California Climate Disclosure Laws Updates from CARB

(Updated after Ninth Circuit Court hearing on January 12, 2026)

The California Air Resources Board (CARB) continues to issue updated guidance for companies preparing to comply with the state’s climate disclosure laws under SB 253 and SB 261.

Additionally, in the last two months, CARB has released three important new resources: proposed regulatory text [link here], a Climate-Related Financial Risk Report Checklist [link here] to guide companies’ first SB 261 filings, and a draft Scope 1 and 2 GHG Reporting Template [link here] to support early reporting under SB 253. Together, these documents mark a significant step toward operationalizing California’s corporate climate reporting framework and offer much-needed clarity for covered entities preparing for compliance in 2026.

What is the Latest Legal Update on California’s SB 261 from the Ninth Circuit Court?

Latest Legal Update: Ninth Circuit Stay on SB 261
After Ninth Circuit Court of Appeals temporarily paused enforcement of SB 261 on November 18, 2025, they recently had the hearing in early January 2026.

During the hearing, plaintiffs argued that SB 261 (and the related emissions disclosure law, SB 253) compels speech that is not commercial in nature because it is not tied to specific products, transactions, or advertising. They contended that the laws force companies to publish broad, public-facing reports on climate risk and emissions, making them presumptively unconstitutional under established Supreme Court precedent.

The State of California countered that the disclosures are commercial speech because they provide material information to investors and lenders assessing financial risk. State attorneys argued that climate risk and emissions data function like other business risk disclosures and do not require companies to express political or ideological views. The judges questioned both sides about how closely the disclosures must be tied to commercial transactions, with particular attention to the breadth of SB 261 and the Scope 3 emissions requirements under SB 253.

The court took the case under submission and will issue a decision in due course. Possible outcomes include upholding the laws, striking them down, or remanding parts of the statutes—such as Scope 3 disclosures—for further consideration of severability. We expect a decision in mid-2026. 

Legal analysts estimate a high likelihood (80%+) that the stay will be reversed, which would restore SB 261’s reporting requirements.

The public docket window between December 1, 2025 and July 1, 2026 will not change, and we’re seeing companies stay the course – they are now posting their climate-related risk reports in the public docket.

What Does CARB’s Latest Guidance Clarify About California’s SB 261?

Data Year Flexibility
CARB’s checklist confirms that companies may use the most recent or best-available data, whether on a calendar-year or fiscal-year basis. For many, this will mean using FY 2024 data (and in some cases, FY 2023).

Applicable Frameworks
Reports may follow any of the frameworks specified in statute:

• The Task Force on Climate-related Financial Disclosures (TCFD) recommendations (June 2017),
• The IFRS S2 Climate-Related Disclosures issued by the International Sustainability Standards Board, or
• A recognized framework issued by a regulated exchange or government entity.

Each company must include a comply-or-explain statement, identifying which framework was used, which recommendations were included or omitted, and why—plus any plans to expand disclosures in the future.

Use of Existing TCFD or ISSB Reports 
If a company already produces a TCFD- or ISSB-aligned report, that report may be used to satisfy SB 261. It must be publicly posted and linked in the CARB docket to qualify. 

Minimum Disclosure Areas
The checklist outlines five core sections that every report must address:

1. Reporting Framework – Statement of the framework used and rationale.
2. Governance – Description of oversight structures for identifying and managing climate-related financial risks, including any board-level involvement.
3. Strategy – Discussion of climate-related risks and opportunities over the short, medium, and long term, their impacts on operations and financial planning, and the resilience of company strategy under future climate scenarios.
4. Risk Management – How the company identifies, assesses, and manages climate-related risks, and integrates them into overall risk processes.
5. Metrics and Targets – Disclosure of metrics and targets used to assess and manage material climate-related risks and opportunities.

Scenario Analysis
Quantitative scenario modeling is not required in the first reporting cycle. CARB accepts qualitative scenario-based assessments to describe how resilient a company’s strategy is to future climate impacts, with encouragement to expand this analysis over time.

GHG Emissions Data
While some frameworks reference Scope 1–3 emissions, CARB notes that emissions data are not required in the initial SB 261 report to avoid duplication with SB 253.

Exemptions
Businesses regulated by the California Department of Insurance or engaged primarily in the business of insurance in any state are excluded from SB 261 reporting requirements, as well as not-for-profits and companies whose only exposure in California is teleworkers.

What exactly is “TCFD”? And what does it have to do with SB261? ➔ 

What Does CARB’s Latest Guidance Clarify About California’s SB 253?

Scope 1 and 2 Emissions Reporting
Under SB 253 (Climate Corporate Data Accountability Act), covered entities must disclose Scope 1 and Scope 2 greenhouse gas (GHG) emissions for the first time by August 10, 2026. CARB has released a draft reporting template to streamline these disclosures, especially for companies reporting for the first time. Use of the template is voluntary for the 2026 cycle, but it provides the clearest view yet of how CARB expects emissions data to be organized and submitted.

No Enforcement Safe Harbor in the Regulation
The biggest surprise of the December 9, 2025 draft regulation release is that the proposed regulation itself does not include any enforcement-notice safe harbor language. That safe harbor only appears in the Staff Report. However, many companies will not want to catch themselves in a position where they are not following the actual regulation, as this could create a real compliance risk with business contracts. Any company relying on the safe-harbor concept is technically operating outside the regulation and state law.

First-Year Requirements and Updated Deadlines

• Businesses that had not begun collecting or not planned to collect data by the December 2024 Enforcement Notice may submit a letter to CARB stating on company letterhead that they do not plan to report. However, this could carry reputational and contractual risk.
• Limited assurance is not mandatory in 2026. However, it is in 2027, so early preparation is recommended. This reflects CARB’s intent to make the first year a transitional period focused on “provide what you have” rather than full verification.

The fiscal year that companies must report their Scope 1 and 2 emissions in year 1 depends on when their fiscal year ends.

• If a company’s fiscal year ends between January 1 and February 1, 2026, it will report emissions from the fiscal year ending in 2026.
• If a company’s fiscal year ends between February 2 and December 31, 2026, it will report emissions from the fiscal year ending in 2025.
• All entities will have at least six months after the end of their fiscal year to submit their report.

What Do These New Updates Really Mean for SB 253?
The first reporting year is intentionally structured as a transitional period where CARB is exercising enforcement discretion, focusing on good-faith participation rather than complete datasets.

The 2026 submission will form the baseline for all subsequent reporting. Any inconsistency or poor methodology introduced in the first year may create complications or require restatement later once assurance kicks in.

Even though CARB is allowing a “provide what you have” approach in 2026, companies should treat this year as the foundation for all future compliance obligations, which will be more stringent and enforceable. A light first year does not diminish the fact that SB 253 ultimately requires full Scope 1, 2, and 3 emissions reporting, with assurance requirements and more detailed reporting in 2027.

Stakeholders – including investors, customers, NGOs, and the media – may still scrutinize first-year submissions. A minimal or incomplete report might signal that the company is unprepared or not serious about climate disclosure.

A Special Note on Assurance
Although CARB confirmed limited assurance is technically not required for 2026, obtaining limited assurance is still the most advisable path for most companies. Companies that do not begin building audit ready data systems now may fall behind when CARB implements:

• Annual reporting deadlines
• Expanded data requirements
• Scope 3 quantification
• Formal data assurance (all of which are mandated by statute for later cycles)

No Delay on SB 253 Due to Litigation
Although the Ninth Circuit has temporarily paused SB 261, SB 253 is not affected. SB 253 continues to move forward on the current schedule.

What is CARB’s Voluntary Draft Checklist for SB 253?

While it is not mandatory to use the template in year 1, CARB views it as a valuable way to streamline reporting, especially for companies making their first report.

For a deeper dive on how the draft checklist is structured and what it really means for SB 253 reporters, check out our full article here.

Template Structure
The draft reporting template includes sections for:

• Organization Information
• Third-Party Verification
• Inventory Boundary
• Scope 1 and Scope 2 Disclosure
• Methodology
• De Minimis / Minor Sources
• California MRR Fields (if applicable)
• Emission Reductions (if applicable)

CARB notes that additional optional fields—such as base year emissions—are included to support comparability and transparency for future reporting years.

Organizational Boundary
The template allows companies to apply any of the GHG Protocol’s three boundary approaches – equity share, operational control, or financial control – provided that the method chosen is clearly disclosed and applied consistently. CARB is also seeking input on whether one boundary method should eventually be standardized for comparability.

Key New Template Features

• Intensity Metrics: Optional fields allow reporting of emissions intensity (e.g., per $ million revenue) to enable comparisons across industries.
• Industry Classification: Entities can classify emissions using NAICS 2-digit sector codes.
• Transparency in Methods: Companies must disclose the source and year of emission factors and global warming potential (GWP) values, and specify their calculation approach.
• Alignment with MRR: The template links to California’s Mandatory Reporting Regulation (MRR) facility IDs for data consistency.
• Emission Reduction Initiatives: Optional reporting fields capture renewable energy purchases, renewable gas contracts, or other verified emissions reduction activities.

Any Other Key Clarifications About California’s SB 219?

• A “Good-Faith Effort” = evidence that your company is:
  ✔ Following recognized methodologies (GHG Protocol, TCFD/ISSB).
  ✔ Obtaining third-party verification or assurance where required (currently in 2027).
  ✔ Paying program fees and submitting by deadlines.
  ✔ Correcting data promptly if inaccuracies are discovered.

• Consolidated Reporting for Subsidiaries 
  CARB confirms that a parent company may submit one consolidated report that covers all of its subsidiaries. Covered subsidiaries do not need to file separately if they are fully included in the parent’s disclosure, though each entity must still pay its separate fee liability.
• Who is Covered?
  CARB released a preliminary list of covered entities in September. However, they confirmed in that workshop that this was meant only to provide a rough estimate of covered entities, not to inform the listed companies that they are covered. Instead, companies should independently consider if they meet the doing business in California and revenue thresholds.
• What Does “Doing Business in California” Mean?
  CARB removed the property holdings and payroll criteria. The definition of “doing business in California” will be determined as any company that financially benefits from transactions in the state or is domiciled in the state.

A Brief History of California Climate Law Rulemaking

The California Legislature passed SB 253 and SB 261 in 2023, creating the most expansive climate disclosure laws in the country. SB 219, passed in August 2024, combined the two laws and gave CARB extra time to complete formal rulemaking. 

Need a refresher on SB 219? Check out our complete guide here ➔ 

Nearly a year after that, on May 29, 2025, CARB held its (long awaited) first public workshop, drawing over 3,000 participants. The architects of the rule, Senators Wiener and Stern, opened the session by reaffirming that deadlines remain solid. CARB shared initial proposals and confirmed that disclosures will align with GHG Protocol, TCFD or ISSB frameworks. The full video is over 3 hours long and includes additional presentations with a comparative analysis of greenhouse gas accounting and reporting mechanisms.  

Additional interim FAQ documents released since then:

• July 9, 2025 – PDF link.
• August 21, 2025 – PDF link. Another 3-hour virtual workshop accompanied this release.
• September 2, 2025 – PDF link. Specific Climate Risk Reporting Checklist for SB 261.
• October 10, 2025 – PDF link. Specific Scope 1 and Scope 2 Emissions Draft Reporting Template for SB 253.
• November 18, 2025 – PDF link. Workshop slides updating definitions, exemptions, and the first-year deadlines.

What Should Companies Do Next for California Compliance?

The latest FAQ provides a clear framework for how to prepare. Companies should: 

1. Confirm eligibility under SB 253 (over $1 billion in annual revenue) and SB 261 (over $500 million in annual revenue) – the lesser amount over the last two years.
2. Compile most recently available data (FY 2024 or 2023) for climate-risk reporting for SB 261.
3. Conduct a qualitative climate-risk assessment following TCFD or ISSB.
4. Plan for disclosure governance, including internal review and executive oversight.
5. Prepare to submit reports via the CARB public docket starting December 1, 2025.
6. Complete a GHG inventory using GHG Protocol on Scope 1 and 2 emissions (due August 10, 2025).
7. Engage a verifier for limited assurance on Scope 1 and 2 emissions (recommended but not required).

Final Thoughts on Meeting California Climate Disclosure Requirements in 2026

CARB’s latest releases, including the Climate-Related Financial Risk Report Checklist for SB 261 and the Draft Scope 1 and Scope 2 GHG Reporting Template for SB 253, provide important clarity on what companies need to disclose and how to prepare for year one reporting.

Although the Ninth Circuit has temporarily paused SB 261, the appeal is on an expedited timeline with a decision expected mid-2026. We advise companies to continue preparing since the obligation is likely to resume.

For SB 253, CARB has confirmed new first-year deadlines and flexibility for companies that did not begin GHG data collection in 2024. The revised August 10, 2026 due date, along with the allowance to submit existing data in year one, creates a slightly expanded window to finalize systems, improve data quality, and prepare for assurance beginning in 2027.

Companies that begin preparing now can develop credible, transparent reports that align with investor expectations and meet assurance requirements with confidence. Those that postpone action risk facing significant challenges as verification and data quality standards tighten.

At Good.Lab, we help companies benchmark readiness, align reporting with TCFD / ISSB frameworks, and ensure accurate GHG measurement and reporting to meet the requirements of SB 253 and SB 261. Now is the time to act.

Let’s build a disclosure strategy that works. ➔