If your company operates in California and meets a certain revenue threshold, two new climate disclosure laws: SB 253 and SB 261, probably apply to you. 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:
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 that:
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)
Plan for third-party assurance (especially for SB 253 Scope 1 & 2 by 2026)
FAQs
What is considered “doing business” in California?
The laws don’t define it precisely, but if your company sells, delivers, provides services, or operates in California—even without a physical office—you’re likely considered to be “doing business” in the state and subject to compliance.
What if my company already reports emissions or climate risks elsewhere?
If your existing reports align with the required standards—GHG Protocol for SB 253 and TCFD or equivalent for SB 261—you can reuse them. California allows companies to leverage existing disclosures as long as they meet the law’s core requirements.
Are private companies included?
Yes. Both SB 253 and SB 261 apply to public and private companies that meet the respective revenue thresholds and do business in California. This expands compliance beyond listed firms to large private enterprises as well.
What happens if we don’t comply?
Failure to comply can lead to significant penalties. Under SB 253, companies may be fined up to $500,000 per reporting year. Under SB 261, the maximum fine is $50,000 per year. Enforcement focuses on transparency and good-faith efforts to comply.
