California enacted two major laws related to climate change in 2023 and both have 2026 deadlines looming:
- SB 253, the California Corporate Greenhouse Gas Reporting Program, requires businesses with total annual revenue in excess of one billion dollars that do business in California disclose their greenhouse gas emissions annually, starting in 2026 for 2025 Scope 1 (direct) and Scope 2 (indirect from energy consumed) emissions. Scope 3 emissions (upstream and downstream) will be required starting in 2027 for 2026 emissions.
- SB 261, the Climate Related Financial Risk Disclosure Program, requires companies that do business in California with annual revenues over $500 million or greater to publish climate-related financial risk reports biennially, starting in 2026.
The California Air Resources Board (CARB) is required by a separate bill, SB 219, to adopt regulations for these programs by July 1, 2025; however, CARB has not yet issued proposed regulations. SB 219 provides some general compliance details but the specifics remain a mystery. Nonetheless, CARB issued an enforcement notice in December 2024 stating that it will exercise “enforcement discretion” for businesses that report greenhouse gas emissions in 2026 to comply with SB 253 so long as the business demonstrates good faith efforts to comply. The enforcement notice provides no guidance on what CARB will consider “good faith efforts” or how CARB will determine what efforts a company has undertaken. In addition, the enforcement notice does not address SB 261. While there is a generally-accepted approach to assessing climate-related financial risk issued by the Task Force on Climate-related Financial Disclosures (TCFD), it is unclear whether CARB will modify this methodology.
The Chamber of Commerce and others have filed litigation challenging both laws. A Motion for Preliminary Injunction was heard by the court on May 27, 2025, but it is unknown how quickly a ruling will be issued. A favorable ruling may provide at least temporary relief for business subject to these laws. The Trump Administration has also issued Executive Orders targeting state laws related to climate change although how those Executive Orders might impact these two laws is not yet apparent.
Despite the uncertainty, businesses that will be subject to either or both of these laws should have a plan for compliance in place. Compliance may require collection of information that businesses already possess but, if a business is not already calculating greenhouse gas emissions and assessing climate-related financial risk, that information may be scattered throughout the company. Identifying and pulling together the information needed may take time and businesses should not wait until the end of 2025 to start this effort.
Planning for compliance may include hiring a qualified consultant to identify the information that will be needed to calculate greenhouse gas emissions and to assist with preparing climate-related financial risk reports. Although the final reports will be public information, engaging consultants through in-house or outside legal counsel may provide greater latitude in drafting and editing these reports under the protections of attorney work product and attorney-client privilege.
Laws requiring disclosures of greenhouse gas emissions have been proposed in multiple other states, including New York, New Jersey, Illinois, Washington, and Colorado during 2025 legislative sessions. These follow the California approach, including reporting thresholds, very closely. Other states can be expected to follow, but presumably reports prepared to comply with California law can be easily modified for submittal to other states.
