SB 253 and SB 261 Explained: California Climate Rules

If your company earns more than $500 million a year and does business in California, you likely have a new legal obligation: reporting on your climate impact. Two laws are behind this requirement, SB 253 and SB 261. Together, they form the most far-reaching corporate climate disclosure regime in the US, and they apply regardless of where your company is headquartered.

For most companies, the difficulty isn't disagreeing with these laws. It's understanding exactly what's required, when, and how the rules keep changing as regulators work through the details. That difficulty has increased in 2026, as the California Air Resources Board (CARB), the agency responsible for enforcing SB 253, continues to refine how the law will work in practice.

Where SB 253 and SB 261 came from

California has a long history of setting environmental policy that other states and federal regulators later adopt. SB 253 and SB 261 continue that pattern. Both were signed into law in October 2023, as part of California's effort to hold large companies accountable for their climate impact.

The two laws cover different ground:

• SB 253, the Climate Corporate Data Accountability Act, addresses emissions. It requires companies to report what they produce, directly and indirectly, across their operations and value chain.
• SB 261, the Climate-Related Financial Risk Act, addresses risk. It requires companies to disclose how climate change could affect them financially, and what they are doing to prepare.

Since 2023, both laws have gone through a lengthy rulemaking process. CARB is responsible for turning the legislation into enforceable detail, and that process is still ongoing. This is why requirements have changed since 2023, most recently following a public workshop CARB held in 2026.

What SB 253 requires

SB 253 applies to companies with annual revenues over $1 billion that do business in California. It requires them to report greenhouse gas emissions across three categories, known as Scopes:

• Scope 1: direct emissions from a company's own operations, such as fuel burned in company vehicles or on-site equipment.
• Scope 2: indirect emissions from purchased energy, such as electricity used to power offices and facilities.
• Scope 3: emissions across a company's entire value chain, including suppliers, business travel, employee commuting, waste, and water usage. This is the broadest and most complex category.

The rollout is staggered. Companies began reporting on Scope 1 and 2 emissions in 2026. CARB has moved the original August deadline to 10 November. Scope 3 reporting was originally expected to apply in full from 2027, but that requirement has now changed significantly. 

What SB 261 requires

SB 261 differs from SB 253 in approach. Rather than emissions data, it requires companies with revenues over $500 million to publicly disclose their climate-related financial risks and how they plan to manage them.

This involves identifying how climate change could realistically affect the business. Risks fall into two categories:

• Physical risks, such as extreme weather disrupting operations.
• Transition risks, such as new regulation, shifting customer demand, or the cost of moving to lower-carbon operations.

Companies must publish this information in a report aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), or an equivalent framework. SB 261 reports were due starting in 2026, ahead of the more data-intensive Scope 3 requirements under SB 253. 

Why the rules keep changing

CARB has not issued fixed rules from the outset. It has consulted publicly and adjusted its approach based on feedback from companies. This is standard practice for a regulation of this scale, but it means businesses need to continue tracking updates rather than treating any single version of the rules as final.

The most significant recent update concerns Scope 3 reporting under SB 253. Earlier in 2026, CARB consulted on three approaches:

• Broad applicability: all companies report on all 15 Scope 3 categories from 2027.
• Sectoral phase-In: only companies in transportation and industrial sectors report on Scope 3 first.
• Category phase-In: all companies report, but only on a smaller set of commonly disclosed categories to start.

Following feedback about the cost and difficulty of gathering Scope 3 data, CARB has proposed the category phase-in approach. From 2027, companies will only need to report on five Scope 3 categories:

1. Purchased Goods and Services
2. Fuel and Energy Related Activities
3. Waste Generated During Operations
4. Business Travel
5. Employee Commuting

CARB selected these categories because they are already the most commonly reported, with more established data sources and calculation methods than categories such as investments or downstream product use. The remaining ten categories will be voluntary for now, with no confirmed date for when they will become mandatory.

CARB has also confirmed two further details:

• From 2027, companies will need limited assurance on their Scope 1 and 2 emissions data, meaning an independent third party must review and confirm the figures. CARB has proposed accepting five recognised assurance standards, giving companies some flexibility.
• Insurance companies, originally exempt from 2026 reporting to avoid duplicating separate requirements from the California Department of Insurance, will now need to comply with SB 253 from 2027 as well, either through a combined report or a supplement to their existing filing.

What this means for your business

If SB 253 applies to your company, the narrower Scope 3 requirement provides more time to build reliable data collection processes around the categories that matter most, rather than addressing all 15 categories at once.

This should not be a reason to delay preparation. Companies that wait until 2027 to begin are likely to find themselves under significant time pressure.

The assurance requirement also warrants early attention. Obtaining external verification of emissions data means internal data collection processes need to be well-documented and defensible, not simply accurate. Building that level of rigour takes time.

Companies working through both SB 253 and SB 261 should treat the two laws as connected rather than separate exercises. The financial risk disclosures required under SB 261 carry more weight when supported by solid emissions data. Similarly, the emissions reporting required under SB 253 is more useful to investors and regulators when presented alongside a clear understanding of financial risk. Companies that build one capability well tend to find the other more straightforward.

How Zevero helps

Zevero helps organisations turn regulatory requirements into a practical reporting process. The platform combines carbon accounting with guidance from sustainability experts, helping businesses measure emissions accurately and prepare for compliance with California's Climate Accountability Package. Through corporate carbon footprinting, organisations can build the Scope 1, 2, and 3 data foundation that SB 253 requires, while ESG reporting helps align emissions data with the climate-risk narrative SB 261 asks for, so disclosures meet the expectations of TCFD, ISSB, and other global frameworks. Get in touch to see how Zevero can support reporting under SB 253 and SB 261.