California Climate Disclosure Laws: Compliance and Regulatory Challenges
California is moving forward with the implementation of its climate disclosure statutes, SB 253 and SB 261, despite ongoing legal challenges and a pending injunction. The California Air Resources Board (CARB) approved the regulations related to these laws on February 26, 2026. However, there remains a level of uncertainty regarding the timing and specifics of reporting obligations for businesses operating in California.
In October 2023, California passed two significant statutes that mandate businesses engaged in transactions within the state to report climate-related information. Businesses are obligated to comply if they are organized or headquartered in California or have significant sales in the state.
The enforcement of SB 261 is currently on hold due to a legal challenge spearheaded by the US Chamber of Commerce, which resulted in an injunction from the US Court of Appeals for the Ninth Circuit. The injunction pauses the enforcement of SB 261 until a final decision is reached, following oral arguments heard by the court in January 2026.
The concerns raised during the legal proceedings center on whether these statutes require companies to disclose information in a manner that could violate the First Amendment. The arguments also questioned the necessity of Scope 3 data collection, which involves tracking greenhouse gas emissions across a company's supply chain.
The Ninth Circuit has yet to make a ruling, leaving the injunction in place for now. Meanwhile, CARB has indicated that the deadline for SB 253 reporting remains August 10, 2026, and companies should prepare accordingly. Following this, businesses are expected to address Scope 3 emissions from 2027 onward.
Commentary received by CARB during its rulemaking process suggested several exemptions and extensions to the reporting deadlines, particularly from the insurance sector. CARB's response emphasized the need for clarity in the regulations and indicated its openness to coordinating with other regulatory bodies such as the California Department of Insurance to avoid duplication.
Furthermore, CARB plans to undertake a second rulemaking process to establish future reporting dates and further clarify reporting requirements. Businesses eligible under these statutes should engage in this process to influence the final rules, especially given the global trend towards mandatory climate disclosures.
In summary, while the implementation of California’s climate disclosure laws faces certain legal hurdles, the state continues to advance its regulatory agenda. Companies meeting the financial thresholds should begin aligning their reporting practices with these requirements and contribute to shaping future regulations through public commentary. The broader trend towards disclosures, driven by international protocols and standards, underscores the importance of robust climate risk assessment strategies.