California Climate Accountability Laws: SB 253, SB 261, and AB 1305 Compliance Guide
California Climate Accountability Laws: SB 253, SB 261, and AB 1305 Compliance Guide
Definition: California’s climate accountability laws—Senate Bill 253 (Climate Corporate Data Accountability Act), Senate Bill 261 (Climate Accountability Act), and Assembly Bill 1305—establish mandatory greenhouse gas emissions reporting requirements and create new liability frameworks for corporations making climate-related claims. Together, these laws create a comprehensive regulatory regime requiring large companies to publicly report Scope 1, 2, and 3 emissions, with reporting beginning in 2026, and enabling enforcement action by California’s Attorney General for misleading climate claims.
Overview of California’s Climate Accountability Framework
California has established itself as the leading subnational jurisdiction for climate regulation. The three primary laws create complementary requirements: mandatory GHG emissions disclosure (SB 253), enforcement authority for misleading climate claims (SB 261), and expanded liability for corporate climate accountability (AB 1305). These laws apply to companies doing business in California with annual revenues exceeding $1 billion and establish strict liability standards for climate-related misrepresentations.
Policy Context and Timeline
SB 253 was signed into law in October 2023 with an effective date of January 1, 2024. Reporting begins in 2026 for baseline year 2025 data. SB 261 was signed in October 2023 and became effective immediately, creating enforcement authority. AB 1305 was signed in September 2023 and expands the scope of climate accountability. As of March 2026, these laws are being actively implemented despite legal challenges from business groups.
Senate Bill 253: Climate Corporate Data Accountability Act
SB 253 Overview
Mandatory GHG emissions reporting requirement for large companies; applies to entities with annual revenues exceeding $1 billion doing business in California; requires reporting of Scope 1, 2, and material Scope 3 emissions; first reporting deadline January 1, 2026 for fiscal year 2025 data; annual reporting thereafter.
Applicability and Scope
Who Must Report: Any entity, including corporations, partnerships, and other business entities, with gross annual revenues exceeding $1 billion in the preceding fiscal year and engaged in business in California.
Reporting Requirement: Annual disclosure of GHG emissions for:
- Scope 1: Direct emissions from company-controlled sources
- Scope 2: Indirect emissions from purchased electricity, steam, heating, and cooling
- Scope 3 (if material): Value chain emissions, including supplier emissions, product use, and waste disposal
Reporting Standards and Methodology
SB 253 requires compliance with one of the following standards:
- GHG Protocol Corporate Standard: Greenhouse Gas Protocol Initiative’s standards for quantifying and reporting GHG emissions
- ISO 14064: International Organization for Standardization standards for GHG quantification and verification
- Other Equivalently Rigorous Standard: California Air Resources Board (CARB) may approve equivalent methodologies
Materiality Threshold for Scope 3
Companies must include Scope 3 emissions if they constitute 40% or more of total GHG emissions (Scope 1+2+3). This threshold balances comprehensiveness with proportionality, recognizing that Scope 3 represents the majority of emissions for most companies but is challenging to measure and verify.
Assurance and Verification
SB 253 does not initially mandate third-party assurance, but CARB has indicated that assurance requirements may be introduced in future years. Best practice and investor expectations increasingly favor independent verification at limited or reasonable assurance levels.
Reporting Timeline and Format
| Year |
Reporting Requirement |
| 2026 (First Report) |
Report calendar year 2025 GHG emissions; reporting deadline January 1, 2026 |
| 2027 and Beyond |
Annual reporting by January 1 each year for preceding fiscal year emissions |
| Ongoing |
CARB will specify detailed reporting format and data submission procedures; portal expected 2026 |
Penalties for Non-Compliance
SB 253 provides for penalties of up to $5,000 per day of violation. CARB has enforcement authority. However, initial enforcement is expected to prioritize large corporations and flagrant non-compliance; smaller entities may receive compliance assistance.
Senate Bill 261: Climate Accountability Act
SB 261 Overview
Creates strict liability framework for misleading climate-related claims; empowers California Attorney General to sue corporations making false or misleading statements about climate impacts, emissions reductions, and sustainability; applies to any company making public claims about climate performance or commitments in California.
Scope and Applicability
SB 261 applies to any entity making material misrepresentations about climate-related information, including:
- GHG emissions levels and trends
- Emissions reduction targets and progress toward targets
- Climate risk assessments and mitigation strategies
- Sustainability certifications or claims
- Investment in green technologies or renewable energy
Liability Standards
Strict Liability: Unlike traditional fraud statutes requiring proof of intent to deceive, SB 261 imposes strict liability for material misrepresentations. A company need not intend to deceive; merely making a false or misleading statement about climate matters creates liability.
Materiality Standard: A statement is material if a reasonable consumer, investor, or employee would consider it important in deciding to purchase, invest in, or work for the company.
Enforcement and Remedies
The California Attorney General has exclusive enforcement authority under SB 261. Remedies include:
- Civil penalties up to $2,500 per violation (or $5,000 if violation is intentional)
- Injunctive relief and mandated corrective advertising
- Restitution to injured consumers or investors
- Attorney’s fees and costs
Scope of Enforcement
As of March 2026, the California Attorney General has signaled active enforcement of SB 261. Several enforcement actions have been initiated against companies making overstated climate claims, particularly in the renewable energy, automotive, and consumer goods sectors. Companies should anticipate heightened scrutiny of climate communications.
Assembly Bill 1305: Expanded Corporate Accountability
AB 1305 Overview
Expands the scope of corporate climate liability; strengthens enforcement mechanisms; creates independent civil cause of action for climate-related harm; applies to corporations causing climate damages in California; addresses both false climate claims and inadequate adaptation planning.
Key Provisions
- Corporate Liability for Climate Damages: Corporations may be held liable for climate-related injuries and property damage if causation is established
- Adaptation and Resilience Requirements: Large corporations must assess and publicly disclose climate adaptation plans for facilities and operations in California
- Fiduciary Duty Enhancement: Corporate directors have fiduciary duty to consider climate-related risks and opportunities; breach of this duty creates potential personal liability
- Supply Chain Accountability: Corporations are responsible for material climate-related risks in their supply chains; failure to assess and disclose creates liability
Physical Risk and Adaptation Disclosure
AB 1305 requires corporations to disclose:
- Identification of facilities and operations exposed to physical climate risks (flooding, wildfire, extreme heat, drought)
- Assessment of climate impact on operations, supply chains, and financial performance
- Adaptation strategies and capital investments in resilience and mitigation
- Third-party assurance of adaptation planning where feasible
Legal Challenges and Current Status (March 2026)
Business Community Opposition and Litigation
California’s climate laws have faced significant legal challenges from business groups and Republican-led states, arguing overreach and unconstitutionality. Key arguments include:
Constitutional Arguments Against the Laws
- Commerce Clause Challenge: Argument that SB 253 and SB 261 impose undue burden on interstate commerce by regulating conduct outside California or by discriminating against out-of-state entities
- First Amendment (SB 261): Free speech arguments that mandatory disclosure of climate information compels speech or prevents freedom of expression on climate matters
- Due Process and Notice: Arguments that strict liability standard (SB 261) violates due process by punishing entities without requiring proof of intent
- Preemption Arguments: Federal law (SEC climate rule, EPA authority) may preempt state climate laws
Litigation Status as of March 2026
Multiple lawsuits challenging SB 253, SB 261, and AB 1305 are pending in California and federal courts. Key developments:
- California Chamber of Commerce, American Petroleum Institute, and other business groups have filed federal court challenges
- Several Republican states have filed amicus briefs opposing the laws
- Federal court has declined initial motions to block implementation, allowing the laws to proceed
- Final resolution may extend into 2026-2027; potential appeal to Ninth Circuit and Supreme Court
Enforcement Pause and Safe Harbor
While legal challenges proceed, California has not paused enforcement of SB 253 or SB 261. The Attorney General has announced enforcement priorities targeting:
- Material misrepresentations about emissions levels and targets
- Greenwashing in marketing and investor disclosures
- Supply chain emissions concealment
No formal safe harbor has been established, but companies making good-faith efforts to comply and correct errors may receive leniency from enforcement.
Compliance Strategy for Companies
Phase 1: Applicability Assessment (Months 1-2)
- Determine if your company meets SB 253 threshold (>$1B annual revenue; doing business in California)
- Review current climate disclosures and identify gaps relative to SB 253, SB 261, and AB 1305 requirements
- Assess climate-related claims in marketing, investor materials, and employee communications for compliance with SB 261 standards
Phase 2: GHG Emissions Accounting (Months 2-6)
- Establish GHG accounting methodology aligned with GHG Protocol, ISO 14064, or equivalent standard
- Collect baseline emissions data for Scope 1 and 2; identify Scope 3 categories and assess materiality (40% threshold)
- Implement data management systems for ongoing tracking and annual reporting
- Engage third-party verification provider for assurance (limited or reasonable assurance)
Phase 3: Climate Communications Audit (Months 3-6)
- Conduct comprehensive audit of all climate-related claims (marketing, advertising, investor relations, sustainability reports, website)
- Assess accuracy and substantiation of claims; identify potential SB 261 violations
- Correct or remove misleading or unsubstantiated claims
- Implement governance framework for climate communication review (legal, sustainability, investor relations approval)
Phase 4: Adaptation and Resilience Disclosure (Months 6-12)
- Assess physical climate risks to California facilities and supply chain partners
- Develop adaptation and resilience strategies addressing identified risks
- Disclose findings and adaptation plans in sustainability reports and corporate communications
- Implement capital investments in resilience (hardening, relocation, insurance)
Phase 5: Reporting Preparation (Months 12-18)
- Finalize baseline year 2025 GHG emissions calculations
- Obtain third-party assurance of emissions data
- Prepare SB 253 report for submission to CARB by January 1, 2026
- Document methodologies, assumptions, and exclusions for audit trail
Key Differences from Federal SEC Rule and EU Standards
| Dimension |
SB 253 |
SEC Climate Rule |
EU Taxonomy/CSRD |
| Applicability Threshold |
>$1B revenue (CA business) |
>$100M assets (public companies) |
>500 employees (EU companies) |
| Scope 3 Requirement |
If material (40%+ threshold) |
Phased; if material |
Required for most companies |
| Assurance Requirement |
Not yet mandated (best practice recommended) |
Not mandated (SEC encouraged) |
Limited assurance required |
| Liability Mechanism |
Strict liability for misstatements (SB 261) |
Securities fraud standards (intent required) |
Administrative penalties; director liability |
Frequently Asked Questions
If my company generates $1.2 billion in revenue but only 5% comes from California, do I need to comply with SB 253?
Yes. SB 253 applies to any entity with gross annual revenues exceeding $1 billion “doing business in California.” Even minimal California business operations trigger applicability. The law does not require proportional reporting; full company emissions must be disclosed if any California business activity exists.
What is the 40% materiality threshold for Scope 3 emissions?
If Scope 3 emissions (value chain, product use, waste) comprise 40% or more of total emissions (Scope 1+2+3), they are deemed material and must be included in SB 253 reporting. This threshold provides clarity on when Scope 3 disclosure is required, though best practice is to report Scope 3 even if below 40% if it represents a significant emission source.
How strict is the liability under SB 261?
SB 261 imposes strict liability, meaning a company can be liable for making false or misleading climate claims even without intent to deceive. The sole question is whether the statement is material and false. This is a significant departure from traditional fraud standards and creates substantial risk for overstated climate claims.
What happens if we miss the January 1, 2026 reporting deadline?
SB 253 provides penalties up to $5,000 per day of violation. While CARB may exercise discretion in enforcement, companies should prioritize meeting the deadline. If a company cannot meet the deadline, it should promptly notify CARB and file as soon as possible to minimize penalty exposure.
How do the California laws interact with SEC and federal regulations?
The California laws are more stringent than current federal regulations in several respects (strict liability under SB 261, Scope 3 materiality threshold, faster timeline). Companies with both California and federal obligations should implement controls satisfying the strictest standard (California) to ensure full compliance.
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