- More than 4,000 U.S. companies, including most S&P 500 firms, identified by California as subject to mandatory climate disclosure rules.
- Two new laws require emissions reporting and climate risk assessments starting in 2026, extending beyond state borders.
- Rules position California as a de facto national standard amid uncertainty over U.S. federal climate reporting.
Sacramento sets scope for sweeping disclosure regime
California regulators have published a list of more than 4,000 companies that must begin disclosing greenhouse gas emissions and climate-related financial risks under the state’s new climate laws. The release by the California Air Resources Board (CARB) brings clarity to the scale of compliance and underscores California’s role in shaping national climate reporting, even as federal efforts stall.
The list covers 4,160 companies, sweeping in a majority of S&P 500 constituents and extending far beyond state borders. Roughly 60% of the named firms are headquartered outside California, meaning the rules will affect businesses with national and global operations if they generate significant revenue in the state.
The laws: SB 253 and SB 261
Governor Gavin Newsom signed the two statutes into law in October 2024. Together, they set out the most comprehensive climate disclosure requirements yet enacted in the U.S.
- SB 253 applies to companies with more than $1 billion in annual revenue that do business in California. It requires disclosure of direct emissions (Scope 1 and 2) beginning in 2026, and indirect value chain emissions (Scope 3) from 2027. Scope 3 covers categories such as supply chains, business travel, commuting, procurement, waste, and water use.
- SB 261 applies to companies with over $500 million in annual revenue doing business in California. It mandates reporting on climate-related financial risks and the strategies firms are adopting to reduce or adapt to those risks. First reports are due by January 1, 2026.
According to CARB, 2,596 companies fall under both laws, while 1,564 will only be subject to the risk disclosure requirements of SB 261.
Enforcement and timing
The new obligations will begin with disclosures in 2026, covering fiscal year 2025 emissions for Scope 1 and 2. Scope 3 reporting will follow in 2027, reflecting the complexity and challenges of tracking value chain emissions. Climate risk disclosures must also be published in 2026.
CARB emphasized that the published list is preliminary. It was built using March 2022 data, meaning some companies may no longer qualify, while others not listed may still be required to report. Exemptions apply in limited cases, such as subsidiaries covered under a parent company’s report.
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Implications for business and investors
For executives and investors, the regulations sharpen the focus on governance and risk management. The requirement to disclose climate-related financial risks brings California’s approach closer to frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD), widely used in Europe and Asia. By mandating Scope 3 reporting, the state is also moving ahead of most U.S. regulators, placing pressure on companies to improve supply chain transparency.
The timing is significant. The U.S. Securities and Exchange Commission has delayed finalization of its own climate disclosure rules amid political and legal challenges. California’s move effectively creates a backdoor national standard, as few large companies can afford to ignore the world’s fifth-largest economy.
What to watch next
C-suite leaders and investors will be monitoring how CARB finalizes its compliance framework, including enforcement mechanisms and penalties for non-reporting. Legal challenges are also possible, given the extraterritorial reach of the laws. Companies already aligning with EU Corporate Sustainability Reporting Directive (CSRD) standards may have a head start, but smaller firms crossing the $500 million threshold could face steep compliance costs.
For policymakers, California’s rollout will test whether state-level regulation can drive national climate transparency in the absence of federal consensus. Globally, it may also influence other jurisdictions weighing how far to extend mandatory Scope 3 reporting.
As disclosure deadlines draw nearer, the immediate task for boards and finance teams is to map data systems, strengthen supplier engagement, and integrate climate risk into core business planning. For investors, the disclosures could reshape assessments of corporate resilience across sectors from energy to consumer goods.
California’s list may be preliminary, but the direction of travel is clear: climate risk and emissions reporting are moving from voluntary practice to binding requirement, with the state acting as the fulcrum of U.S. climate governance.
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