California’s climate disclosure rules: a guide for companies

Climate action in California has repercussions around the globe–the state has the fourth-largest economy in the world. For decades, the state has been a global leader on climate regulations, with the latest example being SB 253 and SB 261 that passed in late 2023 requiring certain companies to disclose climate-related metrics (with both bills being updated in SB 219 in late 2024).

The rule compels thousands of companies doing business in California to disclose their scope 1, 2, and 3 greenhouse gas emissions and/or climate-related financial risk information. Although it's a state rule, the broad scope means that its impact is truly national, capturing companies across the US.

A note on terminology—the California climate disclosure rules have been known by several different acronyms in the course of being agreed and amended. The final bill that legislated for the rules is known as SB 219, and you may sometimes see reference to the original bills SB 253 and SB 261. CARB now calls the package of bills "the 200s." For short-hand, we will be referring to the broader set as the California climate disclosure rules.

Latest updates from CARB's second workshop

On August 21, 2025, the California Air Resources Board (CARB) hosted their second public workshop on the upcoming climate rules. Companies now have a clearer picture of what to expect and can start moving from "planning" to "preparing."

Key takeaways in brief

Deadlines clarified:

• SB261 climate risk reports: due January 1, 2026 (and every other January thereafter)
• SB253 emissions disclosures: Scopes 1&2 likely due June 30, 2026 (final date still to be confirmed by CARB), and scope 3 in 2027
• September 2025: we should get a full list of captured companies, and a draft report template for SB253

Scope: CARB estimates around 2,600 companies will be in scope for SB253 and 4,100 for SB261. They are due to publicly list those companies captured in September 2025.

SB261 clarified: CARB will publish minimum requirement guidelines, but in the meantime confirmed that companies can disclose a TCFD, IFRS S2 report, or other equivalent regulated-disclosure framework.

Fees proposed: $3,106 for SB 253; $1,403 for SB 261; $4,509 if subject to both.

Assurance: SB 253 reports will require third-party assurance, aligned with existing frameworks.

Scope and timeline for California's climate disclosure rules

Here’s the schedule for when companies begin reporting:

What California’s climate disclosure rules require

The CCDAA require some US based public and private companies doing business in California to disclose their scope 1, 2, and 3 emissions, beginning in 2026 on 2025 data. Scope 1 emissions are those that result directly from a company's activities, while scope 2 are those released indirectly, for example, from electricity purchased and used by the company. Scope 3 encompasses all indirect emissions produced from a company's entire supply chain. Scope 3 emissions reporting is required in 2027 on 2026 data; a year after the first scope 1 and 2 disclosures.

Scope 1 and 2 emissions disclosures need to be assured by an independent third party. Scope 3 emissions may also require assurance. The California Air Resources Board (CARB) is set to make that decision in 2027, and can introduce the requirement from 2030. All emissions disclosures will be submitted to and publicly disclosed by either CARB or a new digital reporting registry to be determined.

As well as emissions disclosures, the rule also requires certain entities doing business in California to prepare and publish climate-related financial risk reports aligned with the TCFD or ISSB frameworks.. Those reports must be published on a company's website and submitted to a public docket which CARB will open on December 1, 2026. The first report would be required to be prepared by January 1, 2026, and then refreshed biennially.

What are the liability implications of the California rules?

The law authorizes CARB to bring civil actions against subject companies and seek civil penalties for violations of the act. Penalties for companies relating to the emissions disclosure requirements can be up to $500,000. Penalties relating to the climate risk report part of the requirements can be up to $50,000. There is a safe harbor for scope 3 emissions disclosures; companies are not subject to administrative penalties for misstatements about scope 3 emissions made with reasonable basis and disclosed in good faith. CARB has also said that it will not take enforcement action for incomplete reporting against entities in the first year, on the condition that entities demonstrate good faith efforts to comply with the requirements of the law.

What companies should do to prepare for California climate disclosures

Companies now know the key dates, frameworks, and fees and can start moving from "planning" to "preparing."

1. Mark your calendar: January 1, 2026 (SB 261) and June 30, 2026 (SB 253 Scope 1 & 2, though TBC)
2. Leverage existing reporting: Align TCFD, ISSB, or CSRD workstreams where possible
3. Assess scope now: Review whether you are captured under the revenue and "doing business" definitions; expect a CARB company list soon
4. Plan for assurance: Begin early conversations with assurance providers for SB 253 compliance
5. Give feedback: CARB is actively seeking engagement while definitions and templates are still open

Software for California climate disclosures

Companies can leverage sustainability platforms like Watershed to compile their California reports. Using technology as the backbone of your measurement increases the calculation transparency and reduces the manual work needed to complete the exercise. In particular, Watershed's platform:

• Measures every California SB 253 and SB 261 datapoint, including scope 3 emissions.
• Guides customers through drafting narrative with climate risk analysis support, peer benchmarks, expert guidance, and AI-driven tools
• Has to-date delivered a 100% pass rate on mandatory disclosures when customers have had their measurements audited and assured.
• Includes tools to enable real action – like supplier engagement or decarbonization modeling – for when your focus turns from compliance to action.

Legal challenges to the California climate disclosures rules

The Chamber of Commerce has mounted a legal challenge to these rules. Here's the current status of the Chamber's appeal to the 9th Circuit:

Key dates and actions:

• August 13, 2025: The U.S. District Court denied the preliminary injunction request
• August 20, 2025: The business groups filed a notice of appeal to the Ninth Circuit
• August 20, 2025: The groups also filed a motion for an injunction pending the appeal
• September 15, 2025: A hearing is scheduled for the motion for an injunction pending the appeal

Topics:
• Disclosures
• Climate news
• SEC