedback on internal controls and data collection processes

Identify and categorize relevant Scope 3 emission sources per the GHG Protocol Value Chain Standard
Collect and analyze data to calculate material emissions across key categories, engaging with key stakeholders early, including value chain partners, to gather necessary information to estimate upstream or downstream emissions
Establish a methodology for ongoing Scope 3 tracking, considering data quality and availability; document assumptions where estimations are employed based on heavy assumptions or limitations
Develop a report detailing the emissions inventory, methodology, limitations, and improvement areas
Consider engaging with third-party consultants or assurance providers for assistance with GHG emissions inventory, as Scope 3 accounting can be a complex endeavor

Our clients include marquee organizations globally across the US, India, Asia, and Europe. With a unique blend of strong ESG domain capabilities and innovative AI-based technology, ESG UniVerse streamlines data management, enhances user experience, and supports organizations in achieving their long-term ESG goals through the four modules.

ESG Disclosures and Reporting
GHG Inventorization

Value Chain Assessment

Capabilities of ESG Universe

ESG UniVerse can help your organization in preparing for the requirements of California’s climate regulations. Uniqus also offers a suite of sustainability consulting services to guide clients needing tailored expertise. If interested in learning more, click here or contact Uniqus today.

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