The Clock Is Ticking: Are You Ready for California’s Climate Rules? Disclosures Due January 1, 2026
AUTHORS: CARLI SCHOENLEBER, PAULYNN CUE
REVIEWERS: VANESSA VLASAK, KATIE TEARE, DANA WEISS, NOAH GORDON, MARY REAMES OCTOBER 22, 2025Highlights
California’s New Climate Laws: Taking effect in January 2026, Senate Bill (SB) 261 and SB 253 will require thousands of public and private companies doing business in the state to begin public reporting on climate-related financial risks and greenhouse gas (GHG) emissions.
Key Deadlines: Companies with over $500 million in annual revenue must publish SB 261 climate-risk reports by January 1, 2026. SB 253 emissions reporting for companies with over $1 billion in revenue starts on June 30, 2026, for scope 1 and 2 emissions and in 2027 for scope 3 emissions (both dates subject to change).
Initial Rulemaking: Expected by the first quarter of 2026, however obligations and deadlines are already established in law. Companies should not wait until CARB issues initial rulemaking to begin preparing disclosures.
Start Now or Fall Behind: Companies that haven’t begun preparing are already at risk of falling behind. Immediate action is essential to avoid compliance gaps and protect credibility with investors. Verdani’s experts can guide your company through each step to meet California’s 2026 deadlines with confidence.
Introduction
Together, California’s SB 261 and SB 253 establish the most comprehensive state-level climate reporting requirements in the nation. Adopted in 2023, SB 261 requires disclosure of climate-related financial risks, while SB 253 mandates GHG emissions reporting.
By aligning with global standards for climate transparency, California is setting the pace for U.S. disclosure — with states like New York, Illinois, Colorado, and New Jersey moving in the same direction. Designed to provide decision-useful information for investors and other stakeholders, these laws advance consistent, comparable climate reporting across markets.
The first deadline for SB 261 is January 1, 2026, and will cover all sectors, including real estate, banks, retailers, manufacturers, and other companies with California holdings or operations. Initial rulemaking is expected from the California Air Resources Board (CARB) by the first quarter of 2026, but the deadlines and core requirements of the CA climate rules are already written in law (see bill text: SB 261, SB 253).
First: See If You’re Impacted
CARB’s preliminary list of covered companies (published on September 24) is a helpful starting point.
It includes over 4,000 public and private companies, along with some non-profit organizations, that may be required to comply with SB 261 and/or SB 253. However, some expected names are missing, meaning the list should not be misconstrued as exhaustive. Companies doing business in California should confirm independently whether they are in scope.
Proposed Definitions for Applicability
Proposed definitions for applicability are still under review, forcing companies to move forward with compliance efforts as the industry waits for more information. So far, CARB has signaled the following:
Revenue may be defined as gross receipts under California Revenue and Taxation Code (RTC) §25120, although CARB has also discussed alternative approaches, such as using global sales. Final guidance is pending.
Doing business in California was initially proposed to align with the tax code definition under RTC § 23101, which includes thresholds for sales, property, or payroll (e.g., sales above $735,019). However, CARB has since indicated it may explore alternative approaches, and the final definition remains under review.
Applying these criteria in practice can be complex, particularly for companies with multiple subsidiaries or shared service operations, where consolidating reporting boundaries and revenue can be less straightforward. With deadlines upon us, organizations need to prepare disclosures under the assumption they will need to disclose, while awaiting final applicability guidance.
To support the applicability determination, CARB also released a voluntary stakeholder survey that lets companies input business information to help determine if they are in scope of the reporting requirements.
SB 261 and Climate Risks: The Immediate Priority
Companies must prepare a public report on climate-related financial risks by January 1, 2026, to be posted on their website and aligned with accepted frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) or the International Financial Reporting Standards (IFRS) S2 Climate-related Disclosures. Reports must cover:
Governance
Strategy
Risk management
Metrics and targets
For companies new to climate-risk reporting, the challenge of building systems, collecting data, and preparing credible disclosures by the end of 2025 is steep. SB 261 reports will be public and thus may face scrutiny from customers, regulators, banks, and investors — weak or incomplete filings carry not only regulatory but also reputational risk.
CARB’s draft checklist (published on September 2) sets minimum expectations and emphasizes that disclosures should be prepared through the lens of “decision-usefulness for investors and other stakeholders.” Importantly, it clarifies that GHG emissions are not required to be reported under SB 261 (only SB 253).
Your Path to Compliance (SB 261)
Conduct a climate hazard assessment covering both potential physical risks (e.g., wildfire, flooding, extreme heat) and transition risks (e.g., regulation, insurance, carbon pricing). For many companies, this also involves modeling potential scenarios, integrating climate considerations into governance processes, and ensuring board-level oversight — steps that extend beyond disclosure into core business strategy.
Choose your reporting framework. SB 261 allows alignment with the TCFD framework, the more comprehensive IFRS S2 standards, or another framework prescribed by a government or regulated exchange.
Draft financial risk disclosures aligned with CARB’s checklist, saving time for internal review and benchmarking against peers if possible.
Engage internal stakeholders. Finance and legal departments, supply chain managers, and the board all play critical roles. Cross-functional coordination helps ensure climate-risk reporting is accurate, relevant, and integrated into enterprise-wide risk management, rather than siloed in sustainability teams.
Engage external experts to support in identifying data gaps, aligning with recognized frameworks, and strengthening your company’s compliance strategy. Working with consultants can help ensure your report not only avoids regulatory risk but also builds credibility with investors.
Deadlines and fees:
Prepare to report on website by January 1, 2026.
Register with CARB’s public docket by July 1, 2026 (opens December 1, 2025).
Pay the CARB compliance fee of approximately $1,403 annually.
Create a strategy to fill disclosure gap in time for the 2028 submission (i.e., biennial reporting schedule) .
SB 261 Disclosure Process Overview
SB 253 and GHG Emissions: The Next Wave
SB 253 disclosures are due starting in 2026:
Scope 1 and 2 GHG emissions starting June 30, 2026 (subject to change).
Scope 3 GHG emissions starting in 2027, with exact timing and phasing to be set by CARB through the rulemaking process.
Unlike SB 261, SB 253 requires third-party data assurance. Companies must begin with limited assurance for scope 1 and 2 emissions in 2026 and eventually move to reasonable assurance by 2030 — the same rigor applied to financial audits. For scope 3 emissions, limited assurance will be required by 2030. CARB has also noted it may audit assurance and reporting activities, underscoring the need to build robust systems now.
Why Scope 3 Is More Complex
The biggest challenge for many organizations will be scope 3, or value chain emissions, from supply chains, tenant energy use, and construction materials, which often make up the majority of a company’s emissions. Asset management company Robeco reported in 2023 that scope 3 makes up 86% of real estate emissions, seven times more than scopes 1 and 2.
Collecting and validating this data is difficult because it is scattered across suppliers, subsidiaries, and tenants, often requiring a patchwork of utility bills, fuel use records, and third-party estimates where gaps remain.
Your Path to Compliance (SB 253)
Check for updates from CARB here. CARB is expected to develop initial rulemaking by Q1 2026.
Review draft reporting templates for scope 1 and 2 GHG emissions (posted on October 10); CARB is collecting feedback on these templates until October 27 (see link in bullet above to download).
Review corporate and reporting boundaries to determine what is included in your scope 1 (on-site fuel use) and scope 2 (electricity use) inventories. Assess potential fugitive emissions (a key component of scope 1).
Review scope 1 and 2 tracking systems for completeness and accuracy.
Launch a scope 3 materiality assessment to set boundaries and identify data gaps.
Engage assurance providers in preparation for a capacity crunch as deadlines approach.
Develop estimation methods and strengthen data gathering systems to support reliable reporting.
Engage external experts to help assess materiality, compile and verify scope 1–3 emissions data, align reporting with GHG Protocol standards, and prepare for third-party assurance.
Deadlines and fees:
Report by June 30, 2026, for scope 1 and 2 emissions (subject to change), with scope 3 reporting requirements phasing in starting in 2027 (subject to change). Data must be assured by a third party.
Pay the CARB compliance fee of approximately $3,106 annually.
Create a strategy to fill disclosure gaps in time for the 2027 submission (i.e., annual reporting schedule).
For more background on these laws, see our May 2025 fact sheet, Understanding California’s Climate Legislation – What You Need to Know About SB 253 and SB 261.
Verdani is Your Compliance Partner for California’s Climate Rules
California’s climate disclosure laws mark a major shift toward embedding climate reporting into the fabric of the U.S. economy. They align not only with proposed regulations from other U.S. states but also with rising global expectations for corporate transparency on climate risks (e.g., IFRS, CSRD).
For companies in scope, starting now is essential to reduce the risk of incomplete reporting or non-compliance. With the January 2026 deadline fast approaching, companies need to act quickly to determine applicability, build data systems, and draft credible disclosures.
Verdani is working with clients across industries — from large real estate portfolios to major consumer brands and manufacturers — to prepare for SB 261 and SB 253. With deep sustainability reporting expertise, proactive monitoring of evolving requirements, and end-to-end program support, we help organizations:
Understand applicability under SB 253 and SB 261
Develop inventories and climate risk assessments aligned with TCFD or IFRS S2
Prepare audit-ready climate disclosures that meet CARB requirements and investor expectations
Going beyond checking the box on compliance, Verdani helps clients turn reporting into a value driver — mitigating risk, strengthening governance, and building credibility with investors, tenants, and other stakeholders.
The clock is ticking. Develop disclosures now to stay ahead of the rules and turn compliance into an opportunity to build resilience and trust.
Contact our business development team at [email protected] to learn more.
Authors and Reviewers
Carli Schoenleber
SENIOR COMMUNICATIONS MANAGER (CONTENT AND ENGAGEMENT SPECIALIST)Carli is a Senior Communications Manager at Verdani Partners, where she leads thought leadership, chairs the Engagement Committee, and serves as primary author for Verdani's nonprofit, the Verdani Institute for the Built Environment. With over a decade of experience in the sustainability field, she bridges research and communications to translate complex issues into persuasive messaging and actionable strategies that drive business value and positive impact. Carli holds a B.S. in Environmental Science, Policy, and Management from the University of Minnesota and an M.S. in Forest Ecosystems and Society from Oregon State University.
PAULYNN CUE
CHIEF COMMUNICATIONS & BUSINESS OFFICERPaulynn is the Chief Communications Officer for Verdani Partners, bringing over 20 years of experience in sustainability and ESG, business development, communications, design, and regenerative development. She has been instrumental in shaping Verdani’s programs since 2014. Paulynn studied architecture at Carnegie Mellon University, advertising at New York University, and environmental design at Parson’s School of Design, and has worked with leading organizations such as Gensler, World Building Institute, and the Intergovernmental Renewable Energy Organization Sustainable Development Commission.
Vanessa Vlasak
ASSOCIATE SUSTAINABILITY MANAGERVanessa is an Associate Sustainability Manager at Verdani Partners, supporting one of Verdani’s largest clients in advancing their sustainability program. She has over four years of experience in green real estate and clean energy and is passionate about driving meaningful sustainability initiatives in the commercial real estate sector. Additionally, she contributes to the development of biodiversity services and serves as Co-Chair for Verdani’s Regulatory Committee. Vanessa holds a B.S. in Environmental and Ocean Sciences from the University of San Diego.
Katie Teare
SENIOR SUSTAINABILITY MANAGERKatie is a Global Sustainability Manager with 11 years of experience advancing sustainability in the built environment, with a focus on green building, construction, and commercial real estate. At Verdani Partners, she leads SFDR and GRESB reporting for a major client and serves as Chair of Verdani’s Regulatory Committee. Katie holds Master’s degrees in Business Administration and Public Administration from Presidio Graduate School and a B.S. in Environmental Studies from University California, Santa Barbara.
Dana Weiss
SENIOR DIRECTOR OF SUSTAINABILITY, HEAD OF RESILIENCEDana is a Senior Director of Sustainability at Verdani Partners specializing in climate risk disclosures, management, and resilience. With over 17 years of experience in sustainable design and corporate responsibility, she leads and advises client sustainability teams and spearheads climate resilience across all Verdani clients. Additionally, Dana aids in the strategy and development of decarbonization services and quality control measures. She holds an MBA in Sustainable Business from Presidio Graduate School and a Bachelor of Landscape Architecture degree from SUNY-ESF.
Noah Gordon
ASSOCIATE DIRECTOR OF SUSTAINABILITYNoah is an Associate Director of Sustainability specializing in reporting, residential and industrial real estate, and stakeholder engagement. He has 15 years of experience with the built environment, working in residential property management, urban planning, and sustainability consulting. At Verdani, Noah helps to advance regulatory services and is the GRESB subject matter expert as well as serving as Co-Chair for Verdani’s Regulatory Committee. He holds a B.A. in Political Science from The Ohio State University with master’s course work in Urban Planning and Public Policy from the University of Illinois Chicago.
Mary Reames
SENIOR DIRECTOR OF COMMUNICATIONSMary is a Senior Communications Director specializing in stakeholder engagement and sustainability education. She has over 20 years of experience in sustainability and professional communications, working in sustainability and green building consulting, legal publishing, and environmental law. While at Verdani Partners, she has worked with multiple clients, leading annual report and sustainability education projects to deliver products that engage stakeholders from investors to tenants. Mary holds a B.A. in Sociology and Anthropology from Carleton College, a B.S. in Sustainable Management from the University of Wisconsin – Parkside, and a J.D. with a concentration in Environmental Law from Chicago-Kent College of Law.
Resources
Copyright © 2025 Verdani LLC. All rights reserved. The information contained within this publication was developed using Verdani’s general professional judgment. This publication was prepared without reference to any specific property or scenario and is not intended to substitute for the professional advice of an attorney, engineer, or other climate change professional. Content and data subject to change. Similar outcomes are not guaranteed based on prior results. Neither Verdani LLC nor its employees or agents can be held responsible for the use or misuse of the information contained herein, and Verdani LLC hereby disclaims any liability for damages arising from the use of this information, including without limitation, direct, indirect, or consequential damages including personal injury, property loss, loss of revenue, loss of opportunity, or other loss.
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