California Finalizes First Climate Disclosure Rules, Leaves Scope 3 Questions Open

The California Air Resources Board (CARB) has finalized its initial rulemaking package to implement two landmark climate disclosure laws-SB 253 and SB 261-marking a key step toward corporate climate accountability while leaving critical details unresolved.

The newly adopted rules largely mirror the December 2025 proposal, focusing on foundational elements such as reporting timelines, fee structures, and key definitions. However, CARB has deliberately deferred more complex issues-particularly how companies will report Scope 3 emissions-until a broader rulemaking expected later in 2026.

Under SB 253, companies meeting revenue thresholds must begin reporting Scope 1 and Scope 2 emissions by August 10, 2026, using fiscal-year-aligned data. CARB indicated it will allow enforcement flexibility in the first year, provided companies demonstrate “good faith” efforts, such as submitting available data and outlining plans to address gaps.

Meanwhile, SB 261-which mandates climate-related financial risk disclosures-remains in limbo due to an injunction issued by the U.S. Court of Appeals for the Ninth Circuit. Although enforcement is paused, more than 120 companies have already voluntarily submitted reports.

One notable development is CARB’s indication that insurance companies may eventually be exempt from SB 253, given overlapping disclosures already made to the California Department of Insurance. The regulator plans to coordinate with the department to minimize duplication.

CARB also confirmed a standardized definition of revenue based on California tax law and introduced a flat-rate fee structure to fund program administration.

With legal challenges ongoing and major elements like Scope 3 reporting still undefined, California’s climate disclosure regime is taking shape in phases. The next round of rulemaking will be pivotal in determining how far-and how fast-corporate climate transparency evolves.

SB 253's finalisation with lingering Scope 3 questions is a real inflection point for US climate disclosure, and it will influence how issuers structure their data infrastructure for years. Our ESG-strategy and sustainability-due-diligence teams help US clients build Scope 3 disclosure infrastructure that satisfies California, SEC-adjacent and ISSB S2 requirements.