California’s mandatory climate risk disclosure is almost here: Is your company ready?

Status of SEC climate disclosure rules

Despite widespread assumption to the contrary, the new SEC climate disclosure rules are not dead yet (but are certainly on life support and not likely in any event to become effective during the current presidential term). Because of the outsized role of the US economy in both global gross domestic product and securities markets, mandatory climate-related disclosure regulation by the SEC was intensely debated and contested. The SEC initially solicited comments on proposed rules in 2021 and issued a more than 500-page rule proposal in 2022. Two years later, in March 2024, the SEC adopted the new climate disclosure rules.

Like the California laws, the SEC rules draw on the GHG Protocol methodology, the most widely used international standard for calculating GHG emissions, and on the climate-related financial risk disclosure framework issued in 2017 by the Task Force on Climate-Related Financial Disclosure, which was established by the G20’s Financial Stability Board and recommended disclosure regarding governance, strategy, risk management, metrics, and targets relating to climate-related risks.

Upon adoption, the SEC rules were immediately the subject of several lawsuits challenging the SEC’s authority to issue them and the SEC voluntarily stayed the effectiveness of such rules pending the outcome of the litigation, which was consolidated into one federal case in the US Court of Appeals for the Eighth Circuit. On March 27, 2025, the SEC voted to withdraw its legal defense of the SEC rules before the Court. A coalition of Democratic-led states intervened, and on April 24, 2025, the Court issued an order holding the proceedings in abeyance until the SEC confirmed within 90 days whether it intends to review or revisit the SEC rules.

On July 27, 2025, the SEC filed a status report with the Eight Circuit stating that it “does not intend to review or reconsider the Rules at this time.” It asked the Court to terminate the abeyance and resolve the merits of the challenge to the rules, arguing that given the intervenors, a live controversy over the validity of the rules remained and the case had been fully briefed. Despite a request from the Court to do so, the SEC did not indicate how it might respond to a decision upholding the rules. The SEC stated that if the Court were to uphold the rules, the SEC would then decide whether to rescind or otherwise reconsider the proposed rules, a decision it declined to prejudge. Presumably, recission or revision of the rules if upheld by the Court would require a formal proposal to do so and a notice-and-comment period, likely to entail thousands of comment letters from interested parties supporting and opposing the rules similar to those submitted when the new rules were proposed.

2024 amendments to California climate laws

On September 27, 2024, California amended SB 253 and SB 261 by enacting SB 219. SB 219 delays the deadline for CARB to promulgate regulations requiring GHG emissions reporting from January 1, 2025, until July 1, 2025 (regulations have not yet been proposed or issued but are expected by the end of 2025). SB 219 also grants CARB additional authority to set a schedule for reporting Scope 3 GHG emissions (those within a company’s upstream and downstream value chains and not from its own operations) any time in 2027. As originally enacted, SB 253 required reporting entities to submit their Scope 3 emissions no later than 180 days after such reporting entity’s Scope 1 emissions (those generated by a company) and Scope 2 emissions (those relating to purchased energy used in a company’s operations) were publicly disclosed.

SB 219 also addresses consolidated reporting, a source of criticism regarding SB 253. SB 219 amends SB 253 to explicitly create a subsidiary exemption to the reporting requirements by allowing consolidated reporting at the parent level and exempting subsidiaries (that otherwise qualify as reporting entities and are required to report) from their reporting obligations. This change addresses concerns that each legal entity in every corporate family that qualified as a reporting entity would need to separately submit its GHG emissions, requiring an additional compliance burden.

SB 219 also provides CARB with discretion over whether to engage a third-party emissions reporting organization to receive and publish emissions reports or receive and publish the reports itself. SB 253 originally required CARB to engage an emissions reporting organization to receive and publish the reports. SB 219 also provides additional time for CARB or an emissions reporting organization to make emissions reports publicly available. SB 219 requires that reports be made publicly available no later than 90 days after receipt, whereas SB 253 (as originally enacted) required public disclosure within 30 days of receipt of the emissions reports. SB 219 also amends SB 261 to give CARB discretion to engage a climate reporting organization to oversee the reporting process or choose to perform these obligations on its own. SB 261, as originally enacted, required CARB to engage a climate reporting organization.

CARB enforcement notice regarding SB 253

On December 5, 2024, CARB published an enforcement notice under SB 253. The notice provides that for the first GHG emissions reports due in 2026, reporting entities may submit Scope 1 and Scope 2 emissions from “the reporting entity’s prior fiscal year that can be determined from information the reporting entity already possesses or is already collecting” as of December 5, 2024, and CARB will not seek enforcement action for reports completed in good faith.

Guidance from CARB’s public workshop and FAQs

CARB held a public workshop on May 29, 2025, during which CARB discussed its initial staff concepts of the regulations for SB 253. CARB stated that it believes the definition of “doing business” as used in the California Revenue and Taxation Code, with minor modifications, is the correct definition to apply in regulations implementing SB 253. CARB also proposed looking to the California Revenue and Taxation Code definition of “gross receipts” as a definition for “revenue” under regulations implementing SB 253. CARB suggests it may look to cap-and-trade rules whereby 50% ownership or control requires consolidation.

During the public workshop, CARB emphasized that data on Scope 1 and Scope 2 emissions occurring in 2025 will be required to be reported in 2026.

On July 29, 2025, CARB issued a series of FAQs providing further guidance on compliance with SB 261 and SB 253.

On August 7, 2025, CARB announced another virtual public workshop will be held on August 21, 2025, at 9:30 am PDT. The agenda is expected to include a discussion of key definitions related to SB 261 and SB 253 and CARB’s timeline for adoption of the regulations. Online registration is available here.

Litigation challenging California climate laws

On January 30, 2024, the US Chamber of Commerce and multiple co-plaintiffs filed suit against CARB in the US District Court for the Central District of California seeking to block the implementation of SB 253 and SB 261. The suit alleged that SB 253 and SB 261 violated the US Constitution’s First Amendment, Supremacy Clause, and Dormant Commerce Clause. The district court denied the Chamber’s motion for summary judgment on the First Amendment claims, indicating that more evidence was needed to determine the correct standard of review of the content-based speech regulations. Several months later, the district court dismissed, without prejudice, the Chamber’s claims related to (1) the Supremacy Clause and Dormant Commerce Clause with respect to SB 253 and (2) the Dormant Commerce Clause with respect to SB 261. The district court dismissed, with prejudice, the claims related to the Supremacy Clause with respect to SB 261.

Additional state climate disclosure bills

The legislatures in several states – New York, New Jersey, and Illinois – have proposed their own versions of corporate climate disclosure laws (Additional State Climate Bills). Below is a table summarizing them. The Additional State Climate Bills generally follow the framework of California’s SB 253, as amended by SB 219, and all would require reporting of GHG emissions in accordance with the GHG Protocol. All of the Additional State Climate Bills would require reporting Scope 1 and Scope 2 emissions, with assurance, and most of the bills contemplate the reporting of Scope 3 emissions with assurance. All of the Additional State Climate Bills would require reporting from entities with total revenues exceeding $1 billion and “doing business” in each state. The New York bill aligns the definition of doing business to the definition of “deriving receipts from activity within” the state from the New York Tax Law. This approach mirrors the proposed approach taken by CARB in its initial concepts.

While the Additional State Climate Bills share a similar underlying framework there are certain differences, such as the definitions of which entities are in scope and the definitions of various assurance levels, which may be exaggerated as any such laws are adopted and state agencies begin promulgating regulations to fully carry out these laws.

US state climate corporate data accountability acts (enacted and proposed)