On August 21, 2025, the California Air Resources Board (“CARB”) held a public workshop providing updates on SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-related Financial Risk Act).
Many of the concepts proposed by CARB are still subject to public input. Stakeholders may wish to provide comments now or to the forthcoming draft regulations with an aim to facilitate clear, predictable, and beneficial regulatory requirements.
Key takeaways from the workshop:
- CARB focused the workshop on applicability, timing, the scope of SB 261, the concepts of ‘revenues’ and ‘doing business in California’, fees, and assurances;
- In the coming weeks, CARB will post a list of entities that it believes are subject to SB 253 and SB 261;
- For SB 253 Scope 1 and 2 reporting, CARB is proposing a June 30, 2026 initial reporting deadline for fiscal 2025 emissions;
- For initial SB 261 reports, CARB will not require publication of Scope 1 and 2 data or scenario analyses, despite TCFD requiring such. However, CARB noted that if companies have this information and it is material, then it should be provided; and
- The estimated annual fee to be paid by each in-scope entity is $3,106 for SB 253 and $1,403 for SB 261.
Notably, CARB did not provide any guidance or helpful instruction on parent-subsidiary relationship matters, including consolidated reporting, despite many questions on these matters from the audience. However, CARB repeatedly stated in the workshop that (i) only US entities are in scope of the laws and (ii) companies can report at the parent level.
Applicability
In the coming weeks, CARB will post for public feedback a list of entities that it believes are subject to SB 253 and SB 261.1 The lists will be based on (i) which entities are listed on the California Secretary of State Business Entity public database, which lists any entity with a designated agent for service of process in California and (ii) Dun and Bradstreet data on entities’ revenues. CARB’s forthcoming lists will essentially define which entities “do business in California.” The definition of “doing business in California” in the forthcoming regulations may reference entities that are registered as ‘active’ on the California Secretary of State Business Entity database (instead of the previously proposed definition from the California Revenue and Tax Code).
Importantly, CARB noted that the absence of being included in the upcoming lists does not mean that a company is not in scope of one or both of the laws.2 So, while the forthcoming lists should be helpful indicators of in-scope entities, they are not comprehensive, absolute lists. Companies should independently assess the applicability of the laws with legal counsel.
CARB proposed that the following categories of entities will be exempt from compliance: non-profits, companies whose only business in California is the presence of teleworking employees, government entities, and a California Independent System Operator or business entity whose only activity within California consists of wholesale electricity transactions that occur in interstate commerce.
Timing
CARB proposed a June 30, 2026 initial reporting deadline for SB 253 Scope 1 and 2 data for fiscal 2025 emissions. CARB is contemplating a single due date for all in-scope companies, rather than a due date based off of fiscal year-end (e.g., six months after a company’s fiscal year-end). However, CARB asked for feedback on the feasibility of its proposed deadline and on the timing of Scope 3 emissions disclosures, which are required starting in 2027 for fiscal 2026 emissions. CARB will post draft reporting templates for Scope 1 and 2 emissions by the end of September 2025 for public feedback.
CARB will establish a public docket for companies to post the link to their SB 261 reports. The docket will go online on December 1, 2025, and remain active until July 1, 2026. CARB indicated that the window for posting to the docket does not alter the SB 261 requirement that companies publish their SB 261 report on their website by January 1, 2026.
On October 14, 2025, CARB will propose regulations under SB 253 and SB 261, which begins a 45-day public comment period. CARB’s issuance of final regulations is expected by mid-December 2025.
Scope of SB 261
Consistent with its July FAQs, CARB stated that, for the first reporting period for SB 261, it is looking for ‘good faith reporting’ based on the most recent, best available information, which could include data for fiscal years 2023/2024.
CARB stated that each SB 261 report should:
- State which framework is being used (e.g., TCFD, IFRS SDS or another acceptable framework);
- Discuss which recommendations and disclosures have been compiled and which have not; and
- Provide a short summary of the reasons why any recommendations/disclosures have not been included, as well as a discussion of any plans for future disclosures.
Fees
Both laws authorize CARB to assess companies an annual fee for the implementation and administration of the respective reporting programs.3 Based on CARB’s analysis of costs, modeling assumptions, and number of in-scope entities, the estimated annual fee is $3,106 per reporting entity for SB 253 and $1,403 per reporting entity for SB 261.4
Fees will be payable by each entity in a corporate group that has a reporting obligation. Reporting entities with more than $1 billion in total annual revenues will be subject to fees for both laws, since they will meet both the SB 253 and SB 261 reporting thresholds.
Revenues
In-scope entities subject to SB 253 and SB 261 are determined in part based on “total annual revenues”, which is not defined in either of the laws. At the May workshop, CARB staff proposed defining “total annual revenues” as ‘gross receipts’ (as defined in the California Revenue and Taxation Code), but received feedback that such definition is problematic due to data confidentiality limitations and verification issues, and could be overly broad in application.
Due to the lack of consensus, CARB is now considering defining revenue as “the total global amount of money or sales a company receives from its business activities, such as selling products or providing services.” The revised definition would not include deductions for operating costs and other business expenses.
SB 253 Assurances
CARB will not be publishing a list of approved third-party assurance providers and will not provide accreditation of assurance providers. CARB is seeking feedback on what audit standards should apply.5 CARB may audit assurance and reporting activities, and may take enforcement action as appropriate.
Submitting Comments
The public docket will be open until September 11, 2025 for written feedback.
A form to submit public comments, and a recording of the workshop, can be found here.
1 CARB estimates that 2,596 entities are subject to SB 253 and 4,160 are subject to SB 261.
2 Certain companies, such as limited liability partnerships and general partnerships, are likely not contained in the California Secretary of State Business Entity database, but nonetheless may be required to report if they otherwise meet the requisite thresholds.
3 Fee amounts will be determined based on how many entities are covered by the reporting program and annual costs of the program and will be adjusted annually for inflation.
4 According to CARB, its program administration costs include a one-time cost to set up the program of $20.7 million and annual ongoing costs of implementing both SB 253 and SB 261 of $13.9 million (per year).
5 CARB cited four potential audit standards: (i) the International Standard on Sustainability Assurance 5000, General Requirements for Sustainability Assurance Engagements, developed by the International Auditing and Assurance Standards Board, (ii) AA1000, developed by AccountAbility, (iii) the ISO 14060 family, developed by the International Organization for Standardization, and (iv) American Institute of Certified Public Accountants auditing standards.
[View source.]
