SB 253 vs. SB 261: What’s the difference?
Both SB 253 and SB 261 aim to enhance transparency around climate impacts — but they focus on distinct aspects of corporate accountability.
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SB 253 (Climate Corporate Data Accountability Act) requires companies with annual revenues exceeding $1 billion to report their annual Scope 1 and Scope 2 greenhouse gas (GHG) emissions in accordance with the Greenhouse Gas Protocol (GHGP). Scope 3 emissions — which account for indirect emissions across a company’s value chain — must also be reported, but not until after the first year.
Notably, California has announced it will not enforce Scope 3 reporting requirements during that first year of implementation, providing companies with additional time to prepare for these more complex disclosures.
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SB 261 (Climate-Related Financial Risk Act) mandates that companies with revenues over $500 million and doing business in California disclose climate-related financial risks and plans for addressing those risks in alignment with the Task Force on Climate-Related Financial Disclosures (TCFD).
Together, these two laws represent the broadest set of climate disclosure requirements enacted at a state level in the U.S.
Who needs to comply?
The reach of these bills is expansive:
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SB 253 affects approximately 5,400 companies, both public and private, that exceed the $1 billion revenue threshold.
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SB 261 impacts even more businesses—over 10,000 companies with revenues of $500 million or more doing business in California.
Importantly, these requirements apply to any large company doing business in California, regardless of where they are incorporated. There are no distinctions between public and private companies in the regulation.
The road to compliance: How to get started now
With the first reporting deadlines looming in 2026, businesses have a limited but critical window to align with these requirements. Here’s a phased approach to jumpstart your preparation:
Phase 1: Immediate data gathering
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Begin by calculating your baseline Scopes 1 and 2 carbon emissions.
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Develop initial reduction targets and a strategic roadmap.
Phase 2: Expanding to Scope 3
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Collect data needed to calculate your Scope 3 emissions, which are divided into 15 categories, and include indirect emissions from your entire value chain.
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Calculate your Scope 3 emissions to establish a baseline, and set meaningful reduction targets.
Phase 3: Mapping and managing climate-related financial risks.
Once emissions baselines are in place, companies should begin identifying and assessing the climate-related risks that could impact their financial performance. SB 261 requires alignment with the TCFD framework, which emphasizes a structured and forward-looking approach.
Start by assembling a cross-functional team — ideally with input from operations, finance, risk, and sustainability leaders — to:
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Identify potential risks by examining how climate change could affect key areas of your business, such as supply chain reliability, physical assets, energy use, and regulatory exposure. This includes both:
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Physical risks (e.g., extreme weather events, rising temperatures, water scarcity)
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Transition risks (e.g., shifting policies, market changes, consumer behavior, and investor expectations)
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Assess and prioritize these risks based on their likelihood and potential financial impact.
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Evaluate your company’s readiness to respond, and begin developing mitigation strategies or contingency plans as needed.
This foundational work sets the stage for clear, credible disclosures that align with TCFD expectations — and helps your business make more informed, resilient strategic decisions.
Beyond compliance: Turning mandates into opportunities
While compliance with SB 253 and SB 261 may seem like a daunting administrative task, businesses have an opportunity to approach these requirements strategically. By thinking beyond the checkbox, companies can:
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Enhanced investor confidence: Transparent disclosure demonstrates accountability, strengthening existing investor relations.
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Competitive advantage: Early compliance positions your business as a leader in sustainability, appealing to consumers and partners seeking responsible brands.
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Improved operational resilience: Identifying and addressing vulnerabilities proactively helps companies mitigate potential disruptions from climate-related events, preventing disruptions to sales and protecting your bottom line.
Next steps: Embedding climate risk management into your strategy
To effectively navigate SB 253 and SB 261, businesses should:
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Act early: Begin internal conversations and initial assessments now.
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Build cross-functional teams: Involve finance, operations, sustainability, legal, and leadership teams in compliance efforts.
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Utilize frameworks: Align your processes with GHGP and TCFD frameworks to streamline reporting.
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Prioritize resilience: Integrate climate risk considerations into your long-term business planning and operational strategies.
The stakes are high — not just due to potential penalties up to $500,000 for non-compliance, but more significantly because climate transparency increasingly influences stakeholder decisions.
Want a clear path forward?
If you’re looking for a practical, step-by-step plan to meet the impending regulation’s requirements, our new guide is a must-read. Preparing for SB 261: A roadmap for complying with the upcoming regulation walks you through the process of climate risk assessment, mitigation, and disclosure.
Here’s what you’ll learn:
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How to assess both physical and transition risks to your business
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How to align your reporting with the globally recognized TCFD framework
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What to include in your disclosure to meet the January 2026 deadline
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How to prioritize strategic actions based on your company’s unique risk profile
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How to turn regulatory compliance into a competitive advantage
👉 Download the free guide now and take the next step toward compliance, resilience, and climate leadership.
