CARB update: Key changes to California climate disclosure laws
Key takeaways
On November 18, 2025, the California Air Resources Board (CARB) hosted a public workshop to clarify requirements for corporate greenhouse gas (GHG) reporting and climate-related financial risk disclosures under SB 253 and SB 261.
Recent updates to these bills including court proceedings have introduced new exemptions and extended reporting deadlines, making it essential for organizations to review how these changes may affect their compliance obligations. Here’s what you need to know.
Who’s covered?
SB 253 (GHG emissions disclosure):
- U.S. based entities with significant sales or commercial activity in California, as defined by CA Revenue and Taxation Code §23101. This includes companies that exceed California’s sales thresholds or have commercial domicile in the state, regardless of physical presence, property or payroll.
- Annual global revenue over $1 billion.
- Must disclose GHG emissions (Scope 1 & 2 in 2026; Scope 1, 2, & 3 in 2027+).
SB 261 (Climate risk reporting):
- U.S.-based entities doing business in California, as defined by CA Revenue and Taxation Code §23101. This includes companies that exceed California’s sales thresholds or have commercial domicile in the state, regardless of physical presence, property or payroll.
- Annual revenue over $500 million.
- CARB is not enforcing any failure to post or submit reports by the original January 1, 2026, reporting deadline. An alternate reporting date will be established once the current legal appeal process has been resolved.
RSM insights:
Proposed exemptions (SB 261): Non-profit and charitable organizations (tax-exempt under the Internal Revenue Code) and entities with only teleworking employees in California are exempt. Federal, state, and local government entities, and companies that are majority-owned by government entities are excluded by statue, as are entities subject to regulation by the Department of Insurance.
CARB extended certain deadlines associated with SB 253 and 261. Although the extension was unexpected, it gives companies more time to determine eligibility and comply with California’s climate laws. Each bill—SB 253 and SB 261—has different updated deadlines and exemptions, so businesses should review the changes specific to each. Businesses that were already prepared can use this period to further improve their programs, while those who have yet to organize their people, processes, or technology gain some welcome relief from the business community. It also suggests additional time was needed for corrective action around data clarity, omitted companies, revenue estimates and outdated information. Finally, adopting revenue and tax codes to define "doing business in California" and detailing possible exemptions, represents a constructive step forward and offers much needed clarity for business leaders.
Key deadlines
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SB 253 GHG reports:
- First-year deadline: August 10, 2026
- Fiscal year reporting depends on your fiscal year end date
- Scope 3 reporting begins in 2027
- Limited assurance is NOT required for 2026 submissions. CARB will exercise enforcement discretion for good-faith efforts in the first year.
- Fiscal years ending between January 1 and February 1, 2026: use 2026 fiscal year end data.
- Fiscal years ending between February 2 and December 31, 2026: use 2025 fiscal year end data.
- If your company wasn’t collecting data at the time of the December 2024 Enforcement Notice, you’re not expected to submit Scope 1 & 2 data in 2026. Instead, submit a statement explaining non-collection.
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SB 261 Climate risk reports:
- On November 18, 2025, the United States Court of Appeals for the Ninth Circuit granted a motion for injunction pending appeal1.
- Post on company website by January 1, 2026 (enjoined pending appeal)
- Submit link to CARB by July 1, 2026 (enjoined pending appeal)
- Biennial reporting thereafter (enjoined pending appeal)
RSM insights:
Companies collecting data as of the December 2024 enforcement notice are required to submit Scope 1 and Scope 2 data in 2026. Those not currently collecting this data should make efforts to meet compliance requirements, acknowledging the challenges inherent in accurately measuring or estimating a company's carbon inventory. Companies not engaged in data collection prior to December 2024 will need to measure their complete carbon inventory—including Scope 1, Scope 2, and Scope 3—in 2027.
Additionally, CARB encourages a "best efforts" approach in meeting these requirements. Leveraging this guidance may help tailor future reporting obligations. For instance, demonstrating best efforts in the current year, especially in the absence of feedback from CARB, could allow companies to maintain a more estimative methodology in fulfilling future compliance requirements.
Too many companies had not fully understood assurance implications for their business, including choosing between CPA and non-CPA providers, applying the correct assurance standards (SSAEs, ISAE 3410 or ISO 14065), and/or planning assurance projects. Companies that have evaluated assurance providers should extend contracts for services beginning late Summer or early Fall 2026, allowing testing in 2027 to meet the August 10, 2027, compliance deadline. Some companies may choose to have their records assured early to improve their chances of compliance, though this approach is not generally expected to become standard practice. This extra preparation time should help more companies achieve compliance.
How to determine applicability
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Revenue:
- Use the lesser of the entity’s two previous fiscal years (gross receipts as defined by CA Revenue & Taxation Code §25120 (franchise tax filings)
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Doing business in California:
- Defined by CA Revenue and Taxation Code §23101 (focus on sales and commercial domicile, not property or payroll)
- Proposed: Omit Section 23101(b) (3-4) relating to property holdings and payroll
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Parent-subsidiary relationships:
- Each entity must independently assess if it meets thresholds. “Entity” includes the entities included on the franchise tax return, regardless of whether a subsidiary would qualify individually.
- Parent can report for subsidiaries, but relationship does not automatically determine scope
- For GHG reporting, only entities meeting eligibility criteria report. Reporting does not include those entities that do not independently meet the eligibility requirements.
RSM insights:
Many companies face challenges in determining eligibility. While revenue thresholds are clear, other business nuances require evaluation—especially for those near the thresholds across multiple years, with global reporting structures, or various domestic and international operations. Companies should consult internal or external counsel or submit questions to CARB for clarification.
Reporting requirements and templates
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SB 253:
- CARB’s draft Scope 1–2 template is optional for 2026
- Existing GHG reports covering Scope 1 and 2 are acceptable
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SB 261:
- Early-stage entities may disclose gaps, limitations, and assumptions
- Must state which framework is used (TCFD, IFRS S2, or other government/exchange-required frameworks)
- Explain any missing disclosures and plans for future reporting
RSM insights:
Most companies should use CARB’s templates unless their emissions reporting is mature and tested. These templates support California state reporting and are generally beneficial. We also recommend referencing GHG Protocol templates, which clarify required versus optional disclosures and offer understandable instructions.
CARB acknowledges that integrating climate risks into a company’s risk management framework is an evolving process. We recommend that companies leverage the framework or principles-based nature of the TCFD/ISRS S2 and continue to make progress on integrating climate risks, even while the U.S. Court of Appeals sorts out SB 261 enforcement.
Fees and payment
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Annual fee structure:
- Flat annual fee per regulated entity, calculated as program cost divided by number of regulated entities
- Entities >$500M and <$1B: pay SB 261 fee only
- Entities >$1B: pay both SB 253 and SB 261 fees
- Each covered subsidiary is assessed its own fee; parent may pay all fees in one combined payment
RSM insights:
CARB communicates a non-punitive attitude in both its public workshops and webinars. While it recognizes that some companies need time to compile reliable emissions data, this should not lead businesses to become complacent. California retains the authority to impose fines if it believes a company is not cooperating.
Scope 3 reporting: Coming soon
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2027+:
- Scope 3 reporting begins
- CARB is soliciting feedback on which of the 15 Scope 3 categories are most relevant
RSM insights:
California’s climate disclosure laws are evolving, but the current priorities for 2026 are transparency and good-faith efforts. Entities should review the updated definitions, exemptions and deadlines, and entities should be in contact with their sustainability reporting consultants and assurance providers. We also encourage entities to engage with CARB as the rulemaking process continues.
Many companies delayed Scope 3 emissions reporting but now have more time to assess value chain data. Evaluating stakeholder data, systems, and estimation methods under the GHG Protocol should be prioritized over time. Companies already reporting Scope 3 emissions should only seek assurance when required and instead focus on improving processes, controls, and data systems for better reporting efficiency and accuracy.
1 United States of America Chamber of Commerce v. Liane M. Randolph, in her official capacity as Chair of the California Air Resources Board
Related resources
- /insights/services/business-strategy-operations/california-climate-laws-paving-the-way
- /events/2025-events/climate-change-unpacked-compliance-standards-provider-perspectives
- /insights/services/business-strategy-operations/welcome-to-the-third-wave-of-sustainability-reporting