California Climate Reporting Deadlines Loom Despite Uncertain Implementation Timeline

The California Air Resources Board (CARB) will not publish initial rulemaking for SB 253 and SB 261 — two laws that will impose certain environmental disclosure requirements on large companies doing business in the state — until Q1 2026, according to a notice it recently published, although final implementing regulations were originally expected to roll out by the end of 2025. Despite this delay, CARB has not released guidance regarding any changes to existing compliance deadlines.

Given that the statutory deadlines for SB 253 and SB 261 remain in place, companies should continue to proactively prepare for compliance using the resources and guidance available.

Overview

SB 253 will require U.S. companies doing business in California with over $1 billion in global annual revenues to disclose their Scope 1, 2 and 3 emissions. CARB aims to require Scope 1 and 2 reporting by June 30, 2026, and Scope 3 reporting in 2027.

SB 261 will require U.S. companies doing business in California with over $500 million in global annual revenues to publish public climate-related financial risk reports on its website and on a CARB database. The deadline for initial reports is set for Jan. 1, 2026, and reports must be submitted every two years thereafter.

Recent Developments

Below is a timeline of developments related to SB 253 and 261 over recent months, highlighting the status of delays and ongoing legal challenges to the laws, as well as CARB’s most recently published compliance guidance.

Oct. 24: Exxon Files a Lawsuit Seeking to Prevent Enforcement

Exxon Mobil Corporation (Exxon) filed a lawsuit in the U.S. District Court for the Eastern District of California, primarily arguing that SB 253 and SB 261 unconstitutionally compel speech in violation of the First Amendment. Exxon has also alleged that SB 253 and SB 261 violate the Supremacy Clause based on the National Securities Market Improvement Act, which expressly preempts state laws that impose conditions on disclosure documents related to covered securities. Exxon has requested a declaration that SB 253 and SB 261 violate the First Amendment and are preempted and has requested an injunction preventing enforcement of SB 253 and SB 261 against Exxon.

Oct. 14: CARB Further Delays Rulemaking Timelines

As noted above, CARB posted an online notice stating that it plans to present initial rulemaking (including fee-related provisions) for SB 253 and 261 in the first quarter of 2026, further postponing the release of implementing regulations. CARB attributed the delay to “the large volume of public comments” CARB received on its recently issued resources and “ongoing input related to identifying the range of covered entities.” It remains unclear whether the revised rulemaking timelines will impact existing compliance deadlines, particularly the Jan. 1, 2026, deadline set for initial SB 261 reports. CARB staff have not yet indicated that the Jan. 1 deadline will be waived or would not come into effect while regulations remain pending.

Oct. 10: SB 253 Draft Scope 1 and 2 GHG Reporting Template Opens for Public Comment

On Oct. 10, CARB posted a draft reporting template for Scope 1 and 2 greenhouse gas (GHG) emissions reporting, which proposes input values for inclusion in the initial SB 253 disclosures to be reported in June 2026. Along with the template, CARB published a draft memorandum containing guidance on using the template under the Corporate Greenhouse Gas Reporting Program. The draft template and accompanying memorandum were open for public comment through Oct. 27. Since the template is intended to streamline reporting, companies will not be required to follow it for their SB 253 reports.

Sept. 24: Preliminary Covered Entities List Specifies Companies ‘Doing Business in California’

On Sept. 24, CARB released a preliminary list of 4,160 companies that will likely be considered to be “doing business in California” and therefore covered under SB 253 and/or SB 261. CARB staff stated that it used the California secretary of state master-list of entities doing business in California with active filings through March 2022. The list was prepared using the “statutory requirements of being US-based, meeting the annual revenue threshold of $500 million or more, and doing business in California.” However, CARB still has not issued a definitive interpretation or definition for the “doing business in California” standard, which is key for determining the scope of applicability for SB 253 and SB 261.

This preliminary list does not reflect potential exemptions that may be included in the final implementing regulations and therefore is not a determination by CARB as to which companies will be classified as covered entities. It also remains unclear whether all entities required to report under SB 253 and/or SB 261 will be set forth in a “final” list published by CARB or to what extent reporting requirements will apply to the parent companies of covered entities.[1] Given these uncertainties, companies not on the preliminary list may be ultimately subject to reporting requirements.

Sept. 11: California Federal Court Denies Motion to Pause Implementation Amid Legal Challenges

On Sept. 11, a federal judge in the Central District of California refused to reconsider its prior denial of a motion to enjoin SB 253 and 261 filed by a coalition of trade groups and business associations, including the U.S. Chamber of Commerce, in their ongoing legal challenge of the laws. The decision reaffirmed its prior Aug. 13 preliminary injunction denial, stating the plaintiffs have “not shown a likelihood of success on the merits with respect to either of its facial First Amendment challenges to SBs 253 and 261,” and there have been no material changes after the first denial warranting the court’s reconsideration of a motion to enjoin the two laws.

Now, the coalition has appealed the district court’s denial of the preliminary injunction to the Ninth Circuit. Oral argument has not yet been scheduled.

Sept. 2: SB 261 Draft Guidance Outlines Compliance Options and Minimum Requirements

CARB published draft guidance for SB 261 on Sept. 2 that provides a high-level checklist for reporting entities, including minimum disclosure requirements as to an organization’s climate-related governance, strategy, risk management, and metrics and targets.

According to the guidance, reporting entities may choose to prepare their reports in accordance with either of two third-party reporting frameworks — the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations or the International Financial Reporting Standards (IFRS) S2 — or any existing framework by a regulated exchange or governmental entity.

Enforcement Discretion: CARB notably stated in a December 2024 Enforcement Notice that it will exercise “enforcement discretion” and “will not take enforcement action for incomplete reporting” against companies for the initial reports due in 2026, provided that companies demonstrate good faith efforts to comply.

How to Prepare

Notwithstanding the rulemaking delays and looming legal challenges, CARB remains silent as to whether it will extend the deadlines for initial reports required under SB 253 and SB 261. Thus, companies should proceed on the basis that these deadlines will remain in place, despite the absence of implementing regulations. Companies can take steps to prepare for compliance using the resources and guidance available:

1. Assess Applicability: As noted above, regulations pursuant to SB 253 and SB 261 will apply only to U.S. companies doing business in California with over $1 billion and $500 million in global annual revenues, respectively. CARB’s initial list of covered entities offers insight into which businesses CARB likely will consider as “doing business in California.” Companies unsure about whether SB 253 and SB 261 applies to them should leverage this list to gauge the likelihood of applicability.
2. Establish a Preliminary Action Plan: CARB has published preliminary guidance with respect to both laws. In addition to publishing the a draft guidance memorandum for SB 253 and reporting template for SB 261, CARB staff held virtual public workshops in May and August — the recordings and presentation materials of which are available on the CARB website. Companies should establish a baseline action plan for meeting the minimum disclosure requirements outlined in these guidance materials and assess the costs associated with meeting those requirements. Strategic materials used for the purposes of complying with other TCFD disclosure regimes (where in-scope entities have a regulated presence in other jurisdictions) will be useful as a starting point.
3. Gather Data and Draft Initial SB 261 Reports: In light of the reporting deadlines set for 2026, companies potentially covered under SB 253 and/or SB 261 should start gathering data accordingly. This includes the Scope 1 and 2 data points listed in the preliminary SB 253 reporting template, as well as metrics and target data for SB 261 disclosures. With the deadline for initial SB 261 reports less than three months away, reporting companies also should begin drafting their governance, strategy and risk management disclosures.

If you have questions regarding compliance with these reporting obligations and the pending implementing regulations, or other legal and regulatory issues in the ESG landscape, please do not hesitate to reach out to the attorneys listed.