Takeaways from CARB’s Second Workshop on California’s Corporate Climate Disclosure Rules

On August 21, 2025, The California Air Resources Board (CARB) held its second virtual workshop to “support the development of California’s Corporate Greenhouse Gas Reporting Program” reflected in the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) (each bill as amended by Senate Bill 219).

SB 253 requires U.S. companies with total annual revenues exceeding $1 billion that are doing business in California to publicly report their greenhouse gas emissions, beginning in 2026 with respect to Scopes 1 and 2 emissions for the prior fiscal year. SB 261 requires U.S. companies with total annual revenues exceeding $500 million that are doing business in California to biennially report on climate-related financial risk, with the first report due on or before January 1, 2026.

The 3 ½-hour workshop was widely attended (even more so than CARB’s initial virtual workshop held last May, according to CARB). During the workshop, CARB indicated that it has received thousands of comment letters and that it is continuing to seek input from the public on how to shape future regulatory development of SB 253 and 261. Following its presentation, CARB took questions from workshop attendees for nearly 2 ½ hours. The questions covered numerous topics and lingering uncertainties, including the definitions of “total annual revenues” and “doing business,” the parent/subsidiary relationship and associated reporting requirements, the timeline for SB 253 reporting and assurances, fee requirements applicable in group reporting situations, the scope of SB 253 emissions reporting, the scope of SB 261 reporting, and assurance requirements.

Key Takeaways

• CARB is still contemplating the definitions of “total annual revenues” and “doing business in California."
• CARB is proposing a new definition for “total annual revenues” after receiving numerous comments that the “gross receipts” definition set forth in California Revenue and Taxation Code § 25120(f)(2) would be overly broad and cumbersome. CARB is now proposing that “total annual revenue” be defined as “the total global amount of money or sales a company receives from its business activities, such as selling products or providing services.” The proposed definition does not allow for the deduction of operating costs or business expenses. CARB is seeking input on the new proposed definition.
• CARB described two options that it is currently considering for the definition of “doing business in California” – (1) §§ 23101(a) and 23101(b) of the California Revenue and Tax Code (although CARB acknowledged that it has received numerous comments that these provisions are too broad) or (2) the use of an existing database, such as the California Secretary of State’s database, which lists any entity with a designated agent for service of process in California. CARB also suggested the possibility of using California Franchise Tax Board (FTB) data but indicated that there may be limitations on the FTB’s ability to share data with CARB. Alternatively, CARB indicated that it could propose its own definition. CARB is seeking input on these various options.
• To assist companies in making their determination, CARB stated that it will initiate a process over the next couple of weeks to validate a preliminary list of covered entities based on its analysis of the California Secretary of State’s website and Dunn & Bradstreet data. According to CARB’s preliminary analysis of projected covered entities CARB is estimating that 4,160 entities will be subject to SB 261 and 2,596 entities will be subject to SB 253.
• CARB is currently proposing the following exemptions from SB 253 and SB 261: (1) nonprofits, (2) a company whose only business in California is the presence of teleworking employees, and (3) a California independent system operator (CAISO) or a business whose only activity within the State consists of wholesale electricity transactions that occur in interstate commerce. CARB is seeking public feedback for other possible exemptions.
• Based on public feedback around parent/subsidiary reporting, CARB is now proposing to identify subsidiaries through the use of commercial databases, cross-referenced with the secretary of state database or another database.
• CARB is recommending a “flat” fee per regulated entity calculated as annual program cost divided by the total number of covered entities. Entities that are subject to both SB 253 and SB 261 would pay two fees. Parent companies reporting for multiple subsidiaries would have to pay multiple fees for each in-scope subsidiary. Fees will be annual, including for SB 261, even though SB 261 is a biennial report. Based on its current calculations and estimations, the annual fee associated with SB 253 would be $3,106 and the fee associated with SB 261 would be $1,403. Fees will be adjusted annually for inflation.

SB 253 Reporting

• CARB is proposing a June 30, 2026, implementation deadline for SB 253 Scope 1 and 2 reporting (but will continue to seek public feedback on this). A number of workshop attendees expressed concerns with this date and the ability to provide limited assurance by this date. Some participants recommended staggered reporting and/or staggered assurance. CARB is seeking feedback on the feasibility of its proposed deadline and any data availability and assurance issues.
• In response to questions, CARB noted that the text of SB 253 requires “prior fiscal year” reporting. So, fiscal year (not calendar year) information will be required for the first SB 253 report due in 2026. In response to a question, CARB indicated that the determination for which fiscal year should be covered in the first SB 253 report can be made as of January 1, 2026.
• CARB will post a draft reporting template for Scopes 1 and 2 reporting by the end of September 2025 for public feedback. The draft will include an option to include other actions that reduce greenhouse gases, such as investments in renewable electricity and gas, among others.

SB 261 Reporting

• In response to questions, CARB noted that the text of SB 261 is silent on whether the report should cover fiscal year or calendar year information. So, according to CARB, companies may use calendar year or fiscal year information for their first report and should use the most recent data available. CARB directed attendees to the FAQs it released in July for more information on this topic. As a reminder, the FAQs indicate that initial climate-related financial risk reports submitted by January 1, 2026, may be based on the company’s best available information, including information from fiscal years 2023/2024 or 2024/2025, depending on the organization.
• CARB will provide guidance on the minimum requirements for compliance with SB 261. During the workshop, CARB provided guidance on the minimum requirements for the SB 261 report, which largely track the disclosure requirements of the Task Force on Climate-Related Financial Disclosures framework and its four reporting principles (governance, strategy, risk management and metrics and targets), except as noted below.
• Each SB 261 report should contain a statement on (1) which reporting framework is being applied, (2) which recommendations and disclosures have been complied with and which have not, and (3) a short explanation of the reasons why recommendations/disclosures have not been included as well as a discussion of any plans for future disclosures.
• CARB clarified that Scopes 1 and 2 emissions data will not be required for the first SB 261 report (although an entity also reporting under SB 253 will still be required to provide this information pursuant to SB 253). However, if an entity is already reporting Scope 1 and 2 emissions, and these emissions are material to the entity, the entity should include them in its SB 261 report.
• CARB also clarified that quantitative scenario analysis will not be required for the first SB 261 report. However, if an entity is already using quantitative scenario analysis, the entity should include this information in its report.
• CARB will accept good faith efforts to comply with SB 261 (similar to its position on SB 253 previously announced).

Other Topics

CARB also discussed, at a high level, limited assurance requirements and potential audit standards for assurance providers. CARB noted that it intends to leverage existing frameworks for accreditation of assurance providers. The assurance standard will be addressed in CARB’s implementing regulations. CARB will continue to seek public feedback around this topic.

CARB provided the following proposed timeline for next steps:

• August 21 through September 11: Public comment period for feedback on workshop concepts
• October 14: Notice of proposed rulemaking
• October 17 through November 30: 45-day APA comment period begins
• December 11 and 12: Board consideration of proposed rulemaking at a public board hearing

What's Next

While the workshop did provide more clarity on certain topics, a number of basic questions remain, including who exactly will be in scope of California’s new climate disclosure regulations. Notwithstanding this uncertainty, companies who believe they may be in scope of the regulations should continue to prepare for reporting in 2026. Companies should also consider weighing in on the rulemaking process.

Companies should also continue to monitor the litigation around these laws, however. As we previously reported, on August 13, 2025, the U.S. District Court for the Central District of California issued an order denying plaintiffs’ motion for a preliminary injunction to enjoin the enforcement of SB 253 and SB 261. On August 20, plaintiffs in the case filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit from this order as well as a motion for injunction pending appeal. Defendants must file their opposition to plaintiff’s motion on or before August 29, 2025, and the hearing on the motion will be held September 8, 2025, according to the order.