Does the company need to be headquartered in California?

No, a company does not need to be headquartered in California. The key requirement is that it must be doing business in California, which can include sales, operations, subsidiaries, offices, or other commercial activity in the state.

Do private companies need to comply with SB 253 and SB 261?

Yes, both public and private companies can be required to comply if they meet the revenue thresholds and business activity criteria in California.

What companies fall under SB 253?

SB 253 applies to U.S.-organized partnerships, corporations, LLCs, and other business entities with annual revenues above 1 billion dollars that do business in California. These companies must report Scope 1, Scope 2, and Scope 3 greenhouse gas emissions.

What companies fall under SB 261?

SB 261 applies to U.S.-organized companies with more than 500 million dollars in annual revenue that do business in California. Insurance companies are generally exempt from SB 261 requirements.

How is 'doing business in California' determined?

This generally includes any company engaging in transactions for financial gain in California, including sales, property, payroll, subsidiaries, or operational presence. Companies should review California tax nexus and CARB guidance to confirm applicability.

What should companies do to check if they are in scope?

Companies should verify annual global revenue, confirm U.S. organization status, assess California business activity, and review CARB guidance or preliminary covered-entity lists to determine whether SB 253 or SB 261 applies.

Which Companies Must Comply with SB 253 and SB 261?

Q: Which companies must comply with SB 253 and SB 261?

Companies must comply if they are organized in the United States, do business in California, and meet the revenue thresholds set by the law. SB 253 applies to companies with more than 1 billion dollars in annual revenue, while SB 261 applies to companies with more than 500 million dollars in annual revenue.

2 min. read
Anviksha Mishra

who needs to comply with sb 253 and sb 261

Companies looking to comply with SB 253 and SB 261 in California must understand if these two new climate disclosure laws apply based on revenue thresholds and business operations. Here’s what you need to know.

What Is SB 253?

SB 253 is California’s Climate Corporate Data Accountability Act. It requires large companies to publicly disclose their greenhouse gas (GHG) emissions, including Scope 1, 2, and eventually Scope 3.

Who Must Comply with SB 253?

Any company that needs to comply with SB 253 must meet all of the following:

Is organized in the US (any state or D.C.)
Does business in California
Has total annual revenues over $1 billion

If that’s your company, you’re considered a “reporting entity” under SB 253.

What Must Be Disclosed?

Emission Scope	Description	Deadline
Scope 1	Direct emissions from owned or controlled sources	Annually starting 2026
Scope 2	Indirect emissions from purchased electricity, steam, heat, or cooling	Annually starting 2026
Scope 3	All other indirect emissions (e.g., supply chain, product use)	Annually starting 2027

All disclosures must follow the Greenhouse Gas Protocol standards and be third-party assured.

What Is SB 261?

SB 261 is focused on climate-related financial risk. It requires companies to report how physical and transition climate risks could impact their business—and what they’re doing about it.

Who Must Comply with SB 261?

Any company preparing to comply with SB 261 must ensure they meet these criteria:

Is organized in the US
Does business in California
Has total annual revenues over $500 million

These are referred to as “covered entities” under SB 261.

📌 Note: Companies in the insurance business are exempt.

What Must Be Disclosed?

Every two years, covered entities must publish a Climate-Related Financial Risk Report. It must include:

How climate risks could affect financial performance
Measures the company is taking to adapt or reduce these risks

The report must align with TCFD (Task Force on Climate-Related Financial Disclosures) or an equivalent standard.

Quick Comparison: SB 253 vs SB 261

Feature	SB 253	SB 261
Focus	Greenhouse gas emissions	Financial risks from climate change
Revenue Threshold	$1 billion+	$500 million+
Applies to	All business types	All, except insurance companies
Reporting Frequency	Annually	Every two years
Required Framework	GHG Protocol	TCFD or equivalent
Public Disclosure	Yes, via emissions platform	Yes, on company website
Enforcement	Up to $500K/year in penalties	Up to $50K/year in penalties

When Do These Rules Take Effect?

Law	First Deadline
SB 253 – Scope 1 & 2 Reporting	2026
SB 253 – Scope 3 Reporting	2027
SB 261 – Climate Risk Report	January 1, 2026

Internal Action Items

Check if your total annual revenue exceeds $500M (SB 261) or $1B (SB 253)
Confirm you’re “doing business” in California
Assign teams to lead GHG accounting (SB 253) and climate risk disclosure (SB 261)
Identify appropriate reporting standards (GHG Protocol, TCFD)
Plan for third-party assurance (especially for SB 253 Scope 1 & 2 by 2026)

Taking these steps now ensures your company is ready to comply with SB 253 and SB 261 ahead of the 2026 deadlines.