California Climate Reporting Laws: CARB Provides New Guidance

The California Air Resources Board (CARB) recently held its second virtual public workshop to provide additional guidance on implementing California’s climate disclosure statutes, SB 253 (Climate Corporate Data Accountability Act and codified at Health and Safety Code § 38532) and SB 261 (Climate-Related Financial Risk Act and codified at Health and Safety Code § 38533). These laws require large companies to disclose their greenhouse gas emissions and climate-related financial risks, with initial reporting deadlines rapidly approaching. We have previously written about SB 253 and SB 261 here and here.

While the workshop offered greater clarity on timing and new draft concepts relating to implementation, CARB continues to make key decisions on foundational aspects of the regulations, including which entities will be scoped in. The slides from the workshop can be found here. One key takeaway is that CARB is listening to and implementing feedback from stakeholders following these workshops. CARB expects to publish draft regulations on October 14, 2025. The draft regulations will be open for a 45-day public comment period and, absent any significant delays, are expected to be finalized during a meeting of CARB’s board on December 11-12.

Scoping Definitions and Exemptions

CARB continues to refine the foundational definitions required to determine whether an entity is scoped in for reporting purposes. With respect to the definition of “revenue,” CARB is now proposing a definition that encompasses “the total global amount of money or sales a company receives from its business activities, such as selling products or providing services.” During a workshop in May, CARB suggested defining revenue using the concept of “gross receipts” as defined in California Revenue and Taxation Code (RTC) § 25120(f)(2). During the more recent workshop, CARB reported that the change in approach was attributable to significant public feedback received suggesting that the gross receipts concept was unsuitable in this context because it would be too expansive and involves verification challenges.

With respect to defining what constitutes “doing business in California,” CARB has streamlined its proposed test to apply to those companies (i) that are organized or domiciled in the state and (ii) with sales in California exceeding an inflation-adjusted threshold of $735,019. Previously, CARB had included additional tests related to real and tangible property holdings in the state, as well as compensation amounts paid by an entity; CARB now believes, however, those additional tests are unnecessary because the thresholds are too low. CARB also indicated that in the “coming weeks,” it will publish a list of companies derived from databases maintained by the California’s Secretary of State’s Office setting forth its view of which entities are scoped-in for reporting purposes (although, importantly, CARB made clear that entities themselves are responsible for determining whether compliance is required, irrespective of whether they appear on this preliminary list).  

CARB also announced that certain entities will be exempt from these regulations, including nonprofits, companies whose only presence in California is through teleworking employees and business entities whose sole activity in California is wholesale electricity transactions in interstate commerce.

Reporting Deadlines and Requirements

During the workshop, CARB personnel disclosed that they are considering a June 30, 2026, reporting deadline for reporting Scope 1 and Scope 2 emissions as required by SB 253. To assist scoped-in companies to prepare to comply with SB 253, CARB intends to post draft Scope 1 and Scope 2 reporting templates for public comment by the end of September. CARB personnel also requested feedback from the public with respect to standards for assurances required pursuant to SB 253; however, CARB does not currently intend to require or provide accreditation for assurance providers.

For SB 261, CARB plans to create and open a public docket on December 1, 2025, where entities can upload links to their climate-related financial risk reports. In addition to posting reports on CARB’s public docket, scoped-in companies also will need to post these reports on their corporate websites (or a SB 261-specific website) by January 1, 2026, although the docket will remain open until July 1, 2026. The reports should include a statement on the reporting framework utilized by the company (e.g., TCFD recommendations, IFRS Disclosure Standards¹ or a similar standard), a discussion covering the included recommendations and disclosures and a summary of excluded recommendations along with plans for future disclosures.

Reporting Fees and Next Steps

During the workshop, CARB staff laid out a fee framework for scoped-in companies. Both statutes require payment of annual fees,² and CARB currently estimates fees being $3,106 under SB 253 and $1,403 for SB 261. These annual fees may be adjusted for inflation annually. Entities with over $1 billion in revenue that are subject to both laws will be required to pay both fees and subsidiaries filing reports separate from their parent companies will be required to pay their own separate fee.

Ongoing Legal Developments

Both SB 253 and SB 261 remain subject to legal challenges in the U.S. District Court for the Central District of California, alleging, among other things, that the disclosure statutes unlawfully violate the First Amendment and constitute compelled speech. On August 13, 2025, Judge Otis D. Wright denied a motion for preliminary injunction filed by a coalition of business groups seeking to halt implementation of the statutes. In that ruling, the Court held that plaintiffs failed to show their challenge—that SB 253 lacks a reasonable relationship to California’s interest in providing reliable climate-related information to investors, and that SB 261 does not “directly advance” that interest in a sufficiently narrow way—was likely to succeed. Plaintiffs recently filed a notice of appeal regarding the District Court’s ruling. We wrote about the recent ruling here and will continue monitoring developments.

Preparing for Compliance

As noted, initial reports pursuant to SB 261 are due by January 1, 2026. Companies should continue to monitor developments, including additional guidance issued by CARB. This is particularly critical for companies that do not have climate risk oversight and governance structures or that may not publicly disclose (voluntarily or otherwise) climate-related risks and opportunities. Here are some practical steps companies can begin taking to prepare for compliance:

• Assess applicability to determine whether your company meets the reporting thresholds related to revenue and doing business in California, as proposed.
• Begin tracking and documenting Scope 1, 2 and 3 emissions. Companies will need systems capable of supporting public reporting and eventual assurance requirements.
• Document reporting processes and procedures to take advantage of CARB’s “good faith” transition policy, pursuant to which companies will need to retain documentation showing what data was available by December 5, 2024, and the steps taken to gather emissions information.
• Prepare by engaging with external assurance providers early to understand what documentation, controls and systems will be required to meet the escalating assurance requirements through 2030.
• Monitor CARB’s rulemaking process and weigh the value of submitting comments.
• Coordinate internally by establishing or expanding cross-functional working groups across legal, sustainability, finance, operations and procurement to prepare for internal data collection, reporting and disclosure.

The Akin team is knowledgeable and prepared to assist you in navigating these complex disclosure rules.

[1] In June 2023, the International Sustainability Standards Board issued its first two disclosure standards: IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate Related Disclosures). IFRS S1 requires a company to disclose information regarding its sustainability related risks and opportunities, that may be considered useful to users when making decisions relating to providing resources to the company. IFRS S2 incorporates recommendations from the TCFD and requires the disclosure of information regarding climate-specific risks and opportunities.

[2] Fees are required to be collected annually in relation to SB 261, notwithstanding that reporting under that statute is biennially.