Through SB 253, SB 261, and SB 219, California's Air Resources Board (CARB) mandates transparent corporate reporting of GHG emissions and climate-related financial risks.
SB 253 applies to companies with over USD 1 billion in global revenue doing business in California, requiring annual disclosure of Scope 1 and Scope 2 emissions beginning in 2026, and Scope 1, 2, and 3 emissions from 2027 onward, supported by independently assured data.
CARB's 2025 progress marks several key milestones, including the release of FAQs, public workshops, a preliminary list of covered entities, and a draft Scope 1 and 2 reporting template, with the final rulemaking package expected in Q1 2026.
Third-party assurance requires limited assurance from 2026 to 2029, transitioning to reasonable assurance by 2030, in alignment with internationally recognized frameworks such as ISSA 5000, AA1000, and ISO 14060.
California continues to lead in environmental regulation with the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261). The legislature enacted both laws in October 2023. In September 2024, the legislature passed SB 219 and amended these laws to allow more flexible reporting timelines, update fee structures, and consolidate parent-level reporting.
On August 21, 2025, the California Air Resources Board (CARB) held its second public workshop on implementing SB 253, SB 261, and SB 219. CARB presented draft rules that outline reporting timelines, entity definitions, assurance standards, and proposed fees, and invited public input before finalizing the regulations.
On November 18, 2025, CARB provided further updates, highlighting ongoing refinements to definitions, exemptions, and applicability criteria. The workshop also clarified the scope of the initial regulation focused on fee structures and associated definitions and detailed the first reporting deadline under HSC § 38532.
The Climate Corporate Data Accountability Act (SB 253) mandates that companies publicly disclose independently assured Scope 1 and Scope 2 greenhouse gas (GHG) emissions beginning in 2026, and Scope 1, 2, and 3 emissions from 2027 onward. The law applies to both public and private U.S. companies that conduct business in California and generate more than USD 1 billion in total global revenue, regardless of where they locate their corporate headquarters.
Approximately 2,600 companies fall under SB 253's requirements—a reach that extends further than many organizations initially expect, particularly for multinational firms that operate in California through subsidiaries or indirect activities. CARB uses the California Secretary of State's Business Entity Database to help define "doing business," but the threshold remains subject to interpretation. Companies with California sales, employees, property, or significant contracts may be covered even without a physical presence. Organizations must comply even if the database does not list them.
For CFOs and finance teams, the financial exposure is significant: CARB can impose penalties of up to USD 500,000 per year for non-compliance. Companies also face an estimated filing fee of USD 3,106 per submission. Beyond direct costs, delays or incomplete reporting can undermine trust among investors, customers, and regulators—creating reputational and capital access risks that far exceed regulatory penalties.
For sustainability and ESG leaders, the challenge lies in building robust data systems capable of capturing emissions across diverse operations and complex value chains. Companies must ensure that disclosures remain clear, consistent, and responsive to organizational changes, such as mergers, acquisitions, or divestments.
For compliance and legal teams, parent-subsidiary reporting structures require careful attention. Organizations must clarify whether reporting will be consolidated at the parent level or conducted entity-by-entity, and must document these decisions to withstand regulatory and assurance scrutiny.
CARB has indicated that it will consider "good faith efforts" when assessing compliance. However, companies that establish robust data systems, transparent audit trails, and AI-enabled, audit-ready methodologies early will position themselves not only to ensure compliance but also to strengthen long-term credibility and leadership in corporate climate transparency.
|
Requirement |
Reporting Frequency |
First Reporting Year |
|---|---|---|
|
Scope 1 & 2 Emissions |
Annually |
August 10, 2026 |
|
Scope 3 Emissions |
Annually |
2027 |
CARB staff is proposing an initial reporting deadline of August 10, 2026 for Scope 1 and Scope 2 emissions, incorporating stakeholder feedback and ensuring all entities have sufficient time to comply. Companies with fiscal years ending between January 1 and February 1, 2026 will report data from the fiscal year ending in 2026, while those with fiscal year-end dates between February 2 and December 31, 2026 will report data from the fiscal year ending in 2025. In all cases, reporting entities will have at least six months after the end of their fiscal year to submit their emissions report.
While Scope 3 reporting doesn't begin until 2027, companies should start supplier engagement and data collection immediately. Value chain emissions typically represent 70-90% of total footprint and require 12-18 months to establish reliable baselines. For companies with complex land-use or agricultural supply chains, emerging frameworks like the GHG Protocol Land Sector and Removals Guidance (LSRG) add additional layers of methodology complexity that require early planning and specialized expertise.
The California Air Resources Board released a draft reporting template and guidance memo for Scope 1 and Scope 2 GHG emissions under the Corporate Greenhouse Gas Reporting Program. The template aims to simplify disclosures for first-time reporters while aligning with GHG Protocol principles and CARB's data requirements.
The draft template covers organization information, third-party verification, inventory boundaries, and Scope 1 and 2 disclosures, along with methodology documentation, de minimis sources, emission reductions, and California Mandatory Reporting Regulation (MRR) fields for cross-referencing with CARB databases.
The template introduces standardized data fields including emissions intensity metrics (such as emissions per USD 1 million in revenue), two-digit NAICS codes for industry classification, transparent methodology disclosure through GWP values and emission factors, and materiality thresholds that allow organizations to exclude immaterial sources with documentation. This emphasis on standardized intensity metrics and industry classification signals CARB's intent to enable cross-company benchmarking—turning individual disclosures into comparable industry datasets that could shape future policy decisions and create competitive transparency around climate performance.
For the 2026 reporting cycle, CARB has provided significant flexibility. At the November 18, 2025 workshop, staff clarified that the template is voluntary—companies may instead submit their existing GHG reports covering Scope 1 and 2 emissions. Entities that were not collecting emissions data when the Enforcement Notice was issued only need to provide a letter on company letterhead stating this rather than submitting full emissions data. CARB also confirmed that limited assurance will not be required for 2026 submissions, though entities must still ensure compliance with all applicable laws.
CARB also presented proposed definitions for revenue, doing business in California, and parent-subsidiary relationships, while outlining exclusions and proposed exemptions from the requirements.
Looking ahead, subsequent SB 253 rulemaking will address data assurance requirements, enforcement provisions, recurring reporting deadlines beyond 2026, and standardized reporting templates. CARB is actively seeking stakeholder feedback on which of the 15 Scope 3 categories are most commonly used by companies and most valuable for investors and consumers. Comments can be submitted to climatedisclosure@arb.ca.gov or by contacting CARB staff directly.
CARB accepted public feedback on the draft template until October 27, 2025, and provided key references to support accurate reporting, including CARB GHG Inventory GWP Values, the U.S. EPA Simplified GHG Emissions Calculator, and the GHG Protocol Corporate Standard.
In response to the significant volume of public feedback and ongoing discussions regarding the range of covered entities, CARB revised its schedule. CARB now plans to present the initial rulemaking package, including fee-related provisions, to the Board in Q1 2026.
This timeline shift is significant: it means final regulatory clarity will arrive just months before the first filing deadline in June 2026. Companies waiting for complete guidance before beginning preparation will face compressed timelines, higher costs, and increased risk of non-compliance.
As CARB's rulemaking progresses, the preparation window continues to narrow. Companies should act on current guidance instead of waiting for full regulatory clarity. Early preparation allows organizations to build stronger systems, improve data quality, and achieve smoother reporting once CARB finalizes the rules.
Organizations should begin preparing now by:
Under SB 253, companies must obtain independent third-party assurance for their reported Scope 1 and Scope 2 GHG emissions. From 2026 to 2029, companies must secure limited assurance, and by 2030 they must secure reasonable assurance. CARB expects to finalize detailed assurance requirements by 2026 and may extend assurance requirements to additional disclosure elements in later years.
The transition from limited to reasonable assurance in 2030 isn't just a technical upgrade—it typically doubles audit costs and requires significantly more robust internal controls, documentation standards, and data quality protocols. Companies that build audit-ready systems from day one will avoid expensive retrofitting and reduce the risk of material restatements during the transition.
During its second public workshop, CARB outlined that limited assurance will involve sampling plans, reviews of data management systems, limited data and conformance checks, process documentation, and error logs, culminating in an assurance statement. Potential standards for verification include:
These standards promote consistency and credibility in emissions verification across reporting entities, ensuring that disclosures meet investor-grade quality expectations.
As regulatory expectations like SB 253 redefine corporate climate transparency, businesses need more than compliance—they need confidence in their data. Organizations are now empowered to navigate complex disclosure requirements with accuracy, efficiency, and credibility through platforms like Terrascope.
Unlike platforms built primarily for disclosure compliance, Terrascope combines regulatory reporting with operational decarbonization tooling—turning mandatory disclosures into actionable business intelligence. The platform features: