SB-253 & SB-261: The Compliance Clock Has Started. Here's What CARB Just Updated.

California just moved one step closer to operationalizing its corporate climate disclosure laws. At the latest California Air Resources Board (CARB) public workshop held on November 18th, regulators provided critical updates on SB-253 (GHG emissions reporting) and SB-261 (climate risk disclosure).

Here’s a crisp breakdown of what changed and what it means for your organization:

First-Year Deadlines Are Now Clear:

SB-253:

• First-year Scope 1 & 2 deadline: August 10th, 2026
• Reporting year depends on the fiscal year followed by the company:
  • If the financial year ends between January 1 - February 1, 2026, companies must report on data from FY 2026.
  • If the financial year ends between February 2 - December 31, 2026, companies must report on data from FY 2025.
• Every company gets at least 6 months after their fiscal year-end to submit.

SB-261:

• The first climate risk financial disclosure must be posted publicly by January 1st 2026.
• CARB will be opening a docket on December 1st, 2025, and the link to the report must be submitted by July 1st, 2026.

CARB will exercise Enforcement Discretion in 2026:

• Limited assurance is not required for SB-253 reporting in 2026.
• Optional use of the draft Scope 1-2 template for SB-253 reporting.
• Companies not previously collecting emissions data or were not planning to collect it at the time of the issuance of the Enforcement Notice may submit a simple letter under the company letterhead stating non-readiness under the Enforcement Notice.

This removes immediate legal risk for companies still building their systems.

Fee Structure: Flat Annual Fees for Both Programs:

CARB confirmed a flat-fee model.

• Entities with $500M-$1B revenue must pay the SB-261 fee only annually
• Entities with >$1B revenue must pay SB-253 and SB-261 fees annually
• Each subsidiary must pay its own fee (though parent can make one consolidated payment)

This structure means large multi-entity companies with operations in California will face multiple annual fees.

Major Clarity on Definitions: Who Is Actually “In Scope”?

CARB refined definitions after significant stakeholder pushback.

Revenue:

• Uses CA Revenue & Taxation Code §25120(f)(2)
• Determined by the lower of the entity’s previous two fiscal years

Doing Business in CA:

CARB will apply RTC §23101, based on:

• Active business presence
• Organized or commercially domiciled in the state
• Sales in California > $735,019 (2024 threshold)

Payroll and property thresholds are not included (Section 23101(b)(3-4)), narrowing the definition. This materially affects entities with remote or minimal CA presence.

Exemptions:

Based on stakeholder comments, staff have proposed exempting:

• Non-profits / charitable organizations
• Entities with only teleworking employees in CA

Statutory exclusions (government-owned entities, insurers) still apply.

Parent-Subsidiary Rules:

• CARB reaffirmed that parent–subsidiary status does not determine whether an entity is regulated. Each company, parent and subsidiary, must independently assess whether it meets the inclusion thresholds for SB-253 or SB-261.
• The definition of “parent” and “subsidiary” aligns with CARB’s Cap-and-Invest program, using >50% ownership or control as the test (shares, voting rights, board control, LLC interest, partnership interest, etc.).
• A subsidiary may request that its parent report on its behalf, but the reporting obligation itself is always entity-specific.
• CARB also released new decision flowcharts (present in the updated FAQ) that guide companies step-by-step through determining whether they are subject to SB-253, SB-261, both, or neither.

Climate Risk Reporting (SB-261) – Minimum Requirements

CARB reiterated that reports may align with TCFD or IFRS S2 and they must disclose along the 4 principles of Governance, Strategy, Risk management, Metrics & Targets. Companies early in their risk journey may describe:

• How climate-related risks are relevant to the entity, even if no material risks have been identified
• Gaps, limitations and assumptions made as part of the assessment of climate issues.
• Plans to build capabilities
• Each CARB-submitted report must clearly state which reporting framework is used, specify which disclosures are included or missing, and briefly explain any omissions along with plans to address them in future reporting

Scope 3 reporting is coming, and CARB wants input from all stakeholders

CARB is actively collecting feedback on:

• Which Scope 3 categories are most used
• Which categories are most valuable for investors
• Areas where data availability remains a challenge

This will heavily shape the next rulemaking phase (post-2026). The suggestions can be shared to climatedisclosure@arb.ca.gov.

CARB’s Big Data Challenge: Identifying Who Must Report

CARB acknowledged significant issues in the preliminary list of regulated entities:

• Missing major companies
• Duplicate entries
• Incorrect revenue estimates
• Outdated private-company data
• No reliable way to verify “doing business”

The current solution being pursued is trying to access the Franchise Tax Board (FTB) filings to improve accuracy long-term.

What’s Next?

Future rulemakings for SB-253 will establish other program requirements like assurance requirements, recurring reporting timelines for SB-253 and final reporting templates.

Preparation Beats Perfection

CARB's enforcement discretion for 2026 is a signal: Start building your compliance systems now, even if the data isn't perfect.

The companies that will struggle in the future are those treating 2026 as "optional" and waiting for final rules before acting. The companies that will lead are those using 2026 as a learning year - building processes, identifying gaps, engaging stakeholders, and iterating.

California's climate disclosure laws aren't going away. They're going to expand. The question isn't whether to comply. It's whether you'll comply reactively by scrambling each year or proactively by building systems once that scale across regulations.

Need help assessing your SB-253/261 readiness? Contact ecoPRISM for a free consultation.