California Climate Disclosure Law Nears: What Businesses Must Do Now

Many US companies have been watching the fate of the US Securities and Exchange Commission’s (SEC) climate disclosure rules with interest, especially after legal challenges stalled their implementation. But while the federal effort is stuck in uncertainty, California’s own climate reporting requirements are very much alive, and deadlines are fast approaching.

Under SB 261, companies doing business in California with annual revenues above $500 million will need to submit a narrative report on climate-related financial risks by January 1, 2026. A few months later, SB 253 will require large companies, i.e., those with revenues above $1 billion, to disclose their greenhouse gas (GHG) emissions. Notably, the rules apply to both public and private companies.

The California Rules at a Glance

California’s climate laws aim to bring greater transparency to how companies manage the financial risks of climate change and measure their GHG footprint. The disclosure framework draws from the GHG Protocol and the Task Force on Climate-Related Financial Disclosures (TCFD) guidelines. This means companies will need to detail governance, strategy, risk management, and emissions metrics.

The California Air Resources Board (CARB) has confirmed the January 1, 2026, deadline for climate risk reports will stand, even though the final regulations are still being drafted. While a court-ordered pause is possible due to ongoing litigation, CARB is urging companies to prepare now by gathering the necessary data and resources to meet the risk reporting and emissions disclosure requirements in 2026.

Read More: European Union Plans Major Rollback in Climate Reporting Rules

Key Amendments Under SB 219

Passed in September 2024, SB 219 made several adjustments to SB 253 and SB 261:

• Regulation Timeline Shift: CARB now has until July 1, 2025, to issue GHG reporting rules, expected by the end of 2025.
• Scope 3 Flexibility: Scope 3 emissions (indirect emissions from the value chain) may be reported on a delayed schedule, potentially starting in 2027.
• Consolidated Reporting: Subsidiaries can be exempt if their parent company files a consolidated report.
• Extended Publication Window: Emissions reports must be made public within 90 days, rather than the original 30-day timeframe.

CARB has also signaled that 2025 emissions data, both Scope 1 (direct) and Scope 2 (from purchased energy), will need to be reported in 2026.

Litigation and Legal Uncertainty

The US Chamber of Commerce and others have challenged SB 253 and SB 261, arguing constitutional violations. While some claims have been dismissed, litigation continues. However, California’s deadlines remain in place, meaning companies that delay preparations risk falling behind if the laws are upheld.

What This Means for Companies

If your business meets the revenue thresholds and operates in California, you should:

1. Assess applicability: Determine whether your operations meet the “doing business” criteria.
2. Gather emissions data: Begin compiling Scope 1 and Scope 2 data from 2025 operations, and prepare for Scope 3 tracking.
3. Align with TCFD: Review governance, strategy, and risk management processes for climate-related financial risks.
4. Monitor CARB updates: Watch for regulatory guidance, including the August 21, 2025, workshop.

Also Read: SEC Drops Climate Rules as States and Global Powers Push Ahead

A Broader Trend

California’s approach is influencing other states. New York, New Jersey, and Illinois have proposed similar bills, also based on the GHG Protocol. These laws, if passed, could create a patchwork of state-level climate disclosure requirements across the US.

The Bottom Line

With deadlines under California climate disclosure law now less than 18 months away, companies should not be lulled into inaction by the SEC’s stalled rules. For many, compliance will require significant data collection, internal coordination, and potentially third-party verification. The sooner companies start, the better positioned they’ll be when January 2026 arrives.

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Source: JDSUPRA