Complete Guide to SB 253 & SB 261 Compliance: Using CARB's Preliminary List for 2026 Reporting

Introduction: Navigating California's Climate Disclosure Mandates

California has positioned itself at the forefront of U.S. climate regulation with the passage of SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act). These laws represent significant new ESG reporting requirements for companies operating in the state. The recent release of the California Air Resources Board (CARB) preliminary list of covered companies marks a critical milestone, providing clarity on which organizations must prepare for 2026 reporting deadlines. This guide provides a step-by-step approach to compliance, from understanding the mandates to implementing robust data collection and reporting processes.

This content is for informational purposes only and does not constitute legal advice.

Overview of SB 253 and SB 261 Mandates

SB 253: Climate Corporate Data Accountability Act

SB 253 requires covered companies to disclose their greenhouse gas (GHG) emissions across three scopes:

• Scope 1: Direct emissions from owned or controlled sources
• Scope 2: Indirect emissions from purchased electricity, steam, heating, and cooling
• Scope 3: All other indirect emissions in the value chain

The law applies to companies with over $1 billion in annual revenue that do business in California. Reporting deadlines are phased, with initial reports due in 2026 for large entities. The regulation includes requirements for third-party assurance of emissions data, with increasing levels of assurance required over time.

SB 261: Climate-Related Financial Risk Act

SB 261 mandates biennial climate-related financial risk reports beginning in 2026 for companies with over $500 million in annual revenue operating in California. These reports must describe:

• Climate-related risks to the company
• Measures adopted to mitigate and adapt to these risks
• Governance processes for identifying, assessing, and managing climate-related financial risks

Both laws include exemptions for certain insurance companies and entities already reporting under equivalent frameworks, but organizations should verify their specific eligibility with CARB.

How to Check If Your Company Is on the CARB Preliminary List

The CARB preliminary list identifies companies subject to SB 253 and SB 261 based on revenue thresholds and California business operations. To determine your company's status:

1. Review the official CARB list: Access the published preliminary list through CARB's official channels. The list is based on publicly available revenue data and business registration information.
2. Verify revenue thresholds: Confirm whether your company meets the $1 billion threshold for SB 253 or the $500 million threshold for SB 261 based on global annual revenue.
3. Assess California nexus: Determine if your company "does business in California" as defined by the statutes, which typically includes having physical operations, employees, or significant sales in the state.
4. Check for exemptions: Review whether your company qualifies for any exemptions, such as being an insurance company subject to specific regulatory requirements or already reporting under equivalent frameworks.

Companies not on the preliminary list but meeting the revenue thresholds should still prepare for potential inclusion, as the list may be updated. Organizations can use AIGovHub's regulatory tracking features to monitor updates to CARB's list and related guidance.

Step-by-Step Implementation: From Carbon Accounting to Reporting

Step 1: Initial Assessment and Gap Analysis

Begin by conducting a comprehensive assessment of your current ESG reporting capabilities:

• Map existing data sources: Identify where emissions data currently resides across your organization
• Conduct a gap analysis: Compare current practices against SB 253 and SB 261 requirements
• Establish a governance structure: Designate a compliance team with clear roles and responsibilities
• Engage stakeholders: Involve finance, operations, sustainability, and legal teams early in the process

Step 2: Data Collection and Emissions Calculation

Implement robust systems for collecting and calculating GHG emissions:

• Scope 1 and 2 data: Collect fuel consumption, electricity usage, and other direct energy data from utility bills, fuel purchases, and facility records
• Scope 3 data: This is often the most challenging category. Focus initially on significant Scope 3 categories like purchased goods and services, business travel, and employee commuting
• Select calculation methodologies: Use established protocols like the GHG Protocol Corporate Standard
• Implement data management systems: Consider specialized carbon accounting software to streamline data collection and calculation

Step 3: Verification and Assurance Preparation

SB 253 requires third-party assurance of emissions data. Prepare for this requirement by:

• Understanding assurance levels: Initial reports require limited assurance, with requirements potentially increasing over time
• Selecting qualified assurance providers: Engage firms with experience in GHG verification
• Preparing documentation: Maintain detailed records of data sources, calculations, and methodologies
• Conducting internal reviews: Perform quality checks before submitting data for external verification

Step 4: Report Preparation and Disclosure

Develop comprehensive reports that meet regulatory requirements:

• SB 253 emissions disclosure: Prepare annual reports covering Scope 1, 2, and 3 emissions with clear methodology descriptions
• SB 261 risk reporting: Create biennial reports describing climate-related financial risks and mitigation strategies
• Align with broader frameworks: Consider how these disclosures relate to other reporting requirements like the CSRD (Corporate Sustainability Reporting Directive) for EU operations or potential SEC climate rules
• Ensure transparency: Provide clear, comparable data that enables stakeholders to assess your climate performance

Step 5: Governance and Continuous Improvement

Establish ongoing processes for maintaining compliance:

• Implement monitoring systems: Track emissions data regularly, not just for annual reporting
• Update risk assessments: Regularly review and update climate-related financial risk assessments
• Engage the board: Ensure climate governance is integrated at the highest levels of the organization
• Plan for evolution: Anticipate that reporting requirements may become more stringent over time

Tools and Platforms for Streamlining Compliance

Several specialized platforms can help organizations manage the complex data requirements of SB 253 and SB 261:

Carbon Accounting and Emissions Management

• Persefoni: Provides carbon footprint insights and management capabilities specifically designed for regulatory compliance. Contact vendor for pricing.
• Other ESG platforms: Solutions like Workiva or Diligent ESG offer broader ESG management capabilities that can be configured for climate disclosure requirements. Pricing typically starts from enterprise-level subscriptions.

Data Management and Reporting

• ESG reporting software: Platforms that specialize in collecting, calculating, and reporting ESG data across multiple frameworks
• ERP integrations: Many organizations extend their existing enterprise resource planning systems to capture emissions-related data
• Supply chain engagement tools: Solutions for collecting Scope 3 data from suppliers and partners

Some links in this article are affiliate links. See our disclosure policy.

Common Pitfalls and How to Avoid Them

Pitfall 1: Underestimating Scope 3 Data Challenges

The Problem: Scope 3 emissions often represent the largest portion of a company's carbon footprint but are the most difficult to measure accurately.

Solution: Start early with supplier engagement, use industry-average data where primary data is unavailable initially, and implement progressive improvement plans to enhance data quality over time.

Pitfall 2: Inadequate Documentation for Verification

The Problem: Insufficient documentation can delay or complicate the third-party assurance process required by SB 253.

Solution: Implement robust documentation practices from the beginning, including clear records of data sources, calculation methodologies, and assumptions used.

Pitfall 3: Siloed Approach to Compliance

The Problem: Treating SB 253 and SB 261 compliance as separate from broader business strategy and other regulatory requirements.

Solution: Integrate climate disclosure into overall ESG strategy and consider how these requirements align with other frameworks like CSRD reporting for European operations. For guidance on managing multiple regulatory frameworks, see our EU AI Act compliance roadmap which demonstrates cross-framework alignment strategies.

Pitfall 4: Last-Minute Preparation

The Problem: Waiting until 2025 to begin compliance preparations, leaving insufficient time for data collection, system implementation, and verification.

Solution: Begin preparations immediately, even if your company is not yet on the CARB list but meets revenue thresholds. The 2026 deadline requires multi-year preparation for most organizations.

Frequently Asked Questions

When are the first reports due under SB 253 and SB 261?

Initial reports are due in 2026 for covered companies, with specific deadlines to be established by CARB. Organizations should monitor CARB guidance for exact submission dates.

What happens if my company is on the CARB list but misses the reporting deadline?

Both laws include enforcement provisions and potential penalties for non-compliance. Companies should prioritize timely preparation to avoid regulatory action.

How do SB 253 and SB 261 relate to other climate disclosure frameworks?

These California laws align with global trends toward mandatory climate disclosure, similar to the EU's CSRD (with reporting starting in 2025 for some entities) and proposed SEC climate rules. Companies operating internationally should develop integrated reporting approaches. For insights on managing cross-border compliance challenges, see our guide to healthcare AI governance which addresses multi-jurisdictional considerations.

Can small or medium-sized businesses be affected by these laws?

While SB 253 and SB 261 apply directly only to large companies based on revenue thresholds, smaller businesses in the supply chains of covered companies may be asked to provide emissions data for Scope 3 calculations.

Conclusion and Next Steps

California's SB 253 and SB 261 represent a significant shift in U.S. climate disclosure requirements, with the CARB preliminary list providing clarity on which companies must comply by 2026. Successful compliance requires:

1. Immediate action: Begin preparations now, even if your company is not yet on the CARB list but meets revenue thresholds
2. Comprehensive data strategy: Implement systems for collecting and calculating Scope 1, 2, and 3 emissions data
3. Integrated approach: Align California reporting with broader ESG strategies and other regulatory requirements
4. Ongoing monitoring: Stay informed about evolving requirements through regulatory tracking tools

To ensure timely compliance, companies should conduct initial assessments immediately, engage appropriate tools and expertise, and establish robust governance processes. For ongoing updates on SB 253, SB 261, and other ESG regulations, consider using AIGovHub's regulatory intelligence platform to track developments and deadlines.

As climate disclosure requirements continue to evolve globally, forward-thinking organizations will treat SB 253 and SB 261 compliance not just as a regulatory obligation, but as an opportunity to enhance their sustainability strategy and stakeholder communications. The lessons learned from preparing for these California mandates will prove valuable as similar requirements emerge in other jurisdictions and sectors.