California’s SB 253 & 261
What California’s Climate Laws Mean for Business
California has passed two landmark climate disclosure laws: SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-Related Financial Risk Act). Together, they create the most ambitious state-level reporting requirements in the U.S.
If your company does business in California and meets the revenue thresholds, these laws will directly affect your reporting obligations. Both laws are high-visibility, requiring significant effort and cross-functional reporting. Keep reading to see which laws will impact your business and what you can do about it.
SB 253: Climate Corporate Data Accountability Act
The first law, SB 253, affects any U.S.-based company doing business in California with over $1B in annual revenue. These companies will be required to report their Scope 1 and 2 greenhouse gas emissions by June 30, 2026, with Scope 3 emissions reporting starting in 2027 based on prior-year emissions.
What it requires:
Annual disclosure of greenhouse gas (GHG) emissions, verified by a third party
Covers Scope 1, Scope 2, and Scope 3 emissions (direct, indirect from energy, and full value chain)
Reports will be made public through a digital platform managed by the California Air Resources Board (CARB)
Why it matters:
Scope 3 reporting is complex and requires coordination with suppliers, vendors, and customers
Data must be accurate, consistent, and auditable—late or poor-quality disclosure risks reputational and regulatory consequences
SB 261: Climate-Related Financial Risk Act
SB 261 impacts any U.S.-based company doing business in California with over $500M in annual revenue. This law requires public reporting on climate-related financial risks and mitigation strategies, beginning January 1, 2026 based on 2025 data.
What it requires:
Biennial disclosure of climate-related financial risks and strategies to address them
Must follow the TCFD (Task Force on Climate-related Financial Disclosures) or IFRS S2 framework
Reports must cover governance, strategy, risk management, and metrics/targets
Why it matters:
Goes beyond emissions to focus on financial risk and resilience
Requires scenario analysis, board-level governance, and cross-functional coordination
Weak or rushed disclosures may undermine investor confidence and invite regulatory attention
Real-World Impact
For affected companies, these laws mean tangible impacts on business:
New compliance costs: From emissions accounting to scenario analysis and assurance
Cross-functional involvement: Finance, sustainability, legal, operations, and supply chain all play a role
Investor and customer expectations: California is setting a precedent likely to influence other states and markets
What Companies Should Do Now
The time to act is now. There are practical steps to making sure your business is prepared for these laws:
Assess applicability: Confirm whether your revenue and California business activities trigger these laws
Map requirements: Emissions reporting (SB 253) and financial risk reporting (SB 261) have different—but overlapping—data needs
Engage leadership: These disclosures require board and C-suite involvement
Start early: Especially for Scope 3 emissions and scenario planning, which take time to execute well
The Takeaway
Companies that start now can turn compliance into a chance to strengthen governance, build investor confidence, and demonstrate leadership on climate. Get in touch with The CF Team now to get ahead of these disclosure requirements and future-proof your business.
