On May 29, 2025, the California Air Resources Board (CARB) hosted a virtual public workshop to discuss its progress in implementing California’s sweeping new climate disclosure laws. California Senate Bills (SB) 253, 261, and 219 require any company that “does business” in California and meets certain annual revenue requirements to publicly disclose its climate-related financial risks and the greenhouse gas (GHG) emissions it produces from its entire value chain. These statutes originally set a deadline of January 1, 2025 for CARB to adopt implementing regulations. However, SB 219 extended that deadline to July 1, 2025. (See our previous blog post discussing these statutes in detail.)
Unfortunately for those “doing business” in California, the clearest takeaway from CARB’s workshop is that the agency will not meet this statutory deadline (perhaps for years to come). CARB remains in the “Pre-Rulemaking” stage of its rulemaking process, in which the agency holds public workshops to “develop concepts aligned with State goals” set forth by the statutes. CARB hopes to trigger the “Formal Rulemaking” stage by issuing a proposed rule by the end of 2025. Once the initial proposal is published, by law, CARB will then have a full year to finalize and adopt that rule. This means companies likely will not have final regulations to guide their compliance with the climate disclosure laws until late 2026 at the earliest. Until then, it is uncertain 1) who will be covered by SB 253 and 261, and 2) what will be required by companies that are covered.
Fundamental Questions About Climate Disclosure Laws Remain Unanswered
Who Will Be Covered by the Climate Disclosure Requirements?
CARB is working out the definition of “doing business” and specific annual revenue requirements to identify businesses covered by the new climate disclosure laws. CARB unveiled its staff’s initial proposals for these definitions during the webinar and emphasized the need for additional public comment on the merits of the proposals.
What Does “Doing Business” Mean for California Climate Disclosure Laws?
CARB proposes to adopt, with modifications, the Revenue and Taxation Code’s (RTC) definition of “doing business” to determine what entities will be covered by the climate disclosure laws. RTC Section 23101(a) defines “doing business” as “actively engaging in any transaction for the purpose of financial or pecuniary gain.” CARB proposes narrowing the scope of this definition by adding language to ensure that only businesses with a substantial connection to California, through either legal organization or by meeting thresholds for in-state sales, property values, or employee compensation, are subject to the climate disclosures.
CARB seeks public input on this proposed definition to guide its policymaking in the coming months. Specifically, CARB requests feedback regarding mechanisms to identify businesses meeting the definition of “doing business,” whether the definition is too broad even with the modifications, and whether specific business sectors otherwise meeting the definition should be exempt from the requirements.
What Are the Annual Revenue Requirements for Coverage?
Similarly, CARB proposes borrowing from the RTC to define “total annual revenue” by applying the RTC’s definition of “gross receipts” set forth in Section 25120(f)(2). Entities with a total annual revenue of $500 million will be subject to the financial disclosures of SB 261, while those with a total annual revenue of $1 billion will also be subject to the GHG emissions disclosures of SB 253.
Again, CARB seeks input from the public to confirm whether this definition reflects actual business practices in the state and how the corporate relationships between parents and subsidiaries should be accounted for in calculating businesses’ total annual revenues. CARB also requests public input regarding how to determine a Parent-Subsidiary business relationship exists in the first place. The agency’s initial proposal is to utilize the standards set forth in California’s cap-and-trade programs (i.e., a corporate association exists when one business entity has a degree of ownership or control over another entity greater than 50%), but the agency is open to public suggestions for better alternatives.
What Will Be Required of Covered Businesses?
CARB is also considering and seeking public input regarding what will be required of those businesses covered by the climate disclosure laws. The agency is contemplating ways to fulfill the regulatory intent behind SBs 253, 261, and 219 while streamlining the reporting requirements with existing disclosure laws, keeping the costs of compliance low, and ensuring the disclosures are useful to consumers, investors, and the public.
What Does This Mean for Businesses in California?
Companies and other entities that expect to be covered by the climate disclosure rules remain in limbo while CARB works out these key questions through its lengthy rulemaking process.
SB 253 and 261 Compliance Deadlines Remain, but “Good Faith” Efforts Are Sufficient for 2026
These unanswered questions are especially concerning considering clear indications by California legislators that deadlines to comply with SBs 253 and 261 will not be delayed. The statutes’ legislative sponsors, Senator Henry Stern and Senator Scott Weiner, stated unambiguously during the opening of the workshop that SB 253’s current deadlines (2026 for Scope 1 and 2 emissions and 2027 for Scope 3) are “holding firm” despite CARB’s delays.
Companies in California must prepare to comply with the climate disclosures due next year without the benefit of CARB’s guidance. In light of this uncertainty, technical and legal experts will be essential to help companies determine whether these laws apply to their operations, understand the reporting and disclosure requirements, and plan for the substantial time and resources necessary to comply.
Fortunately, CARB issued an enforcement notice in December 2024 that eases enforcement of SB 253 for the first report due in January 2026. CARB states that it will not take enforcement actions in the 2026 reporting period against entities that demonstrate good faith efforts to comply with the requirements of the law. This means that companies can begin to compile the required data from the 2025 fiscal year without worrying that they will be penalized if the form or content of this data does not entirely comply with CARB’s yet-to-be-issued implementing regulations.
Next Steps
Meanwhile, interested companies and members of the public should stay engaged and active in CARB’s ongoing rulemaking process. Stakeholders can sign up for CARB’s email service list to be notified of future public workshops and updates and may provide comments on implementation by contacting CARB at ClimateDisclosure@arb.ca.gov.
If you think your business could be covered by the new California climate disclosure laws, Miller Nash’s environmental team can help. Reach out to us for support with navigating whether and how your company must comply with the current laws and eventual regulations, screening and evaluating options for third party compliance organizations, and advocating to climate regulators on your behalf during and after the rulemaking process.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
