California’s Climate Disclosure Laws: A New Baseline
California has effectively shifted climate disclosure from a voluntary commitment to an operational expectation. With SB 253 and SB 261, the state has drawn a line around what credible climate transparency looks like, and companies with a footprint in California now have a clearer view of what the coming years will require.
SB 253 is the anchor on the emissions side. Companies formed in the U.S., doing business in California, and generating more than $1 billion in annual revenue will need to publicly disclose greenhouse gas emissions — first Scopes 1 and 2, then Scope 3 a year later. The sequencing matters. Emissions for the prior fiscal year begin appearing in 2026 for Scopes 1 and 2, and 2027 for Scope 3. Independent assurance isn’t optional; it’s woven directly into the statute. Limited assurance applies early for Scopes 1 and 2, with California envisioning a path toward reasonable assurance as the decade unfolds. Regulators will clarify the timing for Scope 3, but no one should assume it falls outside the assurance conversation. This is the shift: emissions accounting must be governed, defensible, and auditable — not a last-minute spreadsheet exercise.
SB 261 takes a different angle, focusing on climate-related financial risk. The threshold is lower than SB 253, capturing companies with more than $500 million in revenue, which expands the number of organizations in scope. Instead of emissions math, the requirement is a public climate-risk report every two years, grounded in TCFD or IFRS S2 concepts. It’s an assessment of governance, strategy, risk management, and the indicators the company relies on to steer decisions. These reports must be publicly accessible beginning in 2026, reinforcing the move toward disclosures that stakeholders can actually find, reference, and compare over time.
What makes these two laws meaningful is how they work in tandem. SB 253 builds the quantitative backbone — the emissions accounting that gives companies a shared language. SB 261 shapes the narrative — the way organizations describe exposure, explain choices, and connect climate realities to financial health. Many companies will fall under both, which is less of a burden and more of an invitation to build a coherent system for how climate information is produced, understood, and communicated.
The practical tension, of course, is timing. The near-term horizon is 2026, when emissions disclosures for Scopes 1 and 2 come due under SB 253, and when the first SB 261 climate-risk reports must be published. Scope 3 disclosures follow the next year. The California Air Resources Board will continue refining mechanics such as formats, portals, and assurance expectations, but the direction is unmistakable. Leadership teams should operate as though the rules will hold — because the market already assumes they will.
The companies that navigate this well are starting with clarity. They’re confirming whether they’re in scope, especially if their revenue hovers near the $500 million or $1 billion thresholds. They’re building emissions data infrastructure early, knowing that assurance demands a reliable audit trail. And they’re using TCFD and IFRS S2 frameworks to organize their climate-risk thinking so the story is coherent internally before it goes public.
Context beyond California matters too. With the SEC’s climate rule paused and the EU continuing forward with CSRD and ESRS, California has become a practical baseline for many U.S. companies. The EU still pushes harder on scope and double materiality, but the alignment across jurisdictions is clear: fragmented narratives are no longer acceptable. Companies operating across multiple regimes need common definitions, boundaries, and controls so their disclosures don’t contradict one another. Consistency builds trust; inconsistency undermines it instantly.
By early next year, maturity will look like a company that knows its applicability, has stable ownership of emissions data, understands where Scope 3 estimates need to improve, and has begun shaping a climate-risk narrative that’s honest about what’s still evolving. The gaps don’t hurt you — but pretending they aren’t there does.
The real risk isn’t compliance. It’s waiting. Treating Scope 3 as a secondary concern or assuming “limited assurance” means “light touch” are the kinds of decisions that create friction later. And if Sustainability, Finance, Operations, and Legal aren’t working from the same playbook, the system will strain under deadline pressure.
California isn’t just adding paperwork. It’s redefining the management system around climate. Organizations that respond reluctantly will feel the weight of that change. Organizations that respond with structure, discipline, and clarity will earn credibility, reduce volatility, and create real strategic leverage.