The California Air Resources Board (CARB) has published a list of more than 4,000 companies that will fall under the state’s new climate reporting laws, marking the most sweeping disclosure mandate in the United States to date. The move signals California’s determination to lead on corporate climate accountability, even as federal efforts such as the SEC’s proposed climate disclosure rule remain in limbo.

Scope and Strategic Framework

The regulations, known as SB 253 and SB 261, were signed into law by Governor Gavin Newsom in October 2024. Together, they create a two-tiered system of requirements that will cover the majority of large U.S. companies. SB 253 applies to firms with annual revenues over $1 billion that do business in California. These companies will be required to disclose their direct Scope 1 and 2 greenhouse gas emissions beginning in 2026, with Scope 3 supply chain emissions to follow in 2027. Scope 3 disclosures include emissions from upstream and downstream activities such as procurement, business travel, employee commuting, waste, and water use.

SB 261 targets companies with revenues greater than $500 million. These businesses must publish reports outlining their climate-related financial risks and the measures they are taking to mitigate or adapt, with the first filings due by January 2026.

Economic and Environmental Impact

CARB’s preliminary list identifies 4,160 companies that will be subject to at least one of the new reporting obligations. Notably, 60 percent of those firms are headquartered outside California, underscoring the state’s outsize influence on national corporate governance standards. Nearly 2,600 companies are expected to comply with both SB 253 and SB 261, while more than 1,500 will fall under SB 261 alone.

The laws will fundamentally reshape corporate climate transparency in the U.S., forcing thousands of firms to quantify and disclose their supply chain emissions for the first time. For investors, regulators, and consumers, the rules promise greater visibility into how businesses are managing climate risks and opportunities. For companies, the requirements could mean significant investments in emissions tracking systems, supplier engagement, and risk management practices.

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Corporate Governance and Transparency

California’s move reflects the growing emphasis on mandatory reporting as a governance tool. By embedding climate disclosures into state law, regulators aim to standardize data and reduce the inconsistencies that have plagued voluntary reporting. The rules also align closely with international frameworks such as the ISSB standards, ensuring that California-based disclosures will resonate with global investors.

CARB stressed that its published list is preliminary. It was developed using 2022 data and may omit companies that are subject to the rules today. Conversely, some subsidiaries may appear on the list even though they qualify for exemptions if their parent companies file consolidated reports. Ultimately, it is each company’s responsibility to determine compliance, regardless of whether it appears on CARB’s initial list.

Challenges to Scaling

The rollout of California’s disclosure regime will not be without hurdles. Many companies, particularly those with complex global supply chains, face difficulties in collecting accurate Scope 3 emissions data. Smaller subsidiaries may struggle with compliance costs, even when part of larger corporate groups. In addition, the risk of legal challenges to the state’s authority could introduce delays or uncertainty, although California has historically prevailed in pushing ambitious climate regulation.

Businesses will also need to reconcile California’s reporting framework with other jurisdictional requirements, including the EU’s Corporate Sustainability Reporting Directive (CSRD). For multinational firms, alignment across regulatory regimes will be essential to avoid duplication and maintain credibility with investors.

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Future Outlook

By releasing the list of covered companies well ahead of implementation deadlines, California is signaling both urgency and transparency. The state’s actions are likely to accelerate the development of emissions accounting tools, climate risk assessments, and assurance services across the U.S. corporate sector.

If successful, the laws could establish California as the de facto national standard-setter for climate disclosure, much as its auto emissions rules have historically shaped U.S. environmental policy. For the 4,000-plus companies identified, the message is clear: climate transparency is no longer optional, and early preparation will be critical to meeting both regulatory requirements and stakeholder expectations.

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