CARB SB 253 & SB 261 Workshop: The Critical Points Summarized

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The California Air Resources Board (CARB) hosted a 4-hour virtual workshop on August 21, 2025, outlining proposed updates to the compliance requirements of SB 253 and SB 261. These changes will significantly shape how companies prepare for compliance.

While these proposals remain under review and open for public comment, they provide critical guidance and insight into how companies should begin planning their compliance strategies.

In this post, we summarize the most important takeaways from CARB’s proposed guidance, including:

  1. Climate Scenario Analysis (CSA) and Greenhouse Gas (GHG) inventory requirements diminished for SB 261

  2. Updated timelines for SB 261 and SB 253

  3. New fee requirements

  4. “Doing Business in California” still undefined

This article concludes with a legal update on the status of pending lawsuits related to California’s Corporate Climate Disclosure Rules. We cover the likelihood of the rules passing court challenges, potential changes, and the possible penalties under phased compliance.

Lastly, CARB is seeking input from stakeholders regarding definitions and exemptions as it seeks to finalize regulations this year. Feedback can be submitted directly to CARB here. Deadline for submittals is August 22, 2025 – September 11, 2025. 

Please note: Feedback submitted through this form will be posted to CARB’s public docket; should you wish to submit your feedback via KERAMIDA instead, please submit this to your KERAMIDA Project Manager.

1. CSA and GHG Inventory Requirements Diminished for SB 261

CARB Confirmed CSA and GHG Inventory Expectations

CARB has proposed minimum requirements for SB 261 submissions. These confirmed KERAMIDA’s interpretation that companies are not required to complete a CSA or GHG inventory for inclusion in their SB 261 climate-related financial risk disclosure. However, CARB encouraged including CSA results or GHG inventories when available. These requirements are still in the proposal stage, and CARB is currently accepting comments.

2. Updated Timelines for SB 261 & SB 253

SB 253 Proposed Deadline

CARB has proposed June 30, 2026, as the initial deadline for reporting 2025 Scope 1 and 2 emissions (including limited assurance), with draft reporting templates expected by September 2025 for public review. Scope 3 emissions would follow in 2027, based on 2026 data. While participants expressed strong concern that the timeline is unrealistic, companies should plan for the June 30, 2026, deadline until further notice, though extensions remain likely.

Extended 261 Docket Timeline

Previously, companies were only required to post disclosures on their websites by January 1, 2026. The August update also introduced a new public docket to promote transparency that will remain open from December 1, 2025, through July 1, 2026. This is not an extension of the January 1, 2026, deadline for companies to publicly post disclosures on their websites, but rather a longer window for companies to submit the link to where they posted their disclosures to CARB’s public docket system. Disclosures must still be posted on the company's website by January 1, 2026.

3. New Fee Requirements

Implementation Fees Proposed

CARB proposed a methodology for calculating implementation fees for SB 261 and SB 253. Fees would be calculated by dividing program costs among covered entities, with separate amounts for each statute based on estimated program administration costs. Preliminary estimates for program fees are:

  • SB 253:   $3,106 per entity

  • SB 261:   $1,403 per entity

These figures are preliminary and illustrative, and CARB is seeking public input as the rulemaking proceeds. These annual fees are also expected to adjust annually based on inflation, program administration costs, and number of covered entities required to report in any given reporting year.

4. “Doing Business in California” Still Undefined & Other Applicability Issues

Covered Entities

CARB confirmed the following Revenue thresholds for Covered Entities

  • SB 253: U.S.-based companies doing business in California with more than $1 billion in annual revenue.

  • SB 261: U.S.-based companies doing business in California with more than $500 million in annual revenue.

CARB also committed to releasing a preliminary list of covered entities; however, they did not confirm how this list will be developed, but noted two possible approaches:

  • Using data from the California Secretary of State’s database.

  • Using data from the Franchise Tax Board (FTB). However, this option may be more challenging due to restrictions on data sharing by the FTB.

Revenue Definition Still Under Review

At its initial virtual workshop in May 2025, CARB considered defining total revenue as “gross receipts” under the California Revenue and Taxation Code. By the August 2025 workshop, CARB recognized the inconsistencies across industries in using gross receipts, global sales, or other measures, and noted that it is actively developing a standardized definition. Establishing this definition will be critical for determining which companies are subject to the rule.

Parent and Subsidiary

CARB confirmed that subsidiaries are considered separate covered entities under SB 253 and SB 261, even when owned by a parent company. Each subsidiary would normally be required to report independently. However, parent companies have the option to file consolidated reports on behalf of their subsidiaries to reduce duplicative reporting.

During the Q/A portion of the webinar, many participants had very specific questions related to different parent/subsidiary relationships. CARB did not directly answer these questions and asked that the participants submit written questions for them to answer in a future document.

Exemptions Under Consideration

CARB has outlined several proposed exemptions, including nonprofits, companies with only teleworking employees in California, government entities, and CAISO or entities engaged solely in wholesale electricity transactions. These exemptions are intended to provide clarity and avoid capturing organizations with minimal in-state presence. CARB is inviting public input on whether these categories are appropriate and if additional exemptions should be considered.

Additional Issues Addressed

“Good Faith” Reporting Standard

SB 261 requires disclosures aligned with TCFD and IFRS standards, but CARB clarified that companies are expected to disclose “to the best of their ability.” This means leveraging existing data, processes, and methodologies, even if the disclosures are not yet perfect.

Assurance

CARB plans to rely on established standards for assurance, such as ISSA 5000, AA1000, ISO 14060, and AICPA. Assurance providers must remain independent and impartial. CARB is seeking feedback on which standards to adopt and how best to ensure consistency and credibility in reported data.

Legal Update on California Climate Laws

The following summary reflects KERAMIDA’s interpretation of recent developments and should not be considered legal advice. Companies should consult qualified legal counsel for definitive guidance.

Pending Litigation

Although both laws (SB 253 and SB 261) face pending litigation, a February court ruling indicates they remain on track to take effect. Phased compliance and reporting beginning in 2026 (covering 2025 data) is still expected. Current rulings suggest a high likelihood that disclosure requirements will survive legal challenges, though some modifications are possible. The risk of either law being fully invalidated appears very low.

Most litigation to date focuses on technical “edge issues” that could affect how companies comply under CARB’s rulemaking, but these are unlikely to eliminate phased compliance requirements. CARB has not proposed regulations yet to implement the SB 253 and SB 261 laws. CARB is expected to provide further clarification through upcoming rulemaking procedures, timelines, and guidance later this year.

Penalties

The statutes establish penalties “per reporting year,” making this both a filing requirement and an ongoing compliance obligation. Depending on company size, penalties could range from $50,000 to $500,000 annually, with the potential to escalate based on compliance history. For the first phase of reporting in 2026, however, CARB has indicated penalties will not be assessed if companies demonstrate a legitimate “good faith effort” to comply. This approach is intended to encourage early participation while building toward stricter enforcement in subsequent years. SB 253 and SB 261 laws do not specify if there are penalties for companies missing their declared targets for GHG emissions reductions.

KERAMIDA has extensive experience working with clients to prepare reports that comply with SB 261 and SB 253 as well as TCFD, IFRS S2, and other standards. Schedule a call with one of our CA SB 253 or SB 261 compliance experts to get started.

Author

Nick McCreary, MS, LEED AP BD+C
Senior Vice President, Sustainability
KERAMIDA Inc.

Contact Nick at nmccreary@keramida.com

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