California SB 253 deadline sparks business rush to comply

SB 253 has become a turning point for thousands of companies that do business in California. This pioneering climate disclosure law, along with other regulations such as SB 261, stands as the first of its kind in the United States. It changes how companies report their environmental data. About 5,400 organizations need to adapt to these new rules.

The Climate Corporate Data Accountability Act, known as California SB 253, applies to U.S.-based companies that make over $1 billion in annual revenue and operate in the state. These companies must report their greenhouse gas emissions. The law requires them to disclose Scope 1 and 2 emissions starting in 2026, and Scope 3 emissions from 2027. While SB 253’s revenue threshold targets large corporations, its effects reach both public and private companies. Companies that fail to comply could face fines up to $500,000.

Legal challenges have put SB 261 on hold during court proceedings, but the California Air Resources Board (CARB) continues to move forward with SB 253. A court injunction during appeal means CARB won’t enforce SB 261’s January 1, 2026 deadline. However, businesses must still get ready for SB 253. CARB has created templates to make reporting easier, helping organizations that are reporting greenhouse gas emissions for the first time.

California enacts SB 253 to mandate corporate climate transparency

California Governor Gavin Newsom signed the landmark Climate Accountability Package in October 2023. This groundbreaking legislation established the strongest corporate climate-transparency requirements in the United States ^[1]. The new law radically changed how businesses must report their environmental effects when operating in the nation’s most populous state.

SB 253 Climate Corporate Data Accountability Act Overview

The Climate Corporate Data Accountability Act (SB 253) now requires businesses that operate in California and have annual global revenues of over $1 billion to report their greenhouse gas (GHG) emissions ^[2]. The law makes these entities publicly disclose their carbon footprint in three distinct categories. Companies need to report Scope 1 emissions (direct greenhouse gas emissions from owned sources) and Scope 2 emissions (indirect emissions from purchased electricity, steam, heating, or cooling) starting in 2026 ^[1]. The following year, they must begin reporting Scope 3 emissions (indirect upstream and downstream value chain emissions) ^[3].

An “independent assurance provider” must verify these disclosures to ensure that the data are accurate and reliable under SB 253 ^[2]. The California Air Resources Board (CARB) will manage implementation, setting August 10, 2026, as the first deadline for Scope 1 and 2 emissions reporting ^[1]. Companies that don’t comply could face administrative penalties up to $500,000 each year ^[2].

How SB 253 is different from SB 261

These two laws aim to increase corporate climate transparency but have several key differences:

• Revenue threshold: SB 253 applies to companies with over $1 billion in global annual revenue, whereas SB 261 applies to businesses with over $500 million in global annual revenue ^[3].

• Reporting focus: SB 253 concentrates exclusively on greenhouse gas emissions data, while SB 261 requires disclosure of climate-related financial risks and adaptation measures ^[1].

• Enforcement status: SB 253 remains fully enforceable, unlike SB 261, which is currently paused following a preliminary injunction by the Ninth Circuit Court of Appeals ^[1].

• Penalty structure: Non-compliance with SB 253 can result in fines up to $500,000 per reporting year, compared to SB 261’s maximum penalty of $50,000 ^[2].

SB 253 reporting must follow the Greenhouse Gas Protocol standards. SB 261, on the other hand, needs to line up with the Task Force on Climate-related Financial Disclosures (TCFD) framework or an equivalent standard ^[2].

Why California’s move is considered a national precedent

SB 253’s enactment marks a crucial development in U.S. climate policy. The law creates the first state-level mandatory emissions reporting system for large corporations ^[1]. Its influence extends well beyond state borders and affects an estimated 5,300 companies nationwide, many based outside California ^[2].

The reporting requirements cover emissions “regardless of location.” This means businesses must track their global carbon footprint, not just their California operations ^[2]. California’s comprehensive approach makes it a de facto national regulator on corporate climate transparency.

The state’s economic power – soon to become the world’s fourth largest economy – gives it the ability to shape corporate behavior across America ^[2]. The legislative findings highlight that “California has achieved record economic growth” and remains “a highly desirable market for the globe’s most profitable companies” ^[2].

Corporate emissions disclosure has typically depended on voluntary reporting, which lacked the consistency and transparency investors and consumers needed ^[2]. California filled a regulatory gap at the federal level by requiring standardized, verified reporting. This could become a model for other states or federal regulators to follow.

Which companies must comply with SB 253 reporting requirements

Major corporations across the United States must now comply with California’s climate disclosure law. The California Air Resources Board (CARB) has established specific criteria to determine which businesses must comply with SB 253.

SB 253 revenue threshold and business activity criteria

The Climate Corporate Data Accountability Act targets U.S.-based companies with annual revenues over $1 billion that do business in California ^[2]. The law applies to partnerships, corporations, limited liability companies, and other entities formed under state or federal laws ^[4].

CARB estimates indicate that 2,596 entities will need to comply with these reporting requirements ^[5]. The revenue calculations look at global earnings, not just California-generated income ^[6]. The revenue threshold uses the “gross receipts” definition from California’s Revenue and Taxation Code. This definition counts money from sales, services, property use, rents, royalties, interest, and dividends ^[3].

Companies with changing revenues get some flexibility. CARB considers the lower figure from its two most recent fiscal years ^[7]. A company can skip reporting if its revenue drops below the threshold in either year ^[3].

How CARB defines ‘doing business in California.

CARB bases its definition of “doing business in California” on the state’s Revenue and Tax Code Section 23101 ^[2]. The basic meaning is “taking part in any transaction to make money” ^[2].

A business meets this definition in two ways:

• It operates from or is based in California ^[7], or

• Its California sales are above $757,070 for 2025 (or 25% of total sales) ^[7]

Sales through agents or independent contractors count too ^[7]. The dollar amount changes yearly and can be found on the State of California Franchise Tax Board website ^[4].

Exemptions and parent-subsidiary reporting rules

The law and CARB’s guidelines exempt several types of organizations:

1. Tax-exempt non-profit and charitable organizations under the Internal Revenue Code ^[2]

2. Companies whose only California connection is remote workers ^[2]

3. Government entities at all levels, plus their majority-owned companies ^[2]

4. Insurance companies under California’s Department of Insurance or similar agencies in other states ^[2]

Parent companies don’t automatically have to report for their subsidiaries ^[6]. Subsidiaries can ask their parent companies to report on their behalf ^[2]. A “subsidiary” means a business where another company owns or controls more than 50% through direct corporate association ^[3].

Each business must check if it meets both the revenue threshold and California business criteria, even within corporate groups ^[6].

CARB sets deadlines and guidance for 2026 emissions reporting

The California Air Resources Board (CARB) has set clear implementation timelines for SB 253. Companies now have specific deadlines to plan their compliance strategies. The reporting system takes a gradual approach that recognizes the complexity of different types of emissions.

Scope 1 and 2 emissions due by August 10, 2026

CARB has picked August 10 2026, as the first deadline to report Scope 1 and Scope 2 emissions under SB 253 ^[1][8]. Companies must submit greenhouse gas emissions data from their previous fiscal year ^[9]. The reporting year depends on when a company’s accounting period ends:

• Companies with fiscal years ending between January 1-February 1, 2026 need to report their 2026 fiscal year data ^[1]

• Companies with fiscal years ending after February 2, 2026 can report their 2025 fiscal year data ^[1]

• Companies with fiscal years ending before August 2026 (such as March 31 or June 30) can choose to report their 2026 fiscal year instead ^[1]

This timeline gives most companies at least six months after their fiscal year-end to prepare their reports ^[10].

Scope 3 emissions phased in starting 2027

Companies must report their Scope 3 emissions starting in 2027. These include indirect emissions that spread through their value chains ^[11]. Companies must submit this data within 180 days of publicly reporting their Scope 1 and Scope 2 emissions ^[12].

SB 253, which ever spread, set a fixed 2027 deadline for Scope 3 reporting. SB 219 later changed this timeline, allowing CARB to set the exact start date ^[13]. The reporting will still cover fiscal year 2026 emissions data ^[10].

CARB’s enforcement notice and safe harbor provisions

CARB released a formal Enforcement Notice on December 5, 2024. This notice addresses the challenges companies face as they prepare for compliance before final regulations come out ^[14]. Companies making genuine compliance efforts will benefit from important safe harbor provisions ^[9].

CARB promises not to enforce penalties for incomplete reporting during the first 2026 cycle. Companies must demonstrate they did their best to retain all relevant emissions data ^[9].

Companies can submit data “from information the reporting entity already possesses or is already collecting” as of December 5, 2024 ^[14]. This practical approach means companies that already report voluntarily can use their current methods for the first compliance cycle ^[14].

SB 253 offers extra protection for Scope 3 reporting until 2030. Companies won’t face penalties for honest mistakes if they have a “reasonable basis and disclosed in good faith” ^[11][15].

Legal challenges delay SB 261 but not SB 253 enforcement

California’s twin climate disclosure laws are facing legal challenges in federal courts, with each statute getting different outcomes. Only one law remains fully effective as the litigation continues.

Ninth Circuit injunction on SB 261

The U.S. Court of Appeals for the Ninth Circuit made a significant ruling on November 18, 2025. This ruling paused enforcement of SB 261 (the Climate-Related Financial Risk Act) while the appeal is pending ^[16]. The January 1, 2026 deadline for climate risk disclosure reports now stands suspended ^[17]. Business organizations, led by the U.S. Chamber of Commerce, prompted this decision after filing an emergency application with the Supreme Court ^[5]. The court scheduled oral arguments about the preliminary injunction for January 9, 2026 ^[18].

The legal battle centers on First Amendment claims that SB 261 forces “compelled speech” about politically controversial topics ^[19]. Judicial panels have shown concern that SB 261’s disclosures would be “very specific and very complete” and might force companies to take positions on climate change ^[19].

Why SB 253 remains enforceable despite legal pushback

The Ninth Circuit made a clear choice when it denied injunctive relief for SB 253. California’s greenhouse gas emissions reporting law continues without interruption ^[5]. This selective approach suggests the court sees different constitutional questions in each law ^[20].

The difference likely comes from how these disclosures work. The court seems to view emissions reporting under SB 253 as more factual and less politically sensitive than SB 261’s climate risk assessments ^[19]. Yes, it is noteworthy that the panel’s questions showed little concern about Scope 1 and 2 emissions reporting ^[19].

CARB’s advisory on voluntary SB 261 submissions

CARB released an enforcement advisory on December 1, 2025. The advisory confirmed they “will not enforce Health and Safety Code section 38533 against covered entities for failing to post and submit reports by the January 1, 2026, statutory deadline” ^[17]. CARB also created a public docket for companies to voluntarily submit SB 261 reports ^[4].

Companies that want to submit voluntary reports must provide a statement on official letterhead listing any subsidiaries included in the consolidated reports ^[4]. These reports should appear on the company’s website with a link submitted through CARB’s public docket ^[4]. CARB reminds companies not to include confidential business information in these public submissions ^[4].

Businesses scramble to meet SB 253 compliance obligations

California businesses are rushing to change how they handle data as the first reporting deadline under SB 253 draws near. They must build new systems to meet the state’s strict disclosure rules.

How companies are preparing emissions data

Organizations now build complete data systems to track emissions throughout their operations. Their data sources must be traceable through meter readings, invoices, and log files ^[21]. The GHG Protocol requires proper documentation of calculation methods ^[22]. Many companies have moved away from manual spreadsheets. They now use automated sustainability platforms that blend with their existing systems ^[22]. These platforms make data collection central, standardize calculations, and cut down errors. Such capabilities matter more as reporting becomes mandatory ^[22].

Role of third-party assurance and audit readiness

SB 253 places climate disclosures on par with financial audits ^[21]. Companies need reliable tracking systems ready before 2030. They must work with independent auditors who are familiar with GHG accounting and have experience in sustainability assurance ^[21]. CARB can review information from both reporting entities and assurance providers ^[2]. Companies have begun implementing internal controls. They maintain documented methods and version-controlled audit trails to make verification easier ^[21].

Impact on supply chains and Scope 3 data collection

Scope 3 reporting remains the biggest operational challenge. It typically makes up 70-90% of a company’s total footprint ^[21]. This requirement reshapes the scene for supplier relationships ^[6]. Companies now update their procurement contracts. They add specific emissions reporting rules and create supplier scorecards to monitor environmental performance ^[6]. Small and medium suppliers often don’t have the resources or expertise to track emissions. This creates compliance bottlenecks ^[6]. Companies have begun supplier training programs and are offering technical support to address these issues ^[6].

Conclusion

California’s SB 253 marks a defining moment for corporate environmental accountability in the United States. The law sets new standards that affect thousands of major businesses nationwide, regardless of their headquarters location. Companies need to act fast, as the first deadline is approaching. They must submit Scope 1 and 2 emissions data by August 10, 2026, and Scope 3 value chain emissions in 2027.

A court injunction has suspended SB 253’s companion legislation, SB 261, but SB 253 moves forward without obstacles. This difference shows how courts view emissions reporting as factual disclosure rather than political speech. Organizations can’t wait to comply even as legal challenges continue elsewhere.

CARB understands these implementation challenges and has provided enforcement advisory and safe harbor provisions. These temporary measures give organizations time to build resilient data collection systems. The core requirement remains the same: companies must establish comprehensive emissions-tracking capabilities with verifiable data sources and clear methods.

Companies should understand that compliance extends well beyond their internal operations. Scope 3 reporting changes supplier relationships throughout value chains and needs unprecedented environmental data sharing. Many organizations now face two challenges: they must upgrade their systems while helping suppliers develop emissions tracking capabilities.

This radical alteration in regulations helps accelerate the necessary business progress. SB 253 makes climate transparency a standard practice rather than an optional choice. Companies that adapt quickly will gain advantages beyond just following rules. They’ll position themselves better with green-minded investors, customers, and business partners. California’s climate disclosure mandate isn’t just another regulation – it’s a turning point for corporate environmental responsibility in America.

FAQs

Q1. What is California SB 253, and who does it affect? California SB 253 is a climate disclosure law that requires U.S.-based companies with over $1 billion in annual revenue doing business in California to report their greenhouse gas emissions. It affects approximately 5,400 organizations, including both public and private entities.

Q2. When are the first reporting deadlines for SB 253? The first reporting deadline for Scope 1 and 2 emissions is August 10, 2026. Scope 3 emissions reporting will be phased in starting in 2027, with disclosures required no later than 180 days after the entity’s Scope 1 and 2 emissions are publicly reported.

Q3. How does SB 253 differ from SB 261? SB 253 focuses on greenhouse gas emissions reporting for companies with over $1 billion in revenue, while SB 261 covers climate-related financial risks for businesses with over $500 million in revenue. Additionally, SB 253 remains fully enforceable, whereas SB 261 is currently paused due to a court injunction.

Q4. What are the penalties for non-compliance with SB 253? Companies that fail to comply with SB 253 reporting requirements face potential administrative penalties of up to $500,000 per year.

Q5. How are businesses preparing to meet SB 253 compliance obligations? Companies are establishing comprehensive data infrastructure to track emissions, engaging third-party assurance providers, and transforming supplier relationships to collect Scope 3 emissions data. Many are shifting from manual spreadsheets to automated sustainability platforms and revising procurement contracts to include emissions reporting requirements.