compliance 12 Oct 2023
Decoding California’s Climate Action: A Deep Dive into SB 253 & SB 261
5 Min Reading Time
California climate disclosure law timelines and implementation are suddenly moving quickly after two years of amendments, adoption delays, and lawsuits, changes. As of November 18th, an injunction halts enforcement of the law requiring companies to report on climate-related financial risks by January 1st, 2026 (SB 261). Meanwhile, according to a California Air Resources Board (CARB) workshop held on November 18th the law that mandates greenhouse gas emissions reporting (SB 253) will proceed with a proposed August 10th, 2026 deadline. CARB has not issued a formal position on the injunction beyond noting that they are evaluating its implications and will update guidance accordingly.
While these changes may be viewed as part of a broader trend of regulatory pullback, they do not diminish the strategic imperative for sustainability actions. The business case remains clear: climate risk management and emissions disclosures are essential for resilience, competitiveness, and long-term business value.
Periods of regulatory pullback create a unique opportunity for leadership. When others slow down, proactive companies stand out. Maintaining momentum signals confidence, stability, and foresight. These are all qualities that stakeholders value most in times of change. Rather than asking, “what if the rules change?” the better questions are, “how can we lead regardless of the rules?” and “what value do we gain from taking action on sustainability?”
The answer lies in embedding sustainability into core strategy. Doing so positions your organization as resilient, future-ready, and competitive in a volatile market.
Under the Climate-Related Financial Risk Act (SB 261), companies must publish biennial reports on climate-related financial risks and strategies to mitigate them. The goal is to help businesses and stakeholders understand exposure to systemic climate risks. On November 18th, 2025, the Ninth Circuit Court of Appeals issued an injunction suspending enforcement of SB 261.
For the time being, this means the January 1st, 2026 deadline is voluntary, and companies are not required to comply with SB 261 unless and until the injunction is lifted, or until further clarification is provided by either CARB or the Ninth Circuit Court of Appeals. The hearing on the appeal is scheduled for January 9th, although an official ruling may not follow for several months. During their November 18th workshop, CARB acknowledged the injunction and said that they are reviewing its impact.
SB 253, the Climate Corporate Data Accountability Act, requires large companies doing business in California to disclose their Scope 1, 2, and 3 greenhouse gas (GHG) emissions. This mandate is widely regarded as a major step toward comprehensive emissions transparency. Enforcement of SB 253 was similarly included in the appeal; however, the Ninth Circuit declined to include SB 253 in the injunction, so it remains on track for phased implementation in 2026 as of November 18th 2025.
During the November 18th workshop, CARB clarified SB 253 requirements and provided updated guidance. CARB proposed a reporting deadline of August 10th, 2026 for covered entities to submit Scope 1 and Scope 2 GHG emissions for the first reporting year, replacing the formerly proposed June 30th, 2026 deadline.
To ease implementation, entities that were not collecting data or were not planning to collect data, at the time the Enforcement Notice was issued (December 5th, 2024), are not expected to submit Scope 1 and 2 reporting data in 2026. CARB also clarified how companies with fiscal year reporting cycles can determine their applicable reporting year for first year of disclosure. Importantly, covered entities are no longer required to obtain limited assurance for Scope 1 and 2 emissions for the first year of disclosure. However, after the first year of disclosure, companies must obtain limited assurance for these emissions.
Scope 3 reporting requirements remain unchanged: under SB 253, companies are still required to report Scope 3 emissions starting in 2027 (related to FY 2026 data), with limited assurance for Scope 3 emissions mandatory for 2030 reporting (related to FY 2029 data).
In line with SB 261’s original reporting deadline of January 1st, organizations nationwide are deep in the process of developing comprehensive climate risk programs and disclosures. For many of these organizations, the question now is whether these efforts were wasted or whether it makes sense to continue.
Despite what the injunction may suggest, the answer is clear: climate risk work remains of high interest to stakeholders. Regulatory timelines may shift, but other underlying drivers of sustainability efforts, such as market expectations, investor pressure, and operational resilience, are not going away.
The SB 261 injunction does not eliminate the likelihood of future climate risk disclosure requirements, especially for companies subject to the EU’s Corporate Sustainability Reporting Directive (CSRD) or operating in jurisdictions committed to adopting or aligning with the International Sustainability Standards Board’s climate-related reporting framework (IFRS S2). Investor and stakeholder expectations for transparency on climate-related risks remain strong, given their potentially material financial implications for organizations. Companies that stop now risk losing internal momentum and undermining the strategic value of work already completed.
The SB 253 newly proposed reporting deadline offers additional time to report first-year Scope 1 and 2 emissions, but it should not be viewed as a reason to delay compiling data. Although CARB has made provisions for the first year of reporting under SB 253, this initial flexibility should not lead to complacency. Accurate emissions calculations, across all emissions scopes require significant internal alignment, data collection capabilities, and time.
Importantly, while limited assurance for Scopes 1 and 2 is not required in 2026, it is still expected for 2027 reporting until reasonable assurance is required in 2030. This phased approach underscores the need for companies to strengthen governance, validate methodologies, and embed emissions tracking into core business processes now.
Organizations are encouraged to continue their emissions reporting efforts across Scopes 1, 2, and 3 during this window to ensure readiness for more rigorous assurance requirements in future cycles.
For businesses that were mid-way through or nearing completion of climate risk assessments and emissions inventories, the smartest move is to build on that progress. These actions are not just compliance exercises: they are critical tools for future-proofing and building resilience in your business. Even if disclosure requirements shift, businesses can continue to leverage the insights gained from this work to shape smarter, more efficient, and more stable operations.
Climate scenario analyses strengthen enterprise risk management, capital allocation, and operational strategy. They identify vulnerabilities and opportunities, enabling companies to adapt to both physical risks (e.g., extreme weather) and mitigate transition risks (e.g., carbon pricing or evolving regulations). Emissions inventories uncover efficiency gains and cost savings across operations and value chains, while informing energy procurement and decarbonization strategies.
Insights into climate risk sharpens decision-making under uncertainty, equipping leaders to make informed choices about investments, supply chains, and growth strategies. Transparent reporting builds investor confidence, improving access to capital and valuation. Proactive planning mitigates exposure to disruptions, reduces costs, and safeguards business continuity. It also unlocks efficiency gains through energy savings and resource optimization.
Beyond operational advantages, companies that lead on sustainability and resilience differentiate themselves in the marketplace, earning trust from customers, investors, and talent. Resilience is not just about risk avoidance; it’s about positioning long-term success in a volatile world.
California’s climate bills may be in flux, but the business case for sustainability is stronger than ever. Regulatory uncertainty is not a reason to stop – it is a reason to lead. Companies that continue their sustainability journey will avoid bottlenecks, strengthen internal alignment, and unlock long-term value.
Ready to turn this moment into an opportunity? Connect with SE Advisory Services to build resilience, sharpen strategy, and lead with confidence in a changing world.
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