SB 253 & SB 261 Compliance Guide: FAQs and Reporting Checklist for Companies

With the new SB 253 and SB 261, the state has already set the rules of the game: corporations must disclose their greenhouse gas emissions and their climate-related financial risks. Now, in 2025, the California Air Resources Board (CARB) is hammering out the details - deadlines, reporting formats, assurance requirements, and fees.

For companies with hundreds of millions to billions in annual revenue, this isn't just another compliance in the box. It's a public accountability moment: emissions and climate risks will soon be out in the open, searchable, and comparable across industries.

To cut through the noise, we've pulled together answers to the most pressing questions from CARB's August 2025 workshop.

FAQs on California's SB 253 & SB 261

1. What are SB 253 and SB 261?

  • SB 253 requires large companies (>$1 billion global revenue) conducting business in California to disclose their greenhouse gas emissions (Scope 1, 2, and later Scope 3).
  • SB 261 requires companies (>$500 million global revenue) to disclose climate- related financial risks every two years, aligned with frameworks like TCFD or IFRS S2.

2. Who must comply?

  • SB 253: Entities with >$1 billion in annual global revenue doing business in California.
  • SB 261: Entities with >$500 million in annual global revenue doing business in California.
  • Exemptions: Nonprofits, certain insurance entities, and some entities with minimal California presence (e.g., telework only).

3. How is "revenue" defined?

CARB is considering two approaches:

  1. "Gross receipts" are defined in the California Revenue & Taxation Code.
  2. A simpler definition: total global money/sales received from business activities (no deductions for costs or expenses).

4. What counts as "doing business in California"?

It is to align with California Revenue & Taxation Code ยง 23101, including:

  • Being domiciled or incorporated in California.
  • Exceeding thresholds for in-state sales.
  • Engaging in financial transactions within the state.

5. How do parent and subsidiary relationships affect reporting?

  • Parent companies and subsidiaries may be consolidated.
  • CARB proposes requiring the identification of parent entities (ownership >50%).
  • Reporting could be consolidated at the parent level to avoid duplication.

6. What emissions must be reported, and when?

  • 2026: Scope 1 and Scope 2 emissions due by June 30 (Proposed deadline, subject to final rulemaking).
  • 2027: Scope 3 emissions reporting begins (timeline still being finalized).

7. Will reports need assurance/verification?

  • Yes. SB 253 requires third-party assurance.
  • Assurance begins with limited assurance and may move to reasonable assurance later.
  • CARB is considering standards like ISSA 5000, AA1000, ISO 14060, and AICPA.

8. What reporting frameworks are allowed under SB 261?

Companies may use frameworks such as:

  • TCFD (Task Force on Climate-Related Financial Disclosures)
  • IFRS S2 (International Sustainability Standards Board)
  • Comparable reports filed with exchanges or government regulators

Reports must state the chosen framework, what was included, what was excluded, and plans for future disclosures.

9. What is the timeline for implementation?

  • Oct 2025: CARB notice of proposed rulemaking.
  • Nov 2025: Public comment period closes.
  • Dec 2025: Board hearing/consideration.
  • Jan 2026: First SB 261 risk reports due.
  • Jun 2026: First SB 253 Scope 1 & 2 reports due.
  • 2027: Scope 3 reporting begins.

10. What fees will companies pay?

  • SB 253 entities: approx. $3,106 per year.
  • SB 261 entities: approx. $1,403 per year.
  • Companies subject to both must pay both fees.
  • Fees are adjusted annually for inflation and program costs.

11. Who can provide assurance?

  • Independent third parties can provide assurance.
  • They must follow integrity, objectivity, and independence standards.
  • Providers will check data systems, sampling, conformance, and error correction.

12. What are the penalties for non-compliance?

  • CARB can review reports and assurance statements.
  • Enforcement applies if reports are missing, late, or materially inaccurate.
  • Specific penalty structures will be finalized in regulations.

13. How can companies prepare now?

  • Determine if revenue and presence thresholds apply.
  • Begin measuring Scope 1 and 2 emissions.
  • Map value chain for Scope 3 data.
  • Review frameworks (TCFD, IFRS S2) for readiness.
  • Build internal systems and engage assurance providers.
  • Track CARB updates - draft Scope 1 & 2 templates are expected to be released by the end of September 2025.

14. What should an SB 261 Climate Risk Report include?

CARB released a Draft Checklist (Sept 2025) to guide companies on what to cover in their SB 261 reports. At a minimum, reports should address the following areas:

Framework Selection

State the framework you are using (e.g., TCFD, IFRS S2, or another accepted one). Be explicit about what is included, what is excluded, and your plan for future disclosures.

Governance

Describe how climate-related risks and opportunities are overseen at the Board and senior management level, and how they are integrated into governance structures.

Strategy

Explain the actual and potential impacts of climate risks and opportunities on operations, strategy, and financial planning (short, medium, and long term). Include scenario analysis where feasible.

Risk Management

Outline your process for identifying, assessing, and managing climate risks, and how those processes fit into enterprise risk management.

Metrics & Targets

Disclose the metrics and targets you use (or plan to use) to measure and manage climate risks. Include GHG emissions data if available (Scope 1 and 2 required under SB 253, Scope 3 later).

Materiality

Focus reporting on financially material risks, which could significantly affect business operations, cash flow, or valuation.

Reporting Period & Data

Use the most recent and best available data (calendar or fiscal year) and be transparent about sources.

Public Posting & CARB Docket

Publish the report on your website and submit the link to CARB's public docket (opens December 2025).

Exemptions & Consolidation

Clarify if your company qualifies for exemptions, and if reporting is consolidated at the parent level.

This checklist is intended as a baseline; companies may go further to meet investor expectations and global standards.

SB 253 and SB 261 aren't just compliance mandates - they're public accountability tools. Starting in 2026, corporate emissions and climate risk disclosures will be searchable, comparable, and subject to public and investor scrutiny. Companies that prepare early will be best positioned to meet the challenge and to turn disclosure into a competitive advantage.

How ecoPRISM Can Help

Navigating California's new climate disclosure law can be overwhelming - especially with evolving requirements, strict deadlines, and the need for reliable assurance. This is where ecoPRISM comes in.

ecoPRISM provides:

  • Centralized ESG Data Management - Eliminate data silos, simplify data collection, validation, and reporting through the ecoPRISM ESG platform.
  • Automated Emissions Tracking - Easily measure and report Scope 1, 2, and Scope 3 emissions.
  • Climate Risk Reporting Tools -Expert guidance for reporting aligned to TCFD and IFRS S2 for SB-261.
  • Assurance-Ready Reports - Generate auditable reports that meet CARB requirements.
  • Future-Ready Compliance - Stay ahead with updates tailored to California's climate regulations.

With ecoPRISM, companies can transform SB 253 and SB 261 compliance into an opportunity - building trust with stakeholders, strengthening governance, and leading on sustainability.

Learn more: ecoPRISM ESG Platform

Visit ecoPRISM or connect with us on LinkedIn to see how we can simplify your sustainability journey with our cutting-edge solutions.