California’s New Climate Reporting Rules: What Businesses Need to Know for 2026
California has introduced two major climate reporting laws, the Climate-Related Financial Risk Act (SB 261) and the Climate Corporate Data Accountability Act (SB 253), that will change how large companies operating in the state report climate risks and greenhouse gas emissions. These rules primarily impact companies with over $500 million to $1 billion in annual revenue, including out-of-state and international businesses that conduct business in California. Most small businesses and nonprofits are not affected. Both laws were signed in 2023, took effect in 2024, and begin requiring annual regulatory filings starting in 2026.
Which Companies Must Follow These Rules?
California created these laws to apply to large companies with a strong presence or economic activity in the state.
SB 261 applies to companies with more than $500 million in yearly revenue that do business in California. This covers more than 5,000 companies, including both US and international businesses.
SB 253 applies to companies with more than $1 billion in annual revenue that conduct business in the state.
These rules apply to both domestic and international companies, regardless of where they are formed or headquartered. The purpose is to capture organizations with a significant environmental impact while avoiding unnecessary burdens on smaller businesses.
Do These Rules Apply to Nonprofits?
Most nonprofits will not need to follow these rules. The laws only apply to organizations that meet the very high revenue thresholds and qualify as doing business in California. While most nonprofits do not reach this size, very large nonprofit organizations or national groups with major operations may want to review the rules carefully to confirm whether they are included.
Are There Any Exemptions?
California has built-in protections to ensure the new climate reporting requirements are fair.
- Companies with revenues below the threshold do not need to report.
- Entities already reporting under certain federal programs may have some overlapping requirements, but they must still meet California’s rules if they fall within the scope.
Small businesses are excluded entirely to avoid placing heavy reporting burdens on organizations with fewer resources.
In addition, while some entities may already report environmental information under federal programs, they must still follow California’s rules if they fall under the state’s definition of “covered entities.”
What Information Must Be Reported?
SB 261 requires the first set of climate-risk reports to be submitted on January 1, 2026, based on information from the 2025 calendar year. Reports are to be submitted annually on January 1 and include data based on the previous year. Companies must describe how climate change could affect their daily operations, long-term planning, and financial health. Companies must report:
- Climate-related financial risks
- How these risks may affect operations
- Plans to reduce or manage those risks
- The governance process for overseeing climate-related issues
This includes both:
- Physical risks, such as fires, storms, or heat waves
- Transition risks, such as new technologies, market changes, or shifting environmental rules
SB 253 also begins in 2026, starting with reporting for Scope 1 and Scope 2 greenhouse gas emissions, while Scope 3 reporting will be added in 2027. As deadlines approach quickly, companies are encouraged to prepare now so they can meet their regulatory requirements without delay. Once implemented, reports are to be submitted annually going forward. The exact annual due date will be set by the California Air Resources Board (CARB). Companies must report:
- Scope 1 emissions: Direct emissions from company operations
- Scope 2 emissions: Indirect emissions from purchased electricity
- Scope 3 emissions: Emissions from suppliers, customers, and other activities (required in 2027)
This phased approach allows companies to develop robust systems for gathering and verifying their emissions data.
What Is the Filing Process?
The California Air Resources Board (CARB) will manage both the reporting system and the public access to these filings. Companies will submit their annual climate risk and greenhouse gas reports through a state-run online reporting platform created by CARB. Once submitted, most reports will be publicly available on the official CARB website, allowing regulators, investors, and the public to review the information. CARB is still finalizing the technical details of this system, but all official instructions, deadlines, and access to the reporting portal will be posted directly through CARB’s Corporate Greenhouse Gas Reporting Program pages as the 2026 deadlines approach.
What This Means for Your Organization
These laws represent a major shift in environmental reporting in the United States. California’s goal is to provide clear and consistent information that supports planning, enhances public transparency, and promotes long-term environmental responsibility. Organizations that meet the revenue requirements should begin preparing now by reviewing their internal systems, gathering the necessary data, and planning for new regulatory filings. Harbor Compliance is here to support your organization as you navigate these new rules and maintain good standing as the deadlines approach. Contact us today to learn more.
