“We’re Halfway There”: Key Takeaways and Lingering Questions from the Public Workshop on California’s Climate Disclosure Rules

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Status Update

On May 29, 2025, the California Air Resources Board (“CARB”) held a virtual public workshop on California’s climate reporting laws, Senate Bill 253 (The Climate Corporate Data Accountability Act) and Senate Bill 261 (The Climate-related Financial Risk Act). If your company is likely to be subject to these laws (as discussed below), then it is time to start gathering the required Scopes 1 and 2 emissions data for 2025, engaging a third-party assurance provider, and producing your first climate-related financial risk report. It looks like a lot of us might be “Livin’ on a Prayer” this fall.

The May 29^th workshop stretched for almost four hours and included “initial staff concepts” on various aspects of the legislation, presentations by the Montrose Environmental Group and the UCLA’s Anderson School of Management, and a Q&A session with the public. CARB described the “kick-off” workshop as an important step in its goal of developing a framework for implementing SB 253 and SB 261 and noted that the initial staff concepts were informed by the feedback that CARB received in response to its December 2024 information solicitation on the bills. A brief summary of SB 253 and SB 261 is set forth below, including adjustments made to the bills by SB 219, which was signed into law in September 2024:

• SB 253 (The Climate Corporate Data Accountability Act) requires U.S. public and private companies with total annual revenues in excess of $1 billion during the prior fiscal year that are “doing business” in California to disclose their Scopes 1, 2 and 3 emissions calculated in accordance with the Greenhouse Gas (GHG) Protocol. Disclosure of prior-year Scopes 1 and 2 emissions is first required in 2026, with limited third-party assurance, and Scope 3 emissions and stricter assurance requirements are phased in starting in 2027. Consolidated parent-level emissions disclosure is permitted.

• SB 261 (The Climate-related Financial Risk Act) requires U.S. public and private companies with total annual revenues in excess of $500 million during the prior fiscal year that are “doing business” in California to publish on their website a biennial climate-related financial risk report in accordance with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). A consolidated parent-level climate-related financial risk report is permitted. The first such risk report must be posted on the company’s website on or before January 1, 2026.

CARB is required to issue regulations implementing SB 253 by July 1, 2025; however, during the workshop, CARB stated that its regulations are still in process and likely will be issued closer to the end of 2025. CARB plans to hold additional workshops in order to continue to solicit feedback from stakeholders and interested parties before proposed regulations are issued. Following the issuance of proposed regulations, there will be a 45-day public comment period, amendments to the regulations if needed, formal adoption of the regulations by CARB, and then a review by the California Office of Administrative Law. CARB confirmed during the workshop that it has one year to publish the final regulations once the proposed regulations are issued. 

Key Takeaways and Lingering Questions from the Workshop

1. What does it mean to be “doing business” in California?

• The initial staff concept is that a company must satisfy both Section 23101(a) and (b) of the California Revenue and Taxation Code. This means that the company must be “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit” and at least one of the following is satisfied during any part of a reporting year: 

1. The company is organized or commercially domiciled in California;
2. Sales of the company in California exceed an inflation adjusted threshold ($735,019 for 2024);
3. The value of the company’s real and tangible personal property in California exceeds the lesser of an inflation adjusted threshold ($73,502 for 2024) or 25% of the company’s total real and tangible personal property; or
4. The amount paid by the company in California for compensation exceeds the lesser of an inflation adjusted threshold ($73,502 for 2024) or 25% of the total compensation paid by the company.

• CARB did not specify how the regulations will measure revenue for companies that do not have a fiscal year that aligns with the calendar year, but presumably this will be addressed in the proposed regulations. It also remains to be seen what the lookback period will be for calculating revenue under both bills.
• Multiple commenters pushed back on the inclusion of Section 23101(b)(4) (the compensation trigger) in the proposed definition of “doing business” in California, as this would include companies that have employees working remotely in the state but no other presence or business in California. CARB noted that the proposed definition “may be overly broad” and asked for public comments on how to address this concern.

2. When will companies be required to comply with SB 253 and SB 261 given the delay in CARB’s rulemaking?

• California Senators Scott Weiner and Henry Stern (two of the lead authors of the bills) opened the workshop by confirming that the original deadlines are “holding firm.” Under SB 253, Scopes 1 and 2 emissions data will need to be reported for 2025 at some point in 2026 and Scope 3 emissions data will need to be reported for 2026 at some point in 2027.
  • Companies can use existing data for their initial reports due in 2026, and there will not be penalties if a company can show a “good faith effort” to comply; however, CARB did not provide details regarding what would constitute a “good faith effort.”
  • Multiple commenters asked CARB when the initial Scopes 1 and 2 emissions reports will be due in 2026. This is not yet clear and presumably will be addressed in the proposed regulations.
• Under SB 261, the first TCFD-based risk report must be posted on a company’s website on or before January 1, 2026. Multiple commenters inquired whether that deadline might be pushed back given the delay in CARB’s rulemaking, and CARB suggested that companies go ahead and conduct their analyses under the initial staff guidance that has been provided and plan to comply by the original deadline.
  • Regarding enforcement of SB 261, CARB emphasized that companies should provide disclosures to the best of their ability, but did not share further details.
  • TCFD guidance frequently says that a company “should consider” reporting information, and multiple commenters asked how CARB plans to interpret whether those suggestions are actually requirements. CARB will address this in the proposed regulations, as well as whether scenario analyses and climate-related targets will be required.

3. We know that parent-level reporting for both SB 253 and SB 261 is permitted for a subsidiary that is in scope. Is subsidiary-level reporting permitted as well?

• Multiple commenters asked CARB whether an in-scope subsidiary will be required to report at the parent level or just permitted to do so. CARB indicated that the legislation did not say that subsidiary-level reporting was not permitted, but presumably this will be clarified in the proposed regulations.
• The initial staff concept for when a parent-subsidiary relationship exists reflects the definition used by the California Cap-and-Trade Program. Under this program, a “corporate association” exists when one entity has 50% or more ownership or control over another entity.

4. What is the impact of the pending litigation challenging SB 253 and SB 261?

• The U.S. Chamber of Commerce brought suit in the U.S. District Court for the Central District of California in January 2024, arguing that the laws violate the First Amendment by compelling corporate speech. There is a hearing on a motion seeking to preliminarily enjoin CARB and the California state attorney general from implementing, applying or enforcing these laws currently scheduled for June 10, 2025.
• The workshop did not address the ongoing litigation, but the laws are not stayed pending the court’s determination. CARB is continuing to push forward with its rulemaking and encouraged companies to proceed with their analyses and preparation for effectiveness.

Next Steps 

Despite a number of unresolved issues, including those noted above, CARB confirmed during the workshop that companies should proceed with evaluating their status and determining whether they are likely to be in-scope entities based on the initial staff concepts. If your company is almost certain to be in-scope, then it is time to start gathering the required Scopes 1 and 2 emissions data for 2025, engaging a third-party assurance provider, and producing the first TCFD-based risk report. With appropriate planning and personnel in place, you’ll make it—we swear.

_{For additional information about any of the above developments, or to discuss any questions that you may have, please contact a member of Maynard Nexsen’s Public Company Advisory Group.}

_{This client alert is for information purposes only and should not be construed as legal advice. The information in this client alert is not intended to create and does not create an attorney-client relationship.}