When I logged into Zoom on Tuesday, I was expecting more clarity. Instead, a few minutes later, the Ninth Circuit Court issued an injunction in two short sentences, temporarily blocking one-half of California’s Climate Rule – SB 261.
SB 261, which was set to require covered entities to publish climate risk reports by January 1st, 2026, could now see its timeline pushed slightly back. The other half of the rules, SB 253, was unaffected, and companies will still be required to report emissions by a new extended August 10th, 2026 deadline.
Along with this bombshell, CARB’s workshop dropped a few others, delivering meaningful updates on safe harbors, deadlines, the definition of “doing business in California”, and how companies should determine applicability under SB 253, SB 261, and SB 219, or “the 200s” for short.
So what does this mean for covered entities? And what should they do next? Essentially, keep calm and carry on.
What Happened
The Ninth Circuit has postponed SB 261 until the court completes the appeal process, which is likely to be in early 2026. Meaning, CARB will likely have to announce an updated compliance date. CARB had already given companies until July 1 to upload URLs to its public docket during the Workshop. We expect the required publication date to slip by a month, not quarters.
Along with the lawsuit, CARB’s workshop had its own revelations, mainly around SB 253 emissions reporting, assurance, and the scope of who’s covered.
The first-year deadline for Scope 1 and Scope 2 reporting was pushed back 6 weeks to August 10th. Limited assurance was changed to being strongly advised in 2026, but it will become mandatory in 2027. Companies that had not started collecting data by December 2024 will now be given enforcement leniency if they explain in a letter that they will not be able to report.
However, with the law unchanged, these companies will be in a legal no-man’s land of not following the law but not facing enforcement action. Also, the 2026 submission will form the baseline for all subsequent reporting. Any inconsistency or poor methodology introduced in the first year may create complications or require restatement later once assurance kicks in.
CARB also clarified how companies should determine whether they are “doing business in California.” Coverage applies to companies that are domiciled in the state or financially benefit from California transactions. Owning property or simply running payroll in the state is not enough. Also, new companies must meet the revenue threshold ($500M or $1B) in the lower one of the two preceding years. Finally, not-for-profits, insurers, government entities, and companies whose only California presence is teleworkers are exempt.
What Companies Should Do Now
So what should companies do with this information?
Keep moving forward. A wait-and-see what happens approach only increases risks of non-compliance. Here are four no-regret actions we are advising our clients to take:
Reassess whether you are covered based on updates to “doing business in CA”: Companies should conduct another scoping analysis to determine whether those changes put them in or out of covered entity status.
Prepare climate risk reports for Jan 1st: Most companies will likely already be, or are very close to being prepared to report their climate risks. The best course of action here is to ensure you are ready whenever things pick back up in 2026.
Ensure emissions are audit-ready: Limited assurance may be optional in 2026, but in 2027, it is not. Building the assurance muscle early ensures you know what it takes when the time comes and gives stakeholders confidence that your emissions are accurate.
Start preparing for Scope 3: Along with limited assurance, Scope 3 (value chain emissions) reporting is mandatory in 2027. CARB has yet to finalize its Scope 3 guidance, but it will certainly constitute a much greater challenge than Scopes 1 and 2 in 2026. Building internal muscles around controls, documentation, and audit-ready processes requires time and effort. Getting started early is the best way to prepare.
Building a leading climate reporting engine took some of the most recognizably climate-friendly companies multiple years. So, no one is expecting perfection in year 1. Committing to getting things right in this first year will set you up for success in the coming years as compliance becomes more comprehensive and enforcement more rigorous.
Why Acting Now Matters
CARB is still moving forward with its nation-leading climate disclosure rules and an ambitious timeline.
The CARB updates are not a signal to slow down or to stop preparing for reporting. It’s an opportunity for companies to catch up on their 253 preparation work with urgency to meet the 2026 deadlines.
We have seen substantial changes over the last year, with shifting timelines and coverage thresholds. These are now very close to their year 1 final form, and most companies will have made significant progress toward compliance. Those who have failed are facing contractual issues with customers and an uphill challenge as compliance gets more stringent in 2027 and beyond. This may be the breathing room these companies need to get prepared.
CARB may be taking a ‘give us what you have’ approach in 2026. But, customers, investors, and other stakeholders are watching closely. Companies that keep calm and carry on will be the ones best positioned for compliance as California’s Climate Rules mature.
