The clock is ticking. By January 1, 2026, companies doing business in California must comply with two landmark climate disclosure laws: SB 253 and SB 261. Together known as the California Climate Accountability Package (CCAP), these laws mark a turning point in climate accountability for the U.S. private sector.
On July 9, 2025, the California Air Resources Board (CARB) published a detailed FAQ to clarify how companies can prepare. While full regulations won’t be finalized until late 2025, this guidance is the clearest picture yet of what’s expected. If your company meets the revenue thresholds and operates in California, you should already be moving.
Table of contents
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1. SB 253 and SB 261 at a glance
Let’s quickly recap what’s at stake:
- SB 253 (Climate Corporate Data Accountability Act) requires companies with over $1 billion in annual revenue doing business in California to disclose Scope 1 and Scope 2 greenhouse gas emissions annually starting in 2026, and Scope 3 emissions starting in 2027.
- SB 261 (Climate-Related Financial Risk Act) applies to companies with over $500 million in annual revenue. It mandates biennial reporting on climate-related financial risks, using frameworks like TCFD or IFRS S2.
This two-pronged framework pairs emissions accountability with financial risk transparency. The bottom line? Now’s the time to get your data, processes, and governance in order. If you wait until regulations are finalized, your company could be left scrambling to catch up.
2. What does the new CARB guidance clarify?
CARB’s recent FAQ doesn’t rewrite the rules, but it does fill in crucial blanks that have kept compliance teams guessing since SB 253 and SB 261 became law. Think of it as the regulatory equivalent of showing your work. CARB is signaling how it intends to interpret key terms (through initial staff concepts), what good faith efforts look like in 2026, and where companies have flexibility versus hard requirements.
The guidance won’t eliminate all uncertainty until the official regulations land, but it gives you enough clarity to build a defensible compliance strategy now.
3. Regulatory development and SB 219 amendments
CARB confirmed in its FAQ that the final regulations will not be issued until late 2025, missing the July 1 deadline originally set by SB 219. However, the reporting deadlines remain unchanged. In other words, the clock hasn’t stopped ticking.
SB 219 didn’t alter the core obligations of SB 253 or SB 261, it simply gave CARB more time to get the framework right. In the meantime, CARB continues to gather feedback, host workshops, and refine the rulemaking process. It’s a live dialogue, but expectations are already taking shape.
4. Defining “Doing Business in California”
This is one of the most asked (and most important!) questions.
CARB’s draft definition aligns with California Revenue and Taxation Code 23101. Under this approach, a company is considered to be “doing business” in California if, in any part of a reporting year, it:
- Is organized or domiciled in California
- Has sales exceeding $735,019 in the state
- Owns property worth over $73,502 or 25% of total property in the state
- Pays compensation over $73,502 or 25% of total compensation in the state
Remote workers? Still under discussion. CARB has flagged it as an area needing clarity, especially as companies operate with distributed teams.
They’re also considering whether thresholds apply at the parent or subsidiary level, and whether “gross receipts” under RTC 25120 should serve as the standard. For now, companies should assume a conservative reading. If you’re close to the line, start preparing.
5. Applicability of Health and Safety Code sections 38532 and 38533
While commonly referred to as SB 253 and SB 261, these laws are codified as Section 38532 (GHG emissions) and Section 38533 (climate-related financial risks) in the California Health and Safety Code. CARB’s official documents use these legal citations, and so should your internal briefings.
6. Data use and “Good Faith Efforts”
This is where nuance meets practicality.
CARB emphasizes that companies demonstrating a good faith effort to comply won’t be penalized in the first year. But good faith isn’t just a buzzword. It means:
- Using established standards like the GHG Protocol, TCFD, or IFRS S2
- Disclosing the best available data, even if it’s prior-year emissions data
- Acknowledging reporting gaps and sharing plans to close them
In other words, “do your best” is only acceptable if it’s backed by documented intent, credible frameworks, and a clear path forward.
7. Reporting deadlines and timeline
- January 1, 2026: First SB 253 and SB 261 reports due
- 2027: Scope 3 emissions disclosure begins under SB 253
- End of 2025: Final CARB regulations expected
Keep in mind that you’ll need your 2025 data to meet your 2026 reporting deadline. That means the work starts now.
8. Reporting frameworks: TCFD, ISSB, and Interoperability
CARB’s guidance is framework-friendly. For SB 261 disclosures, companies are encouraged to follow TCFD or IFRS S2, with flexibility for other recognized frameworks.
These aren’t just boxes to check. TCFD’s four pillars (Governance, Strategy, Risk Management, and Metrics & Targets) offer a practical roadmap. They help companies connect climate risk to real-world financial outcomes.
Companies must evaluate physical risks (think wildfires, floods, heatwaves) and transition risks (regulation, market disruption, reputation). CARB wants to see substance, not slogans. Scenario analysis, risk mapping, and forward-looking metrics are expected, even if your first report leans more qualitative than quantitative.
9. What this means for your business
Don’t wait for perfect clarity. The expectations are already in motion, and the smart move is to start building the capabilities you’ll need regardless of how the final rules shake out.
- For SB 253: Get familiar with the GHG Protocol Corporate Standard. You’ll need to calculate and disclose 2025 emissions with limited assurance by 2026. By 2030, reasonable assurance will be required.
- For SB 261: Prepare a risk disclosure report based on TCFD or IFRS S2. Include your governance structure, strategy, identified risks, metrics, and action plans.
- Data collection starts now: Your first disclosures will be based on 2025 performance.
- Engage leadership: These reports require cross-functional alignment—from sustainability to legal to finance.
The scope is wide, but the path is navigable. Think of it not as a compliance sprint, but as a maturity journey.
10. Key takeaways and next steps
- CARB’s final regulations are delayed but reporting deadlines are firm: January 1, 2026.
- Scope 3 emissions disclosures begin in 2027.
- Companies demonstrating good faith efforts in 2026 will receive regulatory leniency.
- Align with recognized frameworks: GHG Protocol, TCFD, or IFRS S2.
- Understand your status: doing business, revenue thresholds, and corporate structure all matter.
- CARB is reviewing corporate associations using cap-and-trade benchmarks:50% ownership/control could trigger reporting duties.
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