Full disclosure: how preparing for California’s SB 253 and SB 261 can drive business value

Risilience has partnered with Carbon Direct to support companies to comply with climate disclosure laws and identify opportunities for value creation beyond reporting. Saim Ghouse, Head of Client Development – Americas at Risilience and Julia Millot, Carbon Accounting and Target Setting Lead at Carbon Direct, set out how to prepare for California’s disclosures to drive business value.

California is once again on the front foot of climate policy. With the passage of SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act), the state has signaled a new era of climate accountability for business that reaches far beyond its borders.

Time is running out

Even if your organisation is not headquartered in California, companies ‘doing business in California’ will be considered in scope for these disclosures. Time is short too; compliance deadlines are set for 2026, making timely preparation a priority.

These laws matter and can push organisations to take the important first step of establishing baselines for their emissions to better understand the material impacts of climate risk and apply these insights to inform business strategy.

Taking action now is wise; public disclosures can affect investor expectations, supply chain practices, and reputational standing on a global scale.

What does SB 253 and SB 261 require?

At its core, SB 253 mandates that companies quantify their carbon footprint and report on it with investor-grade rigor. For companies doing business in California with more than $1 billion in annual revenue, SB 253 requires:

Disclosure of Scope 1 and Scope 2 GHG emissions by June 30, 2026
Disclosure of Scope 3 emissions starting in 2027

The law includes annual reporting obligations and assurance standards. Recent updates from the California Air Resources Board (CARB) clarify timelines, methodologies, and verification processes, adding specificity but also raising the compliance burden. Regulators can impose penalties for inaccurate or delayed disclosures.

SB 261 requires companies to assess how climate change affects their financial resilience. For companies doing business in California, with more than $500 million in annual revenue, SB 261 requires:

Disclosure of climate-related financial risks, aligned with the Task Force on Climate-related Financial Disclosures (TCFD) or equivalent framework such as the IFRS Sustainability Disclosure Standards (ISSB) by January 1, 2026.

SB 261 creates a biennial reporting requirement. Currently limited assurance is not required, but this could change as other global disclosure requirements (ISSB, CSRD) have included this requirement.

Who must comply with California climate disclosure?

Nearly 2,600 US and international companies must comply with SB 253 and over 4,100 must comply with SB 261. These laws apply to companies doing business in California, regardless of where they maintain their headquarters.

Why companies must act now

With 2026 on the horizon, it’s essential that companies start putting these analyses in motion now. Assessing climate-related risks and measuring GHG emissions takes time and requires input from multiple stakeholders.

Risk analysis requires iteration. Climate risk assessment and scenario modelling requires engagement with multiple internal stakeholders for data collection (emissions, physical footprint, financials) and analyses and sign-off from finance, the C-suite and often the board. With a January 1 deadline, the clock is ticking.
Data collection moves slowly. Engaging suppliers, gathering Scope 1 and Scope 2 data, validating inputs, and refining estimates requires extensive coordination and planning. Even though Scope 3 isn’t required until 2027, companies should begin collecting that data now to be prepared.
Delays bring penalties. Non-compliance can trigger financial penalties, regulatory scrutiny, and negative press coverage. This is particularly damaging in an era of rising investor activism and stakeholder attention to climate risk.

Acting now can help companies uncover cost savings and operational efficiency improvements while gaining credibility with stakeholders.

What are the challenges to being prepared?

Despite the urgency, many companies face significant barriers to readiness.

Data gaps: emissions data is often incomplete, inconsistent, or unavailable from external partners. Companies may rely on estimates or industry averages, which may not meet investor-grade standards.
Integration difficulties: SB 253 requires emissions disclosure; SB 261 requires risk disclosure. Treating these as separate workstreams creates duplication and missed insights. Emissions inventories should feed directly into financial risk modeling.
Resourcing constraints: internal teams may lack the time, expertise, or technology to manage the complexity of compliance. Competing business priorities can push climate disclosure down the list until it’s too late.
Assurance requirements: investors and regulators are increasingly demanding audit-ready data. Cutting corners today leads to painful restatements and credibility gaps tomorrow.

Four steps to take now

To prepare effectively, companies should move quickly on four fronts:

Assess readiness: benchmark current emissions inventories and climate-risk analyses against SB 253 and SB 261 requirements. Identify gaps in data, process, and governance.
Start data collection: supplier engagement requires the longest-lead. Begin outreach, build reporting expectations into contracts, and deploy technology to streamline collection.
Integrate risk scenarios: use emissions data to run initial transition risk analyses and identify your operational footprint for physical risk assessments. Even preliminary results can inform strategic planning and investor communication.
Engage leadership and investors: ensure boards and executive teams are engaged early and align disclosures with broader financial and strategic planning. Investors increasingly view climate disclosure as core to fiduciary responsibility.

How to optimise compliance with SB 253 and SB 261: linking emissions to risk

The most effective approach is to treat SB 253 and SB 261 as two sides of the same coin.

Emissions disclosure (SB 253) provides the hard data on a company’s carbon footprint.
Risk disclosure (SB 261) uses that data as inputs for modelling the financial impacts of climate risk.

This is a closed-loop system: emissions inform risk, risk informs strategy, and strategy drives emissions reductions.

Risilience and Carbon Direct have partnered to help companies manage this cycle end-to-end:

Carbon Direct builds robust, assurance-ready GHG inventories across Scope 1, 2, and 3 emissions.
Risilience leverages that data to run forward-looking scenario analyses aligned with TCFD and other global standards, identifying impacts of transition and physical risks to operations and financials.

Together, these capabilities provide a compliance-ready toolkit that transforms disclosure into strategic planning.

Compliance creates competitive advantage

Rather than addressing SB 253 and SB 261 as compliance burdens, companies that move early will realise there are also opportunities for competitive advantage.

Stronger investor relationships through credible, transparent reporting.
Better supply chain management by engaging suppliers on carbon data.
Improved resilience to climate shocks through proactive risk planning.
Futureproofing as disclosure expands globally and investor scrutiny intensifies.

California’s laws are the opening act of a broader shift toward mandatory climate disclosure. Companies that lead now will not only avoid penalties but also earn trust, reduce costs, and strengthen long-term competitiveness.

The clock is ticking. Partner with Risilience and Carbon Direct today to prepare for SB 253 and SB 261 and leverage compliance to deliver resilience, drive efficiencies and grow business value.

• Register for the Carbon Direct-hosted webinar, Full disclosure: What California’s SB 253 and SB 261 mean for you, on Thursday, 9^th October, at 6pm (BST), 10am (PDT) and 1pm (EDT). Panellists Sam Ghouse, Head of Client Development – Americas at Risilience, Sydney Vergis, Assistant Division Chief, Industrial Strategies Division Assistan at California Air Resources Board (CARB), and Julia Millot, Carbon Accounting and Target Setting Lead at Carbon Direct will discuss insights from CARB on the intent behind these laws and why action beyond compliance is critical, as well as:

How to prepare credible, decision-useful GHG disclosures despite data challenges
How climate risk disclosure can inform strategic and financial decision-making
Practical first steps companies can take to meet compliance and create long-term value.