CARB Provides Updates on SB 261 and SB 254

Quick accuracy note: the California Air Resources Board’s actual climate-disclosure updates concern SB 253 and SB 261. The title above mirrors the requested headline, but the article below reflects the real statutes CARB is implementing. Consider this the legal version of fixing a typo before it becomes a board-meeting legend.

California’s climate-disclosure rules are no longer some far-off policy thundercloud sitting on the horizon. They are here, they are getting sharper, and CARB has spent the past year moving from broad legislative language to real-world implementation details. For companies doing business in California, especially large multistate businesses, the latest CARB updates matter because they answer the practical questions that keep legal, finance, sustainability, and compliance teams awake at 2 a.m.: Who is in scope? What has to be filed first? When is it due? What gets a grace period? And what happens when litigation barges into the room and flips a chair?

At the center of this story are two laws. SB 253, the Climate Corporate Data Accountability Act, is California’s greenhouse gas disclosure law. It targets U.S.-based companies doing business in California with annual revenue above $1 billion and requires reporting on greenhouse gas emissions. SB 261, the Climate-Related Financial Risk Act, applies to U.S.-based companies doing business in California with annual revenue above $500 million and requires a biennial report on climate-related financial risk and how the company is addressing it.

Those two statutes were later refined by SB 219, which gave CARB more room on timing and administration, especially around rulemaking deadlines and the schedule for Scope 3 reporting. That amendment may not sound glamorous, but in compliance land, timing changes are practically a fireworks show.

Why CARB’s latest updates are such a big deal

The original laws were ambitious, but they left major implementation questions hanging in the air. CARB spent 2025 gathering comments, publishing FAQs, releasing workshop materials, posting a preliminary list of potentially covered entities, and circulating draft reporting tools. Then, in early 2026, the agency approved an initial regulation that finally turned several fuzzy areas into something more concrete.

The biggest headline is simple: CARB has moved from “we’re working on it” to “here is the first-year framework.” That matters because companies can now stop treating California climate disclosure as a future strategic project and start treating it like a real compliance calendar item.

Still, CARB’s update is not a full finished manual for every future reporting year. It is more like the first major chapter in an instruction book that is still being written. The February 2026 action addressed core items such as applicability, fees, definitions, exemptions, and the first-year reporting deadline for SB 253. CARB also made clear that more rulemaking is coming, especially for Scope 3 emissions, assurance, and reporting mechanics for 2027 and beyond.

What SB 253 and SB 261 require, in plain English

SB 253: emissions disclosure

SB 253 is the emissions side of the package. If a company is in scope, it must publicly disclose its greenhouse gas emissions according to the Greenhouse Gas Protocol framework. For the first reporting cycle, the focus is on Scope 1 and Scope 2 emissions. Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from purchased electricity, steam, heat, or cooling. Scope 3, the famously complicated category involving upstream and downstream value-chain emissions, is slated to begin later on a schedule set by CARB starting in 2027.

SB 261: climate-related financial risk disclosure

SB 261 is not about measuring emissions ton-by-ton. It is about explaining how climate change creates financial risk for a business. That includes physical risks such as wildfire, flooding, heat, or drought, and transition risks such as policy changes, market shifts, technology changes, insurance pressure, or supply-chain disruption. Covered companies must publish a climate-related financial risk report and describe the measures they have adopted to reduce and adapt to those risks.

In other words, SB 253 asks, “What are your emissions?” while SB 261 asks, “How could climate change hit your business in the wallet, the supply chain, or the strategy deck?” Many large companies will eventually need to answer both.

The most important CARB updates businesses should understand

1. CARB approved initial regulations in February 2026

That February 2026 action was a turning point. CARB approved an initial regulation package that covered several foundational pieces: definitions of key terms, how fees will work, some exemptions, and the first-year SB 253 deadline. It did not answer every remaining question, but it did answer enough to make procrastination a much riskier hobby.

2. The first SB 253 reporting deadline is August 10, 2026

This is the deadline that deserves a giant circle on the calendar. For the first year, CARB set August 10, 2026 as the reporting deadline for Scope 1 and Scope 2 emissions under SB 253. CARB also tied the applicable reporting year to the company’s fiscal year end. If the fiscal year ends on or before February 1, 2026, the company reports the fiscal year ending in 2026. If the fiscal year ends after February 1, 2026, the company generally reports the fiscal year ending in 2025.

That structure is important because it gives companies at least six months after the end of the relevant fiscal year to prepare their first filing. CARB clearly heard stakeholder concerns that businesses needed more workable timing, and the August 10 date reflects that practical shift.

3. First-year SB 253 reporting is limited to Scope 1 and Scope 2

For now, Scope 3 is not part of the first filing. That is huge. Scope 3 is often the most burdensome category because it reaches into the supply chain, product use, business travel, purchased goods, and other data sets that are not always neat, clean, or easily available. CARB’s updates confirm that first-year reporting is about getting Scope 1 and Scope 2 in place, while broader rulemaking for 2027 and beyond is still under development.

Think of it as CARB telling companies: “Walk before you sprint.” A surprising number of compliance programs would improve if regulators used that sentence more often.

4. CARB is using a practical, good-faith approach for the first year

CARB’s guidance has repeatedly emphasized first-year flexibility. The agency said it will exercise enforcement discretion for good-faith first-year submissions under SB 253. It has also said that companies not collecting Scope 1 and Scope 2 data, and not planning to collect it as of the December 2024 enforcement notice, are not expected to submit emissions data for that first cycle. Instead, those entities may submit a statement on company letterhead explaining that position.

That does not mean “do nothing and hope for the best.” It means CARB recognizes the difference between a company building a reasonable compliance process and a company pretending its inbox lost the law.

5. CARB clarified who is in scope

One of the hardest questions has been whether a company is really “doing business in California” for purposes of these laws. CARB’s updates align that determination with California tax concepts. The agency also clarified how revenue will be measured and confirmed that parent companies may submit consolidated reports on behalf of in-scope subsidiaries, although fees are still assessed at the entity level.

This matters because many business groups were not confused about climate reporting itself; they were confused about whether they were on the hook in the first place. CARB’s definitions are meant to reduce that guessing game.

6. Several exemptions are now clearer

CARB’s rulemaking materials and workshops also clarified proposed exemptions and limited-nexus situations. The list includes nonprofit or charitable organizations that are tax-exempt, government entities, certain insurance-related entities, entities whose only California activity is wholesale electricity transactions, and entities whose only California connection is employee compensation or payroll expenses, including teleworking employees.

That last category is especially notable because it addresses a modern compliance headache: a company with no meaningful California operating footprint except a handful of remote workers. CARB appears to be trying to avoid dragging companies into full climate-disclosure obligations based on a very thin California thread.

7. SB 261 is in a different place because of litigation

Here is where the plot twists. SB 261’s statutory reporting deadline was January 1, 2026, but CARB later issued an enforcement advisory explaining that the Ninth Circuit had granted an injunction against enforcement of SB 261 during the appeal. In response, CARB said it would not enforce the January 1, 2026 deadline against covered entities while that injunction remains in place.

That means SB 261 has not vanished, but it has hit a legal pause button. Companies should not confuse “paused enforcement” with “gone forever.” CARB has left the door open for voluntary posting and future instructions, and the broader expectation that climate-risk governance belongs in the enterprise risk conversation is not exactly shrinking.

What smart companies are doing now

The companies treating CARB’s updates seriously are not waiting for every last detail to be finalized. They are building a cross-functional process now. That usually means legal reviews the scope question, tax helps confirm California nexus and revenue treatment, sustainability teams map emissions data, finance evaluates controls, procurement starts looking at supplier information pathways, and communications prepares for the reality that these reports are not just technical filings. They are public documents.

A smart first step is to split the work into two lanes.

Lane one: determine whether the company is in scope under SB 253, SB 261, or both. That includes revenue thresholds, U.S.-based entity status, California nexus, parent-subsidiary reporting structure, and any applicable exemptions.

Lane two: determine data readiness. For SB 253, that means Scope 1 and Scope 2 collection, emissions methodology, documentation, and internal ownership. For SB 261, it means climate-risk governance, risk identification, mitigation measures, and whether an existing TCFD-style or similar report can be adapted when enforcement resumes.

Another smart move is to stop separating climate disclosure from mainstream governance. These laws are not just sustainability exercises. They touch finance, legal exposure, operational resilience, investor relations, insurance, and supply-chain planning. A company that treats them as a side project run by one heroic sustainability manager is writing itself a very stressful future.

Examples of how CARB’s updates change the picture

Example 1: A national retailer

A retailer with more than $1 billion in annual revenue and stores in California is squarely focused on SB 253. CARB’s August 10, 2026 deadline tells the company exactly when the first Scope 1 and Scope 2 disclosure must be ready. The company may postpone full Scope 3 panic for a moment, but not forever.

Example 2: A manufacturer with California sales but no headquarters there

If the manufacturer crosses the revenue threshold and meets CARB’s “doing business in California” test through California sales, it may still be covered even if the corporate headquarters are elsewhere. CARB’s definition work is especially important for companies like this that once thought California climate law was only a California-headquartered problem.

Example 3: A company with remote employees in California only

If the company’s only California connection is payroll or teleworking employees, CARB’s proposed exemption framework may keep it out of scope. That is a meaningful clarification for out-of-state businesses that feared remote work alone had accidentally turned them into a California climate-reporting company overnight.

Example 4: A large company preparing for SB 261

Even with the injunction, a large company that already has TCFD-aligned disclosures might keep refining its climate-risk reporting. Why? Because the core work still has value. Physical and transition risks did not disappear just because a court hit pause, and companies that already understand their risk exposure will be in a better place if and when enforcement restarts.

What businesses should watch next

The next big phase is future rulemaking. CARB has already signaled that additional work is coming for reporting requirements beyond 2026, Scope 3 treatment, assurance expectations, and economic analysis. So while the first-year rules answered several urgent questions, they also opened the door to the next round of debates.

That means companies should keep watching three things: CARB rulemaking, litigation, and internal readiness. Miss any one of those, and the compliance picture gets blurry fast. Watch all three, and the path becomes much more manageable.

Experiences companies are having as these updates land

One of the most interesting parts of the CARB story is not the statute itself, but the experience inside companies trying to respond to it. In many organizations, the first reaction to SB 253 and SB 261 was mild confusion. The legal team read the statute. The sustainability team read the statute. Finance read a summary. Then everyone stared at each other as if the bill might explain itself if left alone on a conference table for 20 more minutes.

Then the real work started. At some companies, the first practical breakthrough came when someone asked a deceptively simple question: Who actually owns this? That question sounds basic, but it reveals the whole challenge. Emissions data may live in operations, facilities, procurement, and travel systems. Climate-risk analysis may live in enterprise risk management, insurance, treasury, and strategy. Public disclosure risk lives with legal and investor relations. CARB’s updates have forced companies to stop treating those functions like neighboring countries with difficult visa rules.

Another common experience is discovering that data exists, but not in one place, and definitely not in one clean format. Utility invoices may be easy enough for Scope 2. Fuel usage might be available for Scope 1. But once teams begin documenting methodologies, fiscal-year boundaries, internal controls, and audit trails, they realize the problem is not only gathering information. It is gathering information in a way that another person could understand six months later without needing a dramatic explanatory monologue.

Many companies are also learning that climate-risk reporting under SB 261 is not just a compliance memo with the word “climate” sprinkled on top. The exercise pushes management to ask sharper questions about flood exposure, wildfire risk, water stress, supplier concentration, insurance availability, capital planning, and customer demand shifts. In practice, that can make the reporting process surprisingly useful. Sometimes the report starts as a legal obligation and ends as a strategy mirror.

There is also a human side to all of this. Sustainability leads often feel pressure because they are expected to know the answer before the rules are fully settled. General counsel wants certainty. Finance wants consistency. Executives want a short slide deck with no footnotes and no surprises. CARB, meanwhile, is still developing future requirements. So companies are learning to operate in a space where preparation has to happen before perfect clarity arrives. That can be frustrating, but it is also normal for a first-generation reporting regime.

Perhaps the most valuable experience so far is this: the businesses that are making the smoothest progress are not necessarily the ones with the fanciest ESG slogans. They are the ones building repeatable processes, documenting assumptions, assigning clear owners, and treating California climate disclosure like a serious enterprise obligation instead of a fashionable side quest. CARB’s updates reward that kind of discipline. And in compliance, boring systems often beat brilliant improvisation every single time.

Conclusion

CARB’s updates have changed the conversation from theory to execution. The agency has now drawn key lines around who may be covered, what the first SB 253 filing looks like, when that first filing is due, and how it is approaching flexibility during the first reporting year. At the same time, the injunction affecting SB 261 reminds everyone that climate disclosure in California is still unfolding in both regulatory and legal arenas.

The bottom line is straightforward: large companies doing business in California should treat these laws as active, material, and operationally relevant. SB 253 is moving ahead with a real 2026 deadline. SB 261 is paused on enforcement, not erased from existence. And CARB has made it abundantly clear that more guidance is coming. The smartest response is not panic. It is preparation, coordination, and a willingness to replace climate-disclosure guesswork with a process that can survive contact with regulators, lawyers, investors, and reality.