SB 253 Update: CARB Still Wrestling With Draft Regulations in March 2026

Companies preparing to comply with California’s SB 253 and submit their first required disclosures in August 2026 received additional guidance this week from the California Air Resources Board (CARB). At a public workshop on March 23, CARB outlined proposed approaches under its developing rulemaking, including options for phasing in compliance over time, and solicited public feedback on those concepts. The following article summarizes the key developments from that workshop.

SB 253 and SB 261 are landmark climate disclosure and financial reporting legislation that impose reporting requirements on large U.S. public and private companies doing business in California, including disclosure of Scope 1 and Scope 2 greenhouse gas (GHG) emissions beginning in 2026, with initial reports due August 10, 2026.

For the first reporting cycle, entities will report fiscal year 2025–2026 data if their fiscal year ends on or before February 1, 2026, and fiscal year 2024–2025 data if their fiscal year ends thereafter, subject to CARB’s Enforcement Notice permitting good faith compliance. Scope 3 GHG emissions will be required beginning in 2027, and companies must also submit biennial climate-related financial risk reports to CARB beginning in 2026. Sidley previously discussed key takeaways from this legislation here.

As of March 2026, enforcement of SB 261 remains stayed pursuant to a Ninth Circuit injunction issued in November 2025. Following oral argument on January 9, 2026, the court has taken the matter under submission, and the stay remains in effect pending a decision on the appeal.

In its March workshop, CARB discussed proposed approaches to organizational boundaries, emissions accounting, reporting scope, and assurance. Important takeaways are discussed below.

Organizational Boundaries for GHG Emissions Reporting

A key early decision for companies preparing to comply with SB 253 will be how to define their organizational boundaries for emissions reporting. At its recent workshop, CARB proposed two approaches, either of which reporting entities may elect to use.

• Under the equity share approach, companies would report emissions based on their percentage ownership interest in an operation.
• Under the control approach, companies would report 100% of emissions from operations they control. CARB indicated that control may be established through either financial control, defined as the ability to direct financial and operating policies for economic benefit, or operational control, defined as the authority to implement operating policies.

CARB is soliciting high-level feedback on whether additional approaches to setting organizational boundaries should be considered, as well as on how reporting entities should explain their selection of an organizational boundary.

Proposed Reporting Templates

CARB indicated that it intends to develop mandatory, standardized reporting templates for Scope 1 and Scope 2 emissions to be implemented beginning in 2027. CARB published a draft template on October 10, 2025, but its use is optional and it is not required for the 2026 reporting cycle.

Scope 3 Accounting Methodologies

CARB proposed a flexible framework under which reporting entities may select from four methodologies for calculating Scope 3 GHG emissions:

• Spend-based method – emissions are estimated based on the monetary value of goods and services. This approach calculates emissions by multiplying the financial value of purchased goods or services by an emission factor representing average emissions per unit of currency spent.
• Activity-based method – emissions are estimated based on physical measures of activity. This approach calculates emissions by applying relevant emission factors to metrics such as kilograms of materials purchased or kilometers traveled.
• Supplier-specific method – emissions are estimated using primary emissions or activity data collected directly from suppliers. This approach typically relies on product- or process-level data (such as cradle-to-gate emissions).
• Hybrid method – emissions are estimated using a combination of the other methodologies. This approach allows reporting entities to apply different methods across categories or data sources, depending on data availability and quality.

Emission factors will be central to these accounting methodologies. An “emission factor” is a representative value that quantifies the amount of GHG emissions associated with a unit of activity (for example, emissions per unit of purchased electricity or per unit of product). CARB indicated that several emission factor data sets may be used for Scope 3 reporting, including EPA’s Emissions & Generation Resource Integrated Database (eGRID), the IPCC Emissions Factor Database (EFDB), EPA’s Emission Factors Hub, and the U.S. Environmentally-Extended Input-Output (USEEIO) model.

The accounting methodologies differ primarily in the type of data used to estimate emissions, for example, whether emissions are based on dollars spent, physical activity, or supplier-provided data, while emission factors are used in each case to convert that data into emission estimates.

CARB further indicated during the workshop that reporting entities would be required to document and explain their selection of organizational boundaries, emission factors, and accounting methodologies as part of their disclosures.

At the workshop, CARB solicited feedback on the criteria emission factors should meet for use in the program, how reporting entities should explain their selection of a particular emission factor, and how they should document and explain changes in emission factor use from prior reporting years.

Scope 3 Regulatory Options

For phasing in Scope 3 emissions in 2027, CARB outlined three potential regulatory options: (1) Broad Applicability, (2) Sectoral Phase-In, and (3) Category Phase-In. CARB’s three options reflect different approaches to phasing in Scope 3 reporting: applying across all reporting entities, limiting initial application to certain sectors, or limiting reporting to a subset of emissions categories.

• Broad Applicability option – reporting entities would be required to report across all Scope 3 categories beginning in 2027, along with disclosures regarding their organizational boundary selection, emission factors, and accounting methodologies. CARB also indicated that reporting entities may exclude categories they determine to be de minimis, provided they offer an appropriate explanation for those determinations. During the workshop, CARB described “de minimis” as referring to categories that are sufficiently small or not feasible to calculate, with such determinations potentially informed by factors including the volume of emissions associated with a category, the degree of influence an entity has over those emissions, and any sector-specific guidance regarding materiality.
• Sectoral Phase-In option – Scope 3 reporting would initially apply in 2027 to entities in the transportation and industrial sectors. This approach reflects the California Climate Scoping Plan’s emphasis on sectors associated with a significant share of statewide emissions and heightened transition risk. Within the industrial sector, the initial focus would include areas such as technology and energy, cement production, and other manufacturing activities. Other sectors reflected in CARB’s statewide emissions profile, such as agriculture, electricity, and commercial buildings, are not part of the initial focus as presented.
• Category Phase-In option – Scope 3 reporting would apply across all reporting entities beginning in 2027, but would initially be limited to a subset of Scope 3 emissions categories. CARB indicated that these initial categories would include those most commonly reported today, such as business travel (Category 6), purchased goods and services (Category 1), fuel- and energy-related activities (Category 3), employee commuting (Category 7), and waste generated in operations (Category 5). Additional categories would be incorporated over time as reporting practices and data availability develop, with companies permitted to report on remaining categories on a voluntary basis during the phase-in period.

Limited Assurance for Scope 1 and Scope 2 Emissions

CARB outlined a framework under which reporting entities would be required to obtain limited assurance over Scope 1 and Scope 2 emissions beginning in 2027.

“Limited assurance” denotes a lower level of review than a full audit (or “reasonable assurance”), and is commonly used in sustainability reporting frameworks.

CARB indicated that reporting entities may rely on a range of established assurance standards, including AA1000AS v3; AICPA attestation standards (AT-C Section 210 (limited review engagement) and AT-C Section 205 (examination engagement)); ISAE 3000 (Revised) and ISAE 3410 (available until December 2026); ISSA 5000 (effective December 2026); and ISO 14064-3:2019 (with provider qualification standards under ISO 14065 and ISO 14066).

CARB noted that these standards are widely recognized across jurisdictions and indicated that it is considering an approach that permits the use of multiple assurance frameworks.

Business Takeaways

In addition to absorbing the information below, businesses should continue to assess how CARB’s proposed framework will impact their reporting. CARB continues to consider numerous aspects of the to-be-proposed regulations and has invited public comment on potential alternatives to its draft regulatory proposals, meaning businesses still have an opportunity to weigh in regarding CARB’s development of the requirements. Comments, including proposed alternatives, may be submitted through the public docket or via email at ClimateDisclosure@arb.ca.gov until April 13.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.