CARB Publishes Preliminary List of Companies Potentially Subject to SB 253 and SB 261

The California Air Resources Board (CARB) took a significant step forward recently in implementing the state’s climate disclosure laws: SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-Related Financial Risk Disclosure law), in each case as amended by SB 219. On September 24, CARB released its preliminary list of entities that staff believe may be subject to one or both statutes. The list is available in full on CARB’s website here.

According to a statement announcing the publication of the list, it was created by cross-referencing the California Secretary of State’s business registry against revenue data published by Dun & Bradstreet, as well as applying the conceptual scoping definitions discussed during CARB’s most recent public workshop. Based on this analysis, CARB staff estimate that roughly 2,600 companies will be subject to SB 253, which applies to entities with more than $1 billion in annual global revenues, and approximately 4,100 companies will be subject to SB 261, which applies at the $500 million threshold. Unsurprisingly, the preliminary roster features some of the nation’s largest companies, spanning the technology, retail, energy, financial services and manufacturing sectors. The expansive list of entities potentially subject to reporting under the statutes underscores the broad reach of the new statutes, which are designed to capture companies doing business in California regardless of where they are headquartered.

Importantly, CARB emphasizes that the list is not a definitive determination of entities that are subject to reporting under SB 253 or SB 261. Entities not included on the list must still independently assess whether the statutes apply to them. Conversely, inclusion on the list is not a final determination that a company is obligated to report. CARB is seeking to validate the entities included in the list by encouraging them to complete a survey, which may be found here. The survey aims to elicit information from entities that believe they were properly listed, as well as those that believe they may qualify for an exemption or otherwise should not be subject to the disclosure requirements (e.g., where an entity is registered in California but does not actually satisfy the relevant thresholds in relation to doing business in the state or applicable revenue figures). Definitive regulatory guidance regarding those and other foundational questions remain subject to finalization by CARB.

With the publication of this list, potentially obligated reporting companies may anticipate heightened scrutiny from stakeholders across the spectrum, including investors, thereby potentially increasing reputational and compliance pressures. For entities included on this initial list, the prudent course of action should involve consulting with legal advisors to confirm the applicability of the statutes and then to begin preparing to satisfy the relevant disclosure obligations while contemporaneously monitoring CARB’s regulatory process. This is particularly true for entities that may not have previously monitored or inventoried greenhouse gas (GHG) emissions metrics or prepared climate- or sustainability-related disclosures using a Task Force on Climate-Related Financial Disclosures (TCFD) (or similar) reporting framework. For entities not included on the list, but that might be on the reporting cusp, it is important to perform a careful applicability analysis and document your reasoning. This last point is important to ensure that entities qualify for enforcement discretion under the “good faith” approach that CARB has enunciated in both its written guidance and during its public workshops.

There are a handful of actions entities should take now, irrespective of whether they are on CARB’s list. These include:

• Determining whether SB 253 or SB 261 applies, using the current conceptual iterations of relevant definitions. For instance:
  • Is the entity organized under California law, registered with the California Secretary of State or otherwise “doing business” in the state under applicable California tax law?
  • Does the entity meet the statutorily defined revenue thresholds (i.e., do global revenues exceed $1 billion (SB 253) or $500 million (SB 261)), based on the most recently completed fiscal year?
  • Does the entity qualify for any exemptions (e.g., government entities, certain insurance companies)?
• Documenting rationales for non-reporting, particularly if the company appears on CARB’s preliminary list but arguably should not be included. Entities in this category should consider completing CARB’s survey.
• Preparing for next steps, including selecting a permissible reporting framework (e.g., TCFD or International Sustainability Standards Board (ISSB)), evaluating the efficacy of existing governance, oversight and reporting processes and procedures, data collection requirements, strategic implications, undertaking climate scenario analyses and identifying key risks and opportunities (including relevant metrics).  

Taking these steps now is critically important, given that inaugural reports under SB 261 are due January 1, 2026. We will continue to monitor developments in this area and intend to provide supplemental information as and when additional information is available. In the meantime, do not hesitate to reach out to our team if you have questions regarding the application of these statutes to your organization.