The California Effect: How SB-253 & SB-261 Will Reshape Global Climate Reporting in 2026

SB 253 and SB 261 apply to large US-formed companies doing business in California, with SB 253 covering companies above $1 billion in revenue. 2026 is the year SB 253 forces a complete, auditable Scope 3 inventory, often using data from the whole global group, while SB 261 is on hold by injunction but its obligations remain.

Introduction

California has finalized regulations to implement its landmark climate disclosure laws, SB‑253 and SB‑261, creating the most expansive U.S. reporting regime for large companies doing business in the state in 2026.

These rules will require covered entities to disclose their full greenhouse gas emissions (including Scope 3) and climate‑related financial risks on a set timeline, with strong links to global frameworks like TCFD, the GHG Protocol, and emerging SEC and EU standards. For global companies, this effectively turns California into a de facto gateway that can trigger enterprise‑wide emissions and risk reporting—even if the corporate headquarters is outside the United States. 

California’s Climate Corporate Data Accountability Act (SB‑253) and Climate‑Related Financial Risk Act (SB‑261) now have implementing regulations that clarify who must report, what they must disclose, and when compliance starts in 2026 and beyond. Together, they are designed to make climate data from large companies more consistent, comparable, and decision‑useful for regulators, investors, and the public.

For global companies, the key shift is that “doing business in California” and crossing certain revenue thresholds can now trigger mandatory climate disclosure—regardless of the parent company's headquarters. That means a non‑U.S. multinational with substantial California revenue may fall into scope even if its primary regulatory focus has previously been the EU’s CSRD or voluntary TCFD‑style reporting. In effect, California is setting a new baseline for global climate disclosure.

Key Numbers at a Glance

• SB‑253 revenue threshold: more than 1 billion USD in annual total revenue for U.S.-formed entities doing business in California.
• SB‑261 revenue threshold: more than 500 million USD in annual total revenue for U.S.-formed entities doing business in California.
• First SB‑253 Scope 1 and 2 report due: August 10, 2026 (covering prior‑year emissions).
• Scope 3 emissions under SB‑253: phased in starting with 2027 reports using 2026 data.
• SB‑261 first statutory report date: January 1, 2026, but CARB is not enforcing SB‑261 while an injunction is in place; climate‑risk reporting is voluntary until litigation outcomes and new timelines are clarified.
• Assurance: limited assurance on Scope 1 and 2 from initial years, ramping over time toward reasonable assurance around 2030.

Who is Covered Under SB‑253 and SB‑261?

At a high level, both laws apply to large public and private U.S.-formed companies that do business in California and exceed specified annual revenue thresholds. “Doing business” uses existing California tax‑law concepts, so your tax and legal teams should confirm which group entities meet that test.

• SB‑253: Targets U.S.-formed entities with more than 1 billion USD in annual global revenue that do business in California, requiring annual climate pollution (GHG) disclosures.
• SB‑261: Targets U.S.-formed entities with more than 500 million USD in annual global revenue that do business in California, requiring biennial climate‑related financial risk reports.

In practice, global groups need to map which U.S. entities are formed under U.S. law, where revenue is consolidated, and how California nexus is created, then decide which entity (or entities) will act as the reporting company.

Why SB‑253 is the “make‑or‑break” Year for Scope 3

For most global groups, SB‑253 is not “just another report”—it is the trigger that forces a complete, auditable Scope 3 inventory. California’s August 10, 2026, deadline effectively turns 2026 into the make‑or‑break year for enterprise‑grade emissions data systems.

• Many companies have mature Scope 1 and 2 inventories but patchy, spreadsheet‑based Scope 3 estimates across purchased goods, transportation, and use of sold products.
• SB‑253 pushes organisations to standardise methodologies, centralise data, and prepare for third‑party assurance, which in turn raises expectations from investors and other regulators globally.
  

Common Mistakes Companies Will Make in 2026 (And How to Avoid Them)

As companies move toward SB-253 and SB-261 compliance, several predictable pitfalls are already emerging. Avoiding these early can significantly reduce cost, risk, and rework.

Treating California as a local compliance issue
Many organisations assume SB-253 applies only to U.S. operations. In reality, Scope 3 requirements and consolidated reporting often require global data coverage, making this a group-wide transformation.

Relying on spreadsheet-based Scope 3 estimates
Manual, fragmented approaches may work for voluntary disclosures, but they break down under audit and assurance requirements. Companies need structured systems, standardised methodologies, and clear audit trails.

Separating climate risk from enterprise risk management
Climate-related risks are often analysed in sustainability teams but not integrated into financial planning or board-level governance. SB-261—and parallel global frameworks—require decision-useful, financially relevant risk insights.

Underestimating assurance readiness
Limited assurance may seem manageable, but preparing for it requires controls, documentation, and repeatable processes similar to financial reporting. Retrofitting this later is significantly more expensive.

Delaying action due to regulatory uncertainty (especially SB-261)
Even with enforcement delays, companies that wait risk falling behind. The most effective organisations are using 2026 to build systems and governance that align across California, SEC, and EU requirements simultaneously.

How do SB 253 and SB 261 differ for global companies?

SB-253 and SB-261 form two complementary pillars of California’s climate disclosure framework. SB-253 drives standardised, auditable emissions data, while SB-261 focuses on decision-useful climate risk and governance disclosures. Understanding how these requirements differ—and how they intersect—is critical for building an efficient, integrated global reporting strategy. The table below summarises the key differences:

SB‑261 in 2026: Injunction Now, Obligations Later

Because of ongoing litigation, SB‑261 sits in a different place than SB‑253 in early 2026.

• A federal court has issued an injunction restricting enforcement of SB‑261, and CARB has stated that it will not enforce SB‑261 reporting deadlines while the injunction stands.
• The regulations are approved, and the law is not repealed, so companies should expect climate‑risk reporting to resume once legal challenges are resolved or the law is amended.
• For most global groups, the practical approach is to build SB‑261‑ready climate‑risk analysis as part of broader SEC/CSRD/TCFD work, even if the first California‑specific report is delayed.

What does this mean for non-US multinationals?

For non‑U.S. multinationals, California’s regime is best understood as a “California trigger, global impact” system. Crossing the revenue threshold with California‑connected business can create reporting duties that require group‑wide emissions inventories and climate‑risk analysis, even if only a fraction of operations are physically in the state.

This raises several operational challenges:

• Data coverage: Many groups have good Scope 1 and 2 inventories, but incomplete or siloed Scope 3 data across complex supply chains.
• Governance alignment: Climate‑related financial risks might be analysed for EU or investor‑driven reporting, but not yet integrated into group‑wide risk management and board oversight.
• Assurance readiness: Independent assurance expectations require emissions and risk data to be traceable, documented, and supported by internal controls comparable to those in financial reporting.

The most efficient approach is to treat California’s rules as part of a broader global climate‑reporting program rather than as a separate side project.

For a deeper policy and supply‑chain perspective, see this analysis of how SB‑253, SB‑261, and AB‑1305 reshape supply‑chain management and Scope 3 reporting.

2026 Priority Checklist for Global Companies

To turn these regulatory demands into a practical plan, global companies can follow a clear, action‑oriented sequence. 

1. Confirm in‑scope entities and thresholds:  Map all group entities that “do business in California” and analyse consolidated and entity‑level revenue against the applicable thresholds. Clarify which legal entity will be treated as the reporting company and how group‑wide data will be consolidated.
2. Build a complete emissions inventory (SB‑253): Ensure Scope 1 and Scope 2 emissions are measured consistently across the group, using a recognised standard like the GHG Protocol. Begin or accelerate Scope 3 data collection and estimation, prioritising material categories such as purchased goods, use of sold products, transportation, and capital goods.
3. Assess climate‑related financial risk (SB‑261): Identify climate‑related physical and transition risks that could materially affect cash flows, asset values, or business models. Align these assessments with your existing risk taxonomy and ensure they are integrated into enterprise risk management, not treated as a standalone sustainability exercise.
4. Align with global frameworks (SEC, CSRD, TCFD, ISSB): Map California disclosure requirements to existing and upcoming obligations under SEC climate rules, EU CSRD, and ISSB‑based standards. Look for opportunities to use one set of data, controls, and narratives to meet multiple regulatory requirements.
5. Upgrade climate data governance and assurance readiness: Treat emissions and climate‑risk data with the same discipline as financial data. Define owners, implement standard processes for data collection and validation, document methodologies and assumptions, and prepare for increasing levels of independent assurance.
6. Invest in enabling systems and workflows: Replace spreadsheet‑driven processes with systems that can ingest activity data, calculate emissions, manage climate‑risk information, and generate audit‑ready outputs. Look for platforms that support multi‑regime reporting so you are not locked into California‑specific templates.
7. Educate leadership and the board: Brief senior management and the board on California’s rules, global convergence in climate disclosure, and the strategic implications for capital allocation, product strategy, and supply‑chain design. This makes it easier to secure resources and ensure governance disclosures are grounded in reality.

How Zero Circle Can Help

SB‑253 and SB‑261 compliance doesn't have to mean building separate processes for every jurisdiction. Zero Circle gives compliance, sustainability, and finance teams a single environment to manage emissions data, climate-risk analysis, and regulatory outputs — across California, the SEC, the EU, and beyond.

• Emissions management: Ingest activity data, apply GHG Protocol methodologies, and generate audit-ready Scope 1, 2, and 3 inventories.
• Climate-risk reporting: Structure TCFD-aligned risk assessments that map directly to SB‑261, SEC, and CSRD requirements.
• Assurance readiness: Maintain traceable, documented data with the controls your third-party assurance provider will expect.
  
  Turning these requirements into scalable, repeatable processes requires the right systems and data architecture.
  To see how Zero Circle works in practice, Explore our Platform.

Conclusion: Turn California into a Catalyst, Not a Compliance Scramble

For global companies, California’s climate disclosure rules are no longer a distant policy concept—they are a 2026 operational reality that will reshape how emissions and climate‑related risks are measured, governed, and communicated. Treating SB‑253 and SB‑261 as the backbone of a global climate‑reporting architecture—rather than as siloed state‑level obligations—allows organisations to turn a regulatory burden into a catalyst for better data, stronger governance, and more credible climate strategy worldwide.

Frequently asked questions

Who is covered by SB 253?

SB 253 applies to US-formed entities doing business in California with more than $1 billion in annual total revenue, both public and private.

Why is 2026 a make-or-break year for Scope 3?

For most global groups, SB 253 is the trigger that forces a complete, auditable Scope 3 inventory, not just another report.

What are common SB 253 and SB 261 mistakes?

Treating California as a local issue when group-wide data is needed, relying on spreadsheet Scope 3 estimates, separating climate risk from enterprise risk management, underestimating assurance readiness and delaying action because of regulatory uncertainty.

How do SB 253 and SB 261 differ?

SB 253 drives standardized, auditable emissions data, with limited assurance in early years ramping to reasonable assurance. SB 261 covers narrative climate-risk reports with no explicit assurance mandate yet.

What does California's regime mean for non-US multinationals?

It works as a California trigger with global impact. Crossing the threshold through a US entity can require data from the wider group.