California SB 253 Climate Accountability Act Explained
Introduction
In the world of climate regulation, California has a history of setting the pace for the rest of the United States. In 2026, that tradition reaches a massive milestone with the official commencement of Senate Bill 253 (SB 253), also known as the Climate Corporate Data Accountability Act. While federal rules have faced legal hurdles and pauses, California’s mandate for carbon transparency has remained remarkably resilient.
If you are a business leader, you might think, "I’m not a California company; this doesn't apply to me." Unfortunately, that is a dangerous assumption. SB 253 applies to any US-formed business, public or private, that "does business in California" and exceeds the revenue threshold. Because the test is whether you do business in California, wherever you are headquartered, its reach extends well beyond the state. Many more companies will feel it as suppliers once covered companies start reporting Scope 3 emissions in 2027. This guide breaks down the 2026 status of the law and what you need to do to stay clear of penalties, which the statute caps at $500,000 per reporting year.
Section 1: Who is Actually in Scope?
SB 253 covers private corporations, LLCs, and partnerships as well as public companies. To be a "reporting entity" in 2026, you must meet two criteria:
- Total Annual Revenue >$1 Billion: This is the entity's total revenue (gross receipts under California tax law), including sales outside California. CARB's regulation measures it entity by entity, leaves out intercompany sales within the same combined reporting group, and uses the lesser of the two previous fiscal years.
- Doing Business in California: CARB's regulation uses the state tax test in Revenue and Taxation Code section 23101: the entity is organized or commercially domiciled in California, or its California sales exceed the lesser of an inflation-indexed threshold or 25% of its total sales. That threshold was $735,019 for 2024 and is $757,070 for 2025 (Franchise Tax Board). Unlike the tax rule, CARB's test does not count property or payroll, and it excludes an entity whose only California activity is paying employees, including teleworkers.
If you meet these thresholds, you are legally required to report. Even if you don't meet them, your customers may. If you sell to a $1B+ company that does business in California, it may ask you for carbon data as it prepares the Scope 3 disclosures that start in 2027.
Section 2: The 2026 Reporting Deadlines
Despite ongoing litigation from business groups, the Ninth Circuit Court of Appeals has allowed SB 253 to move forward: on 18 November 2025 it paused SB 261 while the appeal is heard, and refused to pause SB 253 (order). The California Air Resources Board (CARB) has set the following schedule in its Initial Regulation, which it resubmitted to California's Office of Administrative Law for approval in September 2026 (rulemaking page):
- November 10, 2026: The first-ever deadline for reporting Scope 1 and Scope 2 emissions (covering your prior fiscal year). CARB moved it from August 10, 2026 in June 2026.
- By December 10 each year: CARB sends each reporting entity a fee notice, payable within 60 days. The fee is set by a formula that spreads CARB's program costs across reporting entities, so the amount changes from year to year.
- 2027: The phase-in of Scope 3 emissions (your supply chain) begins.
The "Good Faith" Leniency
CARB will use enforcement discretion for the first reporting cycle. Under its December 2024 enforcement notice and its 2026 reporting guidance, a company may base its first Scope 1 and 2 report on information it already had or was collecting on December 5, 2024, and CARB will accept that report whether or not it has been assured. A company that was not collecting this data at that date is asked to send CARB a statement on company letterhead saying so, before November 10, 2026. The condition is a good faith effort, including keeping all data relevant to the prior fiscal year. This leniency covers the 2026 cycle only. For later years, the statute directs CARB to weigh a company's good faith measures when it sets penalties, and it rules out penalties for Scope 3 misstatements made with a reasonable basis and disclosed in good faith. Staying silent is not a good faith effort, so even a company with no data should file the statement.
Section 3: Why SB 253 is Stricter Than the SEC
Many US executives are surprised to find that SB 253 is actually more demanding than the original federal SEC proposal.
- Mandatory Scope 3: The SEC's final rule of March 2024 left Scope 3 out, and that rule is now stayed, with the SEC proposing on 29 May 2026 to rescind it. California has kept Scope 3. Starting in 2027, reporting entities must disclose the emissions of their value chain.
- Third-Party Assurance: SB 253 requires an assurance engagement by an independent third-party assurance provider. For Scope 1 and 2, the statute sets "Limited Assurance" from 2026 and "Reasonable Assurance", a level of rigor comparable to a financial audit, from 2030. For the first 2026 reports, CARB will accept submissions with or without assurance. For Scope 3, the statute lets CARB require limited assurance from 2030, and the draft rules CARB previewed at its July 2026 workshop require limited assurance for Scope 1 and 2 only.
- Public Disclosure: Your data will also be published on a publicly accessible digital platform run by CARB or the emissions reporting organization it contracts. This means your competitors, investors, and customers can see exactly how carbon-efficient your operations are.
SB 253 is explicitly built on the GHG Protocol: the statute requires reporting entities to measure and report in conformance with its Corporate Standard and its Corporate Value Chain (Scope 3) Standard. Companies that align their reporting with the GHG Protocol now will have the easiest time complying.
Section 4: Common Pitfalls and Compliance Strategies
Pitfall: Waiting for the Lawsuit to End
While groups like the U.S. Chamber of Commerce have challenged the law, the courts have so far refused to halt SB 253's reporting requirements while the case is heard: the district court denied a preliminary injunction in 2025, and the Ninth Circuit declined to pause SB 253 pending appeal. Waiting for a final verdict before starting your data collection is a high-risk strategy that could leave you scrambling before the November 2026 deadline, and again when Scope 3 begins in 2027.
Strategy: Use Spend-Based Estimates Where the Law Allows Them
Spend-based carbon accounting turns your spend in categories like "Electricity," "Fuel," and "Travel" into emissions using cited emission factors. It fits SB 253 best on the Scope 3 side: the statute lets reporting entities use industry average data, proxy data and other generic data in their Scope 3 calculations, which is where spend-based estimates belong. For Scope 1 and 2, your first 2026 report may use the data you already had, but once limited assurance applies, your assurance provider will want to trace those figures back to source records such as utility bills, meter readings and fuel volumes. Start collecting them now. A spend-based screening is still a fast way to find your largest emission sources and the gaps in your records before that work starts.
Strategy: Consolidate Your Subsidiaries
Under the 2024 amendment (SB 219), reports may be consolidated at the parent company level, so a subsidiary that is itself a reporting entity does not need to prepare a separate report. This significantly reduces the administrative burden for complex corporate structures. CARB's regulation also lets a parent consolidate fee payments for its subsidiaries.
Section 5: If You Supply a Company Covered by SB 253
If one of your customers has mentioned SB 253 and asked you for carbon emissions data, you are being pulled into a requirement that was not written for smaller companies but still reaches them. This usually applies if:
- you sell to a company with more than $1 billion in revenue that does business in California;
- that customer is preparing the Scope 3 disclosures it must make from 2027;
- you have been asked for Scope 1, Scope 2 or Scope 3 figures, or for spend data the customer will estimate from.
SB 253 may not apply to your company directly. It applies to your customer, which is why they are asking. Because the statute lets covered companies use industry-average and other secondary data for Scope 3, a spend-based estimate with a stated method is a common answer to a supplier request. Check exactly what your customer asks for before you submit: some customers want primary data from their largest suppliers.
A useful supplier response contains:
- your Scope 1 and Scope 2 totals, with the reporting period and the organizational boundary;
- Scope 3 by category, if requested, with the categories you did not cover named;
- the method (GHG Protocol, spend-based or activity-based) and the source of every emission factor;
- your assumptions and limitations, stated plainly.
You do not need California-specific activity data to answer a supplier request. A spend-based estimate is a baseline you can refine: as you collect utility bills and fuel volumes, replace the estimated lines with activity data and send your customer an update.
Carbon Draft builds this response from your accounting export. Basic ($20) covers Scope 1 and 2. Complete ($49) adds Scope 3 for up to 8 of the 15 categories, where your ledger shows that spend. The Disclosure-Aligned Report ($299) adds the full priced ledger, a calculation workbook and a section that sets out what SB 253 requires, what the report contains and the gap. Every factor is cited to its source (methodology). Each report is a screening-grade inventory a reviewer or assurance provider can start from. It is not an SB 253 filing and it is not assured.
California SB 253 has officially moved from a "future proposal" to a "current requirement." Whether you are a $1B+ giant or a smaller supplier in their chain, the data you produce in 2026 will shape how your customers in the California market see you. You can start with a clear inventory of your operations and the right tools to translate that into carbon data.
Supplying a company covered by SB 253? Upload your accounting export at aisustainablefuture.com/carbon-draft and get a cited, screening-grade carbon report for your supplier response in minutes. Scope 1 and 2 from $20, Scope 3 from $49.
