Important Updates from the Second Public Workshop on California’s Climate Disclosure Rules

On August 21, 2025, the California Air Resources Board (“CARB”) held its second virtual public workshop on California’s climate reporting laws, Senate Bill 253 (The Climate Corporate Data Accountability Act) and Senate Bill 261 (The Climate-related Financial Risk Act).  Please see our initial summary of those laws here. This second workshop provided updates on CARB’s regulatory development timeline and considerations for assurance requirements related to disclosing Scopes 1, 2 and 3 greenhouse gas (GHG) emissions, among other topics, but there is one key update from this second workshop that deserves everyone’s attention.  The definition of what it means to be “doing business” in California for purposes of the climate laws has likely changed, so many observers are probably wishing they “could turn back time” and reclaim the hours they spent this summer analyzing whether companies are subject to the climate laws under an alternative definition of “doing business” in California. 

Updated Definition of “Doing Business” in California

During CARB’s first virtual public workshop on California’s climate laws held on May 29, 2025 (please see our summary of that workshop here), one of the “initial staff concepts” presented by CARB was that a company would be “doing business” in California if it satisfied both Section 23101(a) and (b) of the California Revenue and Taxation Code (the “Tax Code”).  This meant that a company must be “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit” and satisfy at least one of four additional jurisdictional criteria during any part of a reporting year.  However, during the second workshop on August 21, 2025, CARB announced an alternative definition of “doing business” in California:  Companies will now be “in scope” for purposes of the climate laws if they are registered to do business in the state as required by Section 191 of the California Corporations Code (the “Corporations Code”).  A foreign corporation is required to register to do business in California under the Corporations Code if it is “transacting intrastate business,” which means “entering into repeated and successive transactions of its business in the state, other than interstate or foreign commerce.”  Section 191 of the Corporations Code provides examples of activities that do not constitute “transacting intrastate business,” but the determination as to whether a company is required to register is left to the company and its counsel. 

CARB staff explained that its decision to propose an alternative definition of “doing business” in California was motivated by the need to leverage an existing database, and the list of companies that are registered to do business in the state under the Corporations Code is publicly available on the Secretary of State’s website.  Based on CARB’s preliminary analysis of covered entities, which involved cross-checking businesses registered with the Secretary of State with a Dunn & Bradstreet list of U.S.-based companies with global annual sales of $500 million or more, there appear to be approximately 4,160 companies subject to SB 261.  Based on this same process but identifying companies with sales of $1 billion or more, there appear to be approximately 2,596 companies subject to SB 253.  During the public Q&A session, CARB said that it intends to release a preliminary list of companies that are subject to the climate laws in the next couple of weeks, but the staff noted that the list is not dispositive and that companies are required to make the determination.  Also, certain companies, such as limited liability partnerships and general partnerships, are not listed on the Secretary of State’s website but nonetheless may be subject to the climate laws.

Other Important Updates

Additional updates from CARB’s presentation during the August 21^st workshop are summarized below (and CARB’s slides are linked here):

Regulation Development and Implementation

1. “Who”: Covered Entities and Exemptions

• What is the definition of “revenue”?
  • Entities are “in scope” for purposes of SB 253 and SB 261 if they are “doing business” in California under the Corporations Code and satisfy the applicable revenue thresholds in the statutes. During the May 29^th workshop, CARB staff presented an initial definition of “revenue” as “gross receipts” as set forth in the Tax Code. 
  • After receiving negative feedback, CARB presented an alternative definition during the August 21^st workshop – “revenue” means the “total global amount of money or sales a company receives from its business activities, such as selling products or providing services.”
• How will subsidiaries be defined and identified?
  • During the first workshop on May 29^th, the initial staff concept for when a parent-subsidiary relationship exists reflected the definition used by the California Cap-and-Trade program. Under this program, a “corporate association” exists when one entity has 50% or more ownership or control over another entity.
  • CARB referenced the Cap-and-Trade program again during the August 21^st workshop, but the only definition presented was for “subsidiary,” which is a “business in which another company…owns more than 50% of its voting stock.”
  • CARB will identify subsidiaries through commercial databases, cross-referenced with the Secretary of State database and/or the Franchise Tax Board database, and companies will likely be able to self-report on parent-subsidiary relationships in order to consolidate reporting at the parent level.
• Is CARB considering exempting any entities? – Based on comments from various stakeholders, CARB staff is proposing to exempt non-profits, companies whose only business in California is the presence of teleworking employees, government entities and certain wholesale electricity companies. The staff did note that it continues to welcome public feedback on potential additional exemptions.

2. “What”: Fee Regulation Concept

• How is CARB proposing to structure its implementation fees for SB 253 and SB 261? – During the August 21^st workshop, CARB staff proposed an annual “flat” fee per regulated entity, which is calculated by dividing the annual program costs by the number of covered entities. If a subsidiary is subject to either law but chooses to file a report at the parent level, the subsidiary is still a separate entity subject to the fee.
• Is there an estimate for how much the annual fees might be? – CARB estimates that the annual fee for SB 253 entities will be $3,106 and the annual fee for SB 261 entities will be $1,403. These fees will be adjusted annually for inflation.

3. “How”: Further Guidance on Climate Risk Reporting (SB 261)

• How will companies submit their climate-related financial risk reports to CARB?
  • CARB will post a public docket on December 1, 2025 for entities to post a public link to their reports, and the docket will close on July 1, 2026. Companies must post their reports to their corporate website by January 1, 2026 and every two years thereafter. 
  • During the public Q&A session, a commenter asked what a company should do if it expects to cross the SB 261 revenue threshold for 2025 but not for 2026, and CARB staff did not answer. Another commenter asked if the report has to be published on the company’s main corporate website or if it can be posted on a separate microsite (and whether that microsite needs to be accessible from the corporate website), but CARB staff did not answer.
• Is there additional guidance for what companies should include in their reports?
  • During the August 21^st workshop, CARB provided initial guidance on minimum requirements, including that the report must identify which framework is being applied and discuss which recommendations have been included and which have not (and why such recommendations were not included and whether they will be included in the future). CARB also provided links to a number of resources for guidance on climate-related financial reporting, and stated that it intends to issue additional guidance in the coming weeks.
  • CARB outlined the four principles of the Task Force on Climate-Related Financial Disclosures (TCFD) framework and provided guidance regarding what companies should be disclosing under each principle. CARB clarified that the initial reports are not expected to include GHG emissions or quantitative disclosure of climate scenario analyses.
  • During the public Q&A session, a commenter asked if a company can provide a link to multiple existing documents if their TCFD disclosures already appear in these documents, or whether a stand-alone report is required. CARB staff said that a link can be provided to one document if it contains the TCFD disclosures, but it does not appear that a company will be able to link to multiple documents.

4. “When”: Timelines for Scopes 1 and 2 GHG reporting (SB 253)

• When will companies subject to SB 253 first be required to submit their Scopes 1 and 2 GHG emissions? – CARB staff is proposing a June 30, 2026 deadline, but they “welcome public feedback” on this proposed date. During the public Q&A session, multiple commenters asked whether CARB intends to permit companies to report emissions data based on the calendar year instead of their fiscal years, and the staff reiterated that SB 253 data should be based on a company’s fiscal year.  Commenters also asked if CARB was giving any consideration to delaying the limited assurance requirement until later in 2026, but CARB staff did not answer.
• What will the SB 253 reports look like? – CARB will post draft reporting templates by the end of September 2025 for public feedback. The staff also pointed out that companies will have the option to report on their actions intended to reduce GHG emissions, such as investments in renewable energy and carbon credits.

Scope 3 Emissions and Assurance Criteria

CARB also provided guidance regarding how companies should be preparing for the third-party assurance requirements related to their Scopes 1, 2 and 3 GHG emissions reports.  Both limited and reasonable assurance requires verification according to a “systematic, independent and documented process” for evaluating a company’s emissions data report against CARB’s reporting procedures and methods, and the staff provided some additional details regarding what a company’s process will need to look like.  They also provided an overview of what makes an effective third-party verifier, emphasizing the importance of impartiality.  Finally, the staff presented an initial concept for how a limited assurance framework could be implemented by a company, potential standards for this framework and details regarding CARB’s oversight role and responsibilities.

Next Steps

CARB continued to encourage stakeholders to submit questions and comments on the topics discussed during the workshop via the public docket that will be open until September 11, 2025.  Stakeholders can also email the staff (Climatedisclosure@arb.ca.gov), and comments received prior to September 11^th will be published on the public docket. CARB is planning to issue proposed rules on the topics covered during the workshop on October 14^th, and we will continue to monitor and report on how CARB’s implementing regulations develop. Given that the deadline for producing the first SB 261 reports is quickly approaching, companies should probably accept that they can’t “turn back time” and try to “find a way” to comply if they are subject to the California climate laws based on the updated definition for what it means to be “doing business” in the state.