Do SB 253 or SB 261 apply to your company? How to assess revenue, entity and California nexus
California Climate Disclosure — Applicability
A useful applicability assessment answers more than whether consolidated revenue exceeds a headline threshold. It identifies the entity being tested, the reporting boundary, the California connection, the data used and any assumptions that still require legal interpretation.
Important
This is an operational screening guide, not legal advice. CARB materials and legal developments can change. Confirm uncertain or material conclusions with counsel.
Quick screening logic
- Is the relevant business entity formed in the United States?
If yes: Continue to the revenue and California tests. If no or unclear: Review the exact statutory and regulatory entity definition with counsel. - Does total annual revenue exceed $1 billion?
If yes: Assess potential SB 253 and SB 261 coverage. If no or unclear: Continue — SB 261 may still be relevant above $500 million. - Does annual revenue exceed $500 million?
If yes: Assess potential SB 261 coverage. If no or unclear: Direct coverage may be less likely; supplier requests may still matter. - Does the entity do business in California?
If yes: Document the nexus and check current CARB definitions. If no or unclear: Do not assume; investigate registrations, operations and revenue connections. - Is a parent or subsidiary already reporting?
If yes: Map whether consolidated reporting affects the entity. If no or unclear: Define who owns the reporting obligation and data.
Step 1: define the entity and reporting boundary
List the legal entity, ultimate parent, relevant subsidiaries and fiscal year. Record whether revenue is measured at entity or consolidated level under the current rule. Keep the organizational chart and the source used for each conclusion.
Step 2: evidence the revenue test
Record the revenue figure, currency, accounting period and source document. If acquisitions, discontinued operations or differing fiscal years complicate the number, log the issue for finance and legal review.
Step 3: evidence the California nexus
Review current CARB definitions and guidance. Relevant evidence may include state registrations, operations, employees, property, contracts or California-source revenue, but no single checklist should be treated as a substitute for the governing rule.
Step 4: test each law separately
A company can be above the SB 261 threshold but below the SB 253 threshold. It can also face different preparation work because emissions reporting and climate-risk reporting rely on different teams, evidence and review processes.
Step 5: record the decision
- Entity: Legal name, jurisdiction, parent and subsidiaries considered
- Revenue: Period, amount, currency, source and consolidation approach
- California nexus: Facts assessed and controlling guidance used
- Conclusion: In scope, out of scope or further advice required—for each law
- Owner and date: Approver, review date and next scheduled refresh
Common mistakes
- Assuming absence from a regulator or third-party list means the company is out of scope.
- Applying only the $1 billion threshold and overlooking the separate $500 million SB 261 test.
- Using group revenue without documenting why that treatment applies.
- Treating an old memo as permanent despite rulemaking, litigation or corporate-structure changes.
- Failing to create a named owner and review date for the conclusion.
Request an applicability review
Request a GreenKPO applicability review to turn entity, revenue and California-nexus facts into a documented decision record and readiness plan.