Preparing for California's New Climate Disclosure Laws

In 2023, California enacted two landmark pieces of climate legislation: Senate Bill 253 (SB 253), the Climate Corporate Data Accountability Act, and Senate Bill 261 (SB 261), the Climate-related Financial Risk Reporting Program. These new laws introduce significant reporting requirements for large companies doing business in the state. While California published a preliminary list of covered companies on September 24, 2025, coverage may extend to additional businesses. It is crucial for organizations to begin preparing for the complex data collection required and to consider implementing sustainability initiatives to reduce emissions and mitigate climate-related risks.

Key takeaways

• SB 253 mandates GHG emissions reporting: U.S. companies with over $1 billion in annual revenue doing business in California must report their scope 1, 2, and 3 greenhouse gas (GHG) emissions, with reporting beginning in 2026.
• SB 261 requires climate risk disclosure: U.S. entities with over $500 million in annual revenue doing business in California must submit biennial reports on their climate-related financial risks and their strategies to address them, starting January 1, 2026.
• Preparation is critical: The deadlines for this new California Climate Disclosure Law are fast approaching. Businesses should act now to establish data collection processes and reporting frameworks to ensure compliance.
• Good faith efforts are recognized: For SB 253, California will initially offer some leniency on data quality and fines, provided companies demonstrate a tangible, good faith effort in their emissions reporting.

Frequently asked questions about California's Climate Disclosure Law

What is California SB 253, the Climate Corporate Data Accountability Act?

SB 253 is a key component of the California Climate Disclosure Law. It requires U.S.-based companies that do business in California and generate more than $1 billion in annual revenue to publicly disclose their greenhouse gas (GHG) emissions.

The reporting timeline is phased:

• 2026: Companies must begin reporting their scope 1 (direct emissions) and scope 2 (indirect emissions from purchased energy) data.
• 2027: Reporting expands to include scope 3 emissions, which encompass all other indirect emissions that occur in a company’s value chain.

Given the complexity of collecting and verifying this data, especially for scope 3, regulators will allow for some flexibility on timelines and penalties for companies that show a good faith effort to comply.

What is California SB 261, the climate-related financial risk reporting program?

Effective January 1, 2026, SB 261 mandates that U.S.-based entities with over $500 million in annual revenue doing business in California report on their climate-related financial risks. These reports must be submitted every two years and made publicly available.

The law defines “climate-related financial risk” broadly, including any material risk posed to a company's:

• Corporate operations and supply chains
• Capital and financial investments
• Shareholder value and consumer demand
• Broader financial markets and economic health

Companies must detail these risks and outline the measures they have taken to reduce and adapt to them. To support transparency, a public docket for these reports will be open from December 1, 2025, to July 1, 2026.

Who is affected by these new California climate laws?

These laws apply to private and public U.S.-based companies "doing business in California" that meet specific revenue thresholds:

• SB 253: Applies to entities with total annual revenues exceeding $1 billion.
• SB 261: Applies to entities with total annual revenues exceeding $500 million.

While a preliminary list of affected companies has been released, the term "doing business in California" is broad. Any company meeting the revenue thresholds should proactively evaluate its status and prepare for compliance with the California Climate Disclosure Law.

Strategic compliance with CleanMile

Preparing for the California Climate Disclosure Law is a critical step for companies aiming to meet regulatory requirements. Navigating these new regulations may seem complex, but proactive preparation and effective carbon management can position your organization for success.

CleanMile is here to make that process seamless. Our comprehensive platform helps businesses track, plan, and execute their transportation emissions reduction goals with precision, ensuring alignment with California's disclosure requirements.