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)
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.
FAQs
What are the basic criteria that determine whether a company must comply with SB 253 in California?
SB 253 applies to any company organized in the United States, generating more than US $1 billion in annual revenue, and doing business in California. All three conditions must be met for the law to apply.
Which companies fall under the scope of SB 261 compliance?
SB 261 applies to any company organized in the United States, with over US $500 million in annual revenue, doing business in California. The only exception is insurance companies, which are exempt.
How is “doing business in California” defined under these laws?
Both SB 253 and SB 261 apply regardless of company headquarters; the critical factor is active operations in California, such as physical presence or business activity, combined with revenue thresholds.
Can private companies be subject to SB 253 or SB 261?
Yes. Both laws apply to public and private companies as long as they meet the US organization, revenue, and California business activity criteria.
Is global revenue considered when determining SB 253 and SB 261 thresholds?
SB 253 focuses on firms with total annual revenues exceeding US $1 billion, while SB 261 covers those with over US $500 million. The thresholds refer to total company revenue—not just California-specific revenue.
What kind of disclosures must a company liable under SB 253 provide?
A company subject to SB 253 must disclose annual greenhouse gas emissions—Scope 1 and 2 beginning in 2026 and Scope 3 starting in 2027—and align with the Greenhouse Gas Protocol. All disclosures must be third‑party assured.
What reporting obligations exist under SB 261 for covered entities?
Covered entities under SB 261 must publish a biennial climate‑related financial risk report starting in 2026 following the TCFD framework or equivalent. The report must explain climate-related risks and outline mitigation or adaptation measures.
