SB 253 and SB 261: Is your business ready for California’s climate disclosure laws? 

Two Californian laws, SB 253 and SB 261, could require organisations doing business in California to disclose their full greenhouse gas footprint and their exposure to climate-related financial risk.

The broad definition of “doing business in California” means businesses based outside the state can still be affected, with many international and multi-state companies potentially in scope, often unknowingly.

With requirements like these subject to change at short notice, preparing now means your business can avoid being caught out later.

Below, we break down the requirements of SB 253 and SB 261 and the steps your business can take next.

SB 253: disclosing your full carbon footprint

SB 253 requires any public or private entity doing business in California with global annual revenue above $1 billion to publicly disclose greenhouse gas emissions.

“Doing business in California” is defined using California revenue and tax thresholds.

Reporting must cover all three Scopes:

• Scope 1 (direct emissions from owned or controlled sources, such as fuel use)
• Scope 2 (indirect emissions from purchased energy)
• Scope 3 (indirect emissions across the value chain, such as supply chain activity, business travel, product distribution and customer product use)

SB 253 goes beyond self-reporting. Disclosures must undergo independent third-party assurance, moving from limited to reasonable assurance over time.

Accuracy matters. Non-compliant data, miscalculations or unverified claims can lead to fines of up to $500,000 per year, as well as reputational and legal risks.

Where to focus your SB 253 preparation

Your approach should prioritise three key areas:

• In-scope entities: Corporate structures and subsidiaries need a technical review against revenue thresholds, since whether each entity is in scope can be difficult to determine.
• Assurance-ready data: Data collection and documentation for Scope 1, 2 and 3 should provide a clear audit trail, with calculations following defensible Greenhouse Gas (GHG) Protocol methodologies. Scope 3 is typically the most involved area of carbon accounting, since the calculations rely on collecting and standardising emissions data from your full value chain. It is important to maintain detailed records of your data sources and calculation methodologies to make sure your business is audit ready.
• Third-party verification: Third-party verification helps ensure your emissions calculations are robust and verifiable, with sufficient supporting evidence and an audit trail to meet assurance requirements.

SB 261: disclosing your climate-related financial risks

SB 261 requires US entities doing business in California with total annual revenue above $500 million to prepare and publish a climate-related financial risk report on their website every two years.

Reports must follow the Task Force on Climate-related Financial Disclosures (TCFD) framework, or an equivalent such as the International Sustainability Standards Board (ISSB) standards. This means going beyond carbon accounting to assess how climate change affects financial performance.

The TCFD framework is built around four core pillars:

• Governance: How the board and management oversee climate risks and opportunities.
• Strategy: Short, medium and long-term climate risks and opportunities, including scenario analysis (for example, 1.5°C vs 2°C+ warming scenarios).
• Risk management: The processes used to identify, assess and manage climate risks.
• Metrics and targets: The operational metrics and targets used to measure performance.

Where to focus your SB 261 preparation

Your approach should prioritise three key areas:

• Climate risk assessment: SB 261 calls for both quantitative and qualitative assessments of climate-related risk. That means modelling physical risks (such as extreme weather disruption) and transition risks (such as carbon pricing and regulatory shifts) across your operations.
• Specialist expertise: Climate risk modelling and framework-aligned reporting draw on specialist skills that are not always available within finance and legal teams.
• Alignment with reporting requirements: As a published document, your SB 261 report also needs to withstand regulatory scrutiny, investor audits and public evaluation. Falling short could lead to administrative penalties and reputational fallout.

Report once, disclose everywhere

For many businesses, SB 253 and SB 261 will sit alongside other reporting requirements.

Depending on where you operate, these may include the EU Corporate Sustainability Reporting Directive (CSRD) or UK Streamlined Energy and Carbon Reporting (SECR).

Mapping these requirements against each other means the same data can support multiple disclosures, avoiding duplicated work across frameworks and markets.

The value of starting early

Putting the right data, systems and expertise in place takes time, so starting now means your business can respond with confidence if requirements change.

Beyond compliance, early preparation creates a foundation for action: the same data can be used to set decarbonisation targets, such as Science Based Targets (SBTi), and identify energy cost savings.

How Inspired can help

Whether your business is preparing for SB 253, SB 261 or both, Inspired’s dedicated ESG consultants act as an extension of your team, providing the specialist expertise these disclosures require.

• Scope assessment: Assessing your corporate structure to determine whether a parent company or subsidiary is in scope, avoiding missed or duplicated reporting.
• Carbon footprint calculation: Measuring Scope 1 and 2 energy and fuel consumption and your Scope 3 footprint in line with the GHG Protocol, including supply chain mapping and supplier engagement to gather, clean and standardise primary emissions data.
• Climate risk and scenario modelling: Structuring financial scenario analyses to model the impact of physical and transition risks across your operations and aligning governance structures with TCFD expectations.
• Framework-aligned reporting: Producing TCFD-aligned climate risk reports built to withstand scrutiny from regulators, investors and the public.
• Data management: Centralising utility bills, fuel receipts and operational activity data in structured software platforms.
• Assurance readiness: Building audit-grade data collection and documentation in line with the GHG Protocol, with a pre-audit data review to prepare for third-party assurance.
• ISO 14064 verification: Verifying emissions data against ISO 14064, the international standard for greenhouse gas quantification and verification.
• Joined-up reporting and strategy: Mapping SB 253 and SB 261 against other frameworks to avoid duplicated work, then using the data to set actionable decarbonisation targets and identify energy cost savings.