As both public and private companies “doing business” in California with annual revenues above $1 billion prepare to comply with SB 253, CARB last week issued an important enforcement notice stating that it has elected to exercise its enforcement discretion under the Health and Safety Code with respect to SB 253.
In the notice, CARB indicates that it “recognizes that companies may need some lead time to implement new data collection processes to allow for fully complete scope 1 and 2 emissions reporting, to the extent they do not currently possess or collect the relevant information.” Accordingly, for the first report due in 2026, reporting entities may submit Scope 1 and 2 emissions from the prior fiscal year based on information the reporting entity already possesses or is already collecting at the time the notice was issued.
The notice goes on to state that for the first reporting cycle, CARB will not take enforcement action for incomplete reporting against entities, as long as they make a good faith effort to retain all data relevant to GHG emissions reporting for the entity’s prior fiscal year. This enforcement discretion is aimed at supporting entities actively working toward full compliance.
The enforcement notice indicates that CARB will provide details on reporting for subsequent-year reporting cycles as part of CARB’s rulemaking process. Under SB 253, CARB is also required to develop and adopt implementing regulations for SB 253 by July 1, 2025 (originally January 1, 2025, but pushed back by an amendment to SB 253).
The notice follows a series of attempted delays to the law’s implementation, including efforts by the California Department of Finance last July to push the first deadline back by two years (until 2028). When signing the bill into law in October 2023, California Gov. Gavin Newsom suggested that the timeline for implementing SB 253 was likely too aggressive and called for it to be revisited. SB 253 is also still being challenged in the U.S. District Court for the Central District of California, where it survived a legal challenge from the U.S. Chamber of Commerce last November.
While the enforcement notice garnered harsh criticism from the law’s co-sponsors in the California legislature, it likely comes as a relief to in-scope companies who are preparing to comply with SB 253 beginning in 2026, although notably, many of these companies may already be disclosing Scopes 1 and 2 data on a voluntary basis.
Notwithstanding the CARB enforcement notice, companies obligated to disclose Scopes 1 and 2 GHG emissions under SB 253 should continue to prepare for the upcoming—and unchanged—2026 reporting deadline and make a good faith effort to collect and retain all data relevant to Scope 1 and 2 emissions.
Despite the ongoing legal challenges to SB 253, regulations are increasingly being adopted worldwide that will require reporting of Scopes 1, 2, and 3 GHG emissions.
Further, investors continue to expect information from companies about their environmental impacts, risks, and opportunities, especially when these environmental factors influence a company’s financial statements and business.