CARB update: Key changes to California climate disclosure laws

RSM insights:

Proposed exemptions (SB 261): Non-profit and charitable organizations (tax-exempt under the Internal Revenue Code) and entities with only teleworking employees in California are exempt. Federal, state, and local government entities, and companies that are majority-owned by government entities are excluded by statue, as are entities subject to regulation by the Department of Insurance.

CARB extended certain deadlines associated with SB 253 and 261. Although the extension was unexpected, it gives companies more time to determine eligibility and comply with California’s climate laws. Each bill—SB 253,—and SB 261,—has different updated deadlines and exemptions, so businesses should review the changes specific to each. Businesses that were already prepared can use this period to further improve their programs, while those who have yet to organize their people, processes, or technology gain some welcome relief from the business community. It also suggests additional time was needed for corrective action around data clarity, omitted companies, revenue estimates and outdated information. Finally, adopting revenue and tax codes to define "doing business in California" and detailing possible exemptions, represents a constructive step forward and offers much needed clarify for business leaders.

RSM insights:

Companies collecting data as of the December 2024 enforcement notice are required to submit Scope 1 and Scope 2 data in 2026. Those not currently collecting this data should make efforts to meet compliance requirements, acknowledging the challenges inherent in accurately measuring or estimating a company's carbon inventory. Companies not engaged in data collection prior to December 2024 will need to measure their complete carbon inventory—including Scope 1, Scope 2, and Scope 3—in 2027.

Additionally, CARB encourages a "best efforts" approach in meeting these requirements. Leveraging this guidance may help tailor future reporting obligations. For instance, demonstrating best efforts in the current year, especially in the absence of feedback from CARB, could allow companies to maintain a more estimative methodology in fulfilling future compliance requirements.

Too many companies had not fully understood assurance implications for their business, including choosing between CPA and non-CPA providers, applying the correct assurance standards (SSAEs, ISAE 3410 or ISO 14065), and/or planning assurance projects. Companies that have evaluated assurance providers should extend contracts for services beginning late Summer or early Fall 2026, allowing testing in 2027 to meet the August 10, 2027, compliance deadline. Some companies may choose to have their records assured early to improve their chances of compliance, though this approach is not generally expected to become standard practice. This extra preparation time should help more companies achieve compliance.

RSM insights:

Many companies face challenges in determining eligibility, While revenue thresholds are clear, other business nuances require evaluation—especially for those near the thresholds across multiple years, with global reporting structures, or various domestic and international operations. Companies should consult internal or external counsel or submit questions to CARB for clarification.

RSM insights:

Most companies should use CARB’s templates unless their emissions reporting is mature and tested. These templates support California state reporting and are generally beneficial. We also recommend referencing GHG Protocol templates, which clarify required versus optional disclosures and offer understandable instructions.

CARB acknowledges that integrating climate risks into a company’s risk management framework is an evolving process. We recommend that companies leverage the framework or principles-based nature of the TCFD/ISRS S2 and continue to make progress on integrating climate risks, even while the U.S. Court of Appeals sorts out SB 261 enforcement.

RSM insights:

CARB communicates a non-punitive attitude in both its public workshops and webinars. While it recognizes that some companies need time to compile reliable emissions data, this should not lead businesses to become complacent. California retains the authority to impose fines if it believes a company is not cooperating.

RSM insights:

California’s climate disclosure laws are evolving, but the current priorities for 2026 are transparency and good-faith efforts. Entities should review the updated definitions, exemptions and deadlines, and entities should be in contact with their sustainability reporting consultants and assurance providers. We also encourage entities to engage with CARB as the rulemaking process continues.

Many companies delayed Scope 3 emissions reporting but now have more time to assess value chain data. Evaluating stakeholder data, systems, and estimation methods under the GHG Protocol should be prioritized over time. Companies already reporting Scope 3 emissions should only seek assurance when required and instead focus on improving processes, controls, and data systems for better reporting efficiency and accuracy.