California SB 253 and SB 261: Climate Disclosure Law Compliance Timeline for Businesses
In September 2023, California Governor Newsom signed two climate disclosure bills that collectively represent the most expansive mandatory corporate climate reporting regime in the United States. SB 253, the Climate Corporate Data Accountability Act, and SB 261, the Greenhouse Gases: Climate-Related Financial Risk Act, impose distinct but complementary disclosure obligations on large businesses doing business in California — without regard to whether those businesses are publicly traded.
SB 253 requires "reporting entities" — defined as companies with total annual revenues exceeding $1 billion that do business in California — to publicly disclose their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions. Scope 1 emissions are direct emissions from company-owned sources. Scope 2 covers indirect emissions from purchased energy. Scope 3 — the most expansive and most contested category — covers all other indirect emissions in the company's value chain, including supplier emissions, employee commuting, and the lifecycle emissions of products sold.
The disclosure timeline has been adjusted from the original statute: Scope 1 and 2 disclosures are required beginning in 2026, with the first filings covering the 2025 calendar year. Scope 3 disclosures are required beginning in 2027 (covering the 2026 year). Disclosures must be published annually to a digital platform designated by the California Air Resources Board (CARB). Scope 1 and 2 emissions must be verified by an independent third-party assurance provider at the "limited assurance" level beginning in 2026, escalating to "reasonable assurance" (a higher standard) in 2030. Scope 3 disclosures require limited assurance beginning in 2030.
SB 261 operates on a different threshold and covers a broader range of companies: any entity with total revenues exceeding $500 million (not $1 billion) that does business in California. These entities must produce a biennial report disclosing climate-related financial risks to their business — essentially, an assessment of how physical climate risks (floods, wildfires, drought) and transition risks (regulatory changes, market shifts toward low-carbon products) could affect their financial condition. The first biennial reports are due January 1, 2026.
The Scope 3 requirement is the most operationally demanding. Companies typically do not have direct visibility into their suppliers' or customers' emissions, and building a defensible Scope 3 inventory requires engagement with supply chain partners, industry emissions factors, and methodologies developed under the GHG Protocol. The law provides a "safe harbor" — companies are not liable under the law if they make a good-faith effort to report Scope 3 emissions using available data and accepted methodologies, even if the resulting figures are estimates.
Penalties for noncompliance are administered by CARB and can reach $500,000 per year per reporting entity for failure to comply. Note that the laws apply to entities "doing business in California" — a standard derived from California Revenue and Taxation Code section 23101, which encompasses any entity with California sales, property, or payroll above de minimis thresholds. Many large companies that do not think of themselves as California businesses will qualify if they have California customers, contracts, or remote employees.
Corporate counsel should immediately identify whether clients meet either threshold, begin gap analyses against existing GHG reporting practices, and engage third-party assurance providers early — capacity in the climate assurance market is limited, and early engagement will reduce the risk of being unable to meet the 2026 deadline.