The Green Stop – Update on California SB253 and SB261

Ashly Pleasant, director of sustainability services, provides an update on The Green Stop about new climate regulations in California — SB 253 and SB 261. Listen to gain insight into how these new regulations may impact your company doing business in California.

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Welcome to The Green Stop, your one-stop source for sustainability trends, regulatory developments and the evolving demands of corporate responsibility communication. I’m Ashly Pleasant, and today we’re covering SB 253 and SB 261 as California moves into the implementation phase of these climate disclosure laws. With reporting deadlines approaching, companies are being called to measure and communicate climate risk and greenhouse gas emissions with a level of rigor and transparency that has not been required before.

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We’ll cover the basics, who’s in scope, what’s required and what’s still being finalized. Then we’ll take it a step further and explore how to turn disclosure exercises into a value driver for your business.

So, let’s get into it. Why these laws matter.

SB 253 and 261 are raising expectations around how companies measure, manage and communicate climate-related risks. These laws create a mandatory standardized reporting regime that goes beyond voluntary ESG frameworks and applies to both public and private companies doing business in California. This is not just a California issue. Other states, including New York, Illinois and Washington, are already introducing similar legislation. And with the first reports due in 2026, the window to prepare is narrowing. What these laws make clear is that climate disclosure is no longer optional or reputational-driven. It’s now a matter of regulatory compliance, business continuity and long-term accountability.

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So, who’s in scope and what’s required? So, let’s start with SB 253. This law applies to U.S. companies with more than $1 billion in annual revenue that are considered to be doing business in California. It requires public disclosure of greenhouse gas emissions in accordance with the GHG protocol. So, the timeline looks like this. In 2026, disclosure of scope 1 and scope 2 emissions, and then in 2027, disclosure expands to include scope 3 emissions. Limited assurance will be required by 2027, which increases to reasonable assurance by 2030. All disclosures will be submitted to a digital reporting platform managed by CARB.

Now, SB 261 focuses on climate-related financial risks. It applies to companies with more than $500 million in annual revenue also doing business in California. This law requires companies to disclose climate-related financial risks and explain how those risks are being managed. Disclosures must align with the TCFD or similar framework and are also due in 2026. But before we get into what those disclosures actually include, we need to talk about the two biggest areas companies still have questions about: how doing business in California is defined and what counts as revenue under the law.

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What’s still unclear? Two key definitions. Let’s start with doing business in California. CARB has indicated it will likely rely on California’s Revenue and Taxation Code, Section 23101, which defines doing business as meeting any one of the following, more than $690,000 in sales into California, more than $69,000 in property or payroll in California or any single transaction in California conducted for financial gain. Even if you don’t have a physical presence in the state, a contract or sales relationship could bring your company into scope.

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Now let’s talk about revenue. SB 253 and SB 261 apply to companies with more than $1 billion and $500 million in annual revenue, respectively. But CARB is leaning towards the California Tax Code definition of gross receipts, not GAAP or IFRS. That means total inflows are counted, no deductions or intercompany eliminations are allowed. And global revenue may be included, not just California-sourced revenue. If you’re evaluating whether your company is in scope, you need to be looking at tax reporting revenue, not revenue defined by GAAP or IFRS, as reported on your P&L statement.

GHG Emissions Reporting, SB 253. Under SB 253, emissions must be reported in line with the Greenhouse Gas Protocol or a similar standard. That includes Scope 1, direct emissions from company-owned sources like vehicles or on-site fuel use. Scope 2 is indirect emissions from purchased electricity, steam or heating and cooling. Scope 3 is all other indirect emissions, including supplier operations, product transport and business travel. This also includes end-of-life treatment of your products. Scope 3 is usually the largest source of emissions and the most difficult to measure. But it’s also the area that can uncover new insights about risk, performance and supply chain strategy. Disclosures will be public, updated annually and require independent assurance. Limited assurance is due by 2027, and reasonable assurance is required by 2030. If your company hasn’t established a process, start with a baseline inventory for Scope 1 and 2 and begin building the infrastructure to measure and verify Scope 30.

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Climate Risk Disclosures, SB 261. SB 261 focuses on climate-related financial risk and follows the TCFD framework. Disclosures must cover four categories, starting with governance. Governance is who is accountable for climate oversight. Strategy, that covers how climate risk may impact your business across the short, medium and long-term horizons. That includes physical risks like extreme weather and flooding, as well as transition risks like policy shifts, reputational pressure or regulatory costs. Then there’s risk management. That defines how your company identifies, assesses and responds to risk. Finally, metrics and targets. The data you’re using to monitor performance, including GHG emissions and any climate-related goals or targets. These disclosures connect climate exposure to operational strategy and financial planning. They also help companies recognize interdependencies. For example, how Scope 3 emissions might also indicate exposure to transition risk.

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As of mid-2025, the U.S. has already experienced over a dozen billion-dollar climate disasters. This is no longer about future risk. It’s about managing what’s already here.

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Turning compliance into value.

Meeting the requirements of SB 253 and SB 261 takes time, coordination and investment. But for companies willing to treat this as more than a reporting exercise, it opens the door to measurable business benefits. First, it forces internal alignment. Reporting under these laws requires collaboration across sustainability, legal, finance, operations and IT. That level of coordination, when done right, helps break silos and improves how risk, data and long-term strategy are managed across the organization.

Second, the process uncovers insights. Whether it’s calculating Scope 3 emissions or assessing climate-related financial exposure, companies often discover operational inefficiencies, supply chain vulnerabilities or areas of unnecessary cost. What starts as compliance becomes a foundation for performance improvement.

Third, it strengthens your positioning. Investors, lenders, clients and regulators are increasingly using disclosure data to evaluate companies, not just on environmental performance, but on preparedness, resilience and transparency. Companies that can demonstrate control over their emissions and climate risks are better positioned to win contracts, secure capital, and build trust.

And finally, early action builds capacity. These laws are California-led, but they are not isolated. Other states are moving in the same direction. New York, Illinois and Washington have proposed similar legislation. Companies that invest in reporting infrastructure now will be ready, not reactive, when the next mandate arrives. The takeaway here isn’t just that these laws are manageable, it’s that they’re useful. With the right mindset, compliance can become a tool for better data, better decisions and better business.

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California’s climate laws are raising the bar, and with the first deadlines just around the corner, the time to act is now. Whether you’re already in scope or just preparing for what’s coming, this is the moment to build internal capacity, develop consistent data systems and position your company to lead in a new era of climate accountability. Thanks for listening to The Green Stop. If this episode helped clarify your next steps, share it with a colleague or bring it into your next team discussion. And if you’re building your compliance strategy, we’re here to support the work ahead. Until next time.