Sacramento California outside the capital building
getty
In 2023, California passed legislation requiring large companies to file climate change disclosures. In February, the California Air Resources Board adopted what was thought to be the final language, enacting corporate greenhouse gas reporting and climate-related financial risk disclosure requirements starting in August 2026. However, in June, CARB withdrew the original language and delayed implementation. The new final proposal was released on July 27, triggering a 15-day comment period before it progresses.
In September 2023, California approved the Climate Accountability Package, a pair of bills aimed at creating sustainability reporting requirements. Senate Bill 253 required companies that do business in California and have an excess of $1 billion in revenue, defined as “reporting entities”, to submit an annual report for Scope 1 and Scope 2 starting in 2026. Scope 3 reporting will begin in 2027.
Senate Bill 261 required companies that do business in California and have an excess of $500 million in revenue, defined as “covered entities”, to submit a biennial climate-related financial risk report. The report is based on the work of the Task Force on Climate-Related Financial Disclosures, established by the Financial Stability Board.
The responsibility of drafting specific regulations and implementing the reporting standards was delegated to the California Air Resources Board. CARB was initially given until January 1, 2025 to draft the rules and processes. However, the process of drafting such complex regulations required more time. As a result, the Legislature gave CARB an additional six months to complete the drafting in Senate Bill 219, a deadline they failed to meet. These three bills have been nicknamed “the 200s” by regulators.
CARB was in the final stages of adopting the enacting language, when the courts intervened. In November 2025, the United States Court of Appeals for the Ninth Circuit issued a temporary order pausing the enactment of SB 261. It did not pause SB 253, and as a result, CARB moved forward. On February 26, the full board of CARB voted to approve the staff proposal.
However, during that meeting the board directed the executive director to consider if additional modifications were needed. On May 20, CARB submitted an updated rulemaking proposal to the Office of Administrative Law for review. On June 23, CARB withdrew the regulation adopted in February. They also delayed implementation from August to November.
Similar delays and problems have plagued the development of sustainability reporting and climate-related risk reporting in in jurisdictions around the world. Legislators were quick to adopt reporting requirements when they were politically trendy in 2020 and 2021. However, the legislative requirements passed were general, establishing timelines and goals, while delegating the drafting of the specifics to regulatory bodies.
Once the actual drafting began, regulators struggled to develop the new standards. The nuances of creating an entirely new regulatory scheme, while balancing the pressure from environmental groups and the impacted businesses proved more complicated than legislators originally envisioned.
Some jurisdictions, including the European Union and the U.S. Securities and Exchange Commission, reversed course under political pressure, either reducing or eliminating the requirements. Most jurisdictions narrowed the scope of the reporting requirements, limiting their impact to extremely large, publicly traded companies.
California held the line, keeping the original language from 2023 intact. However, as was predicted by Governor Gavin Newsom when he signed the bills into law, implementation had to be delayed.
The new final regulation mostly mirrors the proposal adopted in February. Many changes are stylistic, attempting to conform to the language of the regulation to existing language in use in other state statutes.
One notable change is to the definition of a subsidiary. The original regulation clearly defined what factors are considered to determine if a company is a subsidiary or stand alone entity. The updated proposal removes the definition and points to a definition found in another section of the code. The summary stated “This clarifying change is intended to resolve stakeholder confusion regarding indicia used to determine whether entities have a direct corporate association.”
The update also incorporates language relating to the reporting requirements for 2026. CARB previously issued guidance stating that companies would be required to report for FY 2026, but only data that the company was already gathering on December 5, 2024 when the guidance was issued. This original guidance was meant to alleviate concerns by businesses that they will be required to meet new reporting requirements, but without sufficient notice or time to collect the data. The updated proposal codifies that requirement.
Public Comment is open until August 11. CARB will then review those comments before presenting the proposal to the full board for approval. Barring any further delays, it appears that climate change reporting will begin in late 2026, with the real focus being on 2027.