California’s Climate Disclosure Regulations Are Here—Is Your Business Ready?

California’s new climate disclosure regulations are set to take effect next year. Thereafter, companies that are not in compliance will be at risk of incurring substantial penalties—from $50,000 to $500,000 per year. For covered entities, now is the time to take action. Learn more from the California environmental compliance lawyers at Bick Law LLP:

California’s Climate Corporate Data Accountability Act (SB 253)

California’s Climate Corporate Data Accountability Act (SB 253) applies to entities formed under U.S. law with total annual revenues of $1 billion or more and who “do[] business in California.” It requires covered businesses (referred to as “reporting entities”) to disclose their greenhouse gas emissions on an annual basis.

The Climate Corporate Data Accountability Act establishes three separate disclosure requirements—referred to as Scope 1, Scope 2, and Scope 3. Reporting entities must begin complying with the Scope 1 and Scope 2 disclosure requirements next year, while the Scope 3 disclosure regulations take effect in 2027. Scope 1, Scope 2, and Scope 3 emissions are defined as follows:

• Scope 1 Emissions (“Direct”) – Scope 1 emissions include “all direct greenhouse gas emissions that stem from sources that a reporting entity owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities.”
• Scope 2 Emissions (“Indirect”) – Scope 2 emissions include “indirect greenhouse gas emissions from consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity, regardless of location.”
• Scope 3 Emissions (“Indirect Upstream and Downstream”) – Scope 3 emissions include “indirect upstream and downstream greenhouse gas emissions, other than scope 2 emissions, from sources that the reporting entity does not own or directly control.”

The law further requires reporting entities to obtain third-party assurance for their emissions disclosures.

The Climate Corporate Data Accountability Act requires the State Air Resources Board (CARB) to promulgate regulations that establish the specific requirements and deadlines that reporting entities must meet in order to maintain compliance. CARB has said they expect to begin the rulemaking process in Q1 of 2026 and intend to propose an August 10, 2026 reporting deadline. For now, reporting entities must ensure that they are appropriately tracking their direct and indirect greenhouse gas emissions for the 2025 fiscal year so that they will be prepared to comply when necessary.

Under the Climate Corporate Data Accountability Act, reporting entities that fail to comply can face administrative penalties of up to $500,000 per year. CARB issued an Enforcement Notice on December 5, 2024 explaining that, for this first reporting cycle, CARB will exercise its enforcement discretion and is only requiring a good faith effort to comply with the reporting requirements.

California’s Climate-Related Financial Risk Act (SB 261)

California’s Climate-Related Financial Risk Act (SB 261) applies to U.S.-based entities doing business in California that have total annual revenues of $500 million or more. It requires “covered entities” to publish biannual “climate-related financial risk reports,” with the first report due on January 1, 2026. The law defines “climate-related financial risk” as follows:

“’Climate-related financial risk’ means material risk of harm to immediate and long-term financial outcomes due to physical and transition risks, including, but not limited to, risks to corporate operations, provision of goods and services, supply chains, employee health and safety, capital and financial investments, institutional investments, financial standing of loan recipients and borrowers, shareholder value, consumer demand, and financial markets and economic health.”

Under the Climate-Related Financial Risk Act, covered entities must disclose their climate-related financial risk in accordance with a recognized voluntary methodology, like the framework established in the June 2017 Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) or the International Financial Reporting Standards Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB).

The Climate-Related Financial Risk Act also provides that if a covered entity is unable to publish a report that meets the requirements of the TCFD framework, it must “provide the recommended disclosures to the best of its ability, provide a detailed explanation for any reporting gaps, and describe steps the covered entity will take to prepare complete disclosures.” Noncompliance with the Climate-Related Financial Risk Act carries a maximum administrative penalty of $50,000 per year.

Ninth Circuit Pauses Enforcement of Climate-Related Financial Risk Act–For Now

On November 18, 2025, the U.S. Court of Appeals for the Ninth Circuit paused enforcement of the Climate-Related Financial Risk Act. The Ninth Circuit issued an order granting, in part, a motion for an injunction pending appeal filed by the plaintiffs in U.S. Chamber of Commerce, et. al. v. Randolph. While the plaintiffs sought an injunction against the enforcement of both the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act, the Ninth Circuit only granted the plaintiffs’ motion with regard to the latter. It did not explain its reasoning for doing so.

But, while enforcement of the Climate-Related Financial Risk Act is on hold, the statute is not dead in the water. The litigation remains ongoing, and it is possible that the Ninth Circuit will ultimately rule that the statute is enforceable as written. As a result, at present, covered entities must still prepare for the possibility that they will need to comply with the statute starting in 2026.

Contact the California Environmental Lawyers at Bick Law LLP

If you need more information about companies’ compliance obligations under the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act, we invite you to get in touch. To schedule a confidential consultation with a California environmental lawyer at Bick Law LLP, give us a call at 949-432-3500 today.