Despite the U.S withdrawing from the Paris Agreement, several American states have now taken climate action into their own hands. California, a long-time pioneer in environmental regulation, is now following the EU’s lead, introducing mandatory corporate disclosures on emissions and climate-related risks. Enter the California Climate Accountability Package.
This article addresses the key questions to help your company prepare for the new disclosure requirements: what the California Climate Accountability Package is, which companies it applies to, and what practical steps your company should take next.
What is the California Climate Accountability Package?
In October 2023, California adopted the California Climate Accountability Package, consisting of two climate laws:
- Climate Corporate Data Accountability Act (SB 253), requiring companies to disclose their greenhouse gas (GHG) emissions.
- Climate‑Related Financial Risk Act (SB 261), requiring companies to report on climate‑related financial risks.
The California Air Resources Board (CARB) is responsible for developing and implementing regulations, but has yet to finalise key definitions. Nevertheless, the first compliance deadlines are fast approaching.
Interestingly, California’s laws have inspired similar proposals elsewhere in the USA. New York’s Bill S3456 and Colorado’s Bill 25-1119 both aim to introduce comparable corporate climate disclosure rules, though neither has been enacted. Watching how SB 253 and SB 261 unfold in California can help companies anticipate potential future requirements in other states.
Who is in scope – and what for?
What are the next steps for your company?
First, check if you are in scope. Then proceed to:
- Assess your revenue. SB 253 applies to entities with > USD 1 billion in annual global revenue, while SB 261 applies to entities with > USD 500 million. Revenue is measured on a consolidated basis across parent and subsidiary entities and is based on the prior fiscal year.
- Review your company’s sales, property and payroll within California. If you exceed the Section 23101 thresholds (USD 735,019 in sales, USD 73,502 in property or payroll, or 25 % of totals), you may be considered to be “doing business in California”.
- Check exemptions. Confirm whether your organisation qualifies for an exemption (e.g., non‑profit status or insurance company under SB 261).
- Review preliminary lists. CARB has released a preliminary list of entities that may be covered. Inclusion or exclusion from this list does not determine compliance obligations but is a starting point.
If your business activities put you within the scope of SB 253 or SB 261, here are the next steps to take.
If your company is covered under SB 253, you should:
If your company is covered under SB 261, you should:
* Disclosure made with reasonable effort and transparency, based on the best information available at the time
CARB will host an online docket, a public database listing links to companies’ climate-related financial risk reports. The first reports must be published on company websites by January 1, 2026, and posted to CARB’s docket between December 1, 2025, and July 1, 2026. CARB indicated that it will accept good‑faith reporting* during the first compliance cycle.
Latest developments and open questions
Here are the latest developments as of November 10th, 2025:
Business criteria
CARB is still refining the definition of “doing business in California. Its current draft refers to Section 23101 of the state’s tax code, which uses thresholds for sales, property, and payroll. However, these criteria may capture companies with only a minimal presence in the state.
CARB is also considering using the Secretary of State’s business registry to identify entities with a registered agent in California.Companies should monitor which approach CARB ultimately adopts.
Parent–subsidiary relationships
CARB has proposed using the cap‑and‑trade program’s definition of a subsidiary (parent company owns more than 50 % of voting stock). It is also evaluating whether to allow parent companies to report on behalf of subsidiaries to avoid duplicative filings.
Exemptions
Current drafts exempt non-profits, government entities, teleworking-only firms, and wholesale electricity traders. Insurance companies are exempt under SB 261. Final definitions may still change.
Want to get started or get further?
Our Reporting & Policy team helps companies stay on top of evolving regulations, such as SB 253 and SB 261, as well as other emerging disclosure rules. For support in understanding and responding to these developments, reach out to Team Lead Benjamin Brinch at bbr@nordicsustainability.com.
If your company has not yet conducted a climate risk analysis or greenhouse gas inventory, our Climate team can help you get started. Contact our Climate Lead Ole Høy Jakobsen at oja@nordicsustainability.com.
Additional useful resources
To navigate the evolving requirements under SB 253 and SB 261, companies should make use of the following resources:
- CARB’s FAQ document
- CARB public workshops – presentation slides and recordings
- Draft templates and checklists – e.g. draft reporting template for SB 253 (Scope 1 and 2 emissions)
- Preliminary list of covered entities
Author details
Lena Roessler
Associate Consultant
David Færgeman
Senior Consultant
