With California’s Climate-Related Financial Risk Act (SB 261) reporting deadline quickly approaching, thousands of organizations are preparing to publicly disclose the physical and transition risks they face as a result of climate change. Though the first reports for SB 261 aren’t due until January 1, 2026, many companies are already well underway.?
In this article, we’ll talk about the advantages of early action, why teams are getting started now, and how you can, too.?
The Business Case for Early Action?
Compliance, Credibility, and Decision-Useful Data.?
Compliance with SB 261 is not a “check-the-box” exercise. Companies need to detail their governance structures and the physical and transition risks they face from climate change, taking into account their specific locations, operations, industries, and stakeholders. They must also share any metrics and targets they use to hold themselves accountable. Data-driven, transparent reporting is critical, not just for ensuring regulatory compliance, but for safeguarding credibility.?
Getting a head start on disclosure is the best way to avoid last-minute scrambling, which can lead to errors, drain internal resources, and increase costs. Early action allows time to address data gaps—a common problem. It helps teams avoid using overly vague statements in their reports, which, in addition to creating compliance risk, can erode stakeholder trust by signaling a lack of attention to the financial impacts of climate change. A proactive approach also prevents missed opportunities—the earlier you have decision-useful data and insights, the better equipped you’ll be to respond to market changes and enhance (and protect) business value.?
What Early Movers Are Doing?
Aligning with TCFD, Engaging Stakeholders, Identifying Risks.
Many companies have already started preparing for SB 261 compliance, allowing plenty of time to review data, refine their narratives, and ensure consistency with the company’s other disclosures and public statements. Among early movers, there are some common priorities and points of focus. These include:?
Aligning with the TCFD Framework
SB 261 specifically references the Task Force on Climate-Related Financial Risk (TCFD), which offers four foundational pillars that should underpin disclosures: Governance, Strategy, Risk Management, and Metrics & Targets. Proactive teams are using these pillars as the starting point to structure their SB 261 disclosures. You can find , along with examples of TCFD reports from businesses in a variety of sectors.??
Engaging Internal Stakeholders?
Climate risk disclosure is a collaborative endeavor. For many companies, legal and compliance staff are taking the lead on SB 261 reporting. They must coordinate closely with finance, sustainability, operations, and other internal stakeholders. The ability to make a strong business case for transparent risk disclosure will lay the groundwork for more streamlined internal communication and efficient reporting—not just for SB 261, but for regulations like CA SB 253, Europe’s CSRD, and others.?
Identifying Material Risks?
The cornerstone of SB 261 compliance is a description of the climate-related risks that are material for your organization. Well-prepared teams are using authoritative climate data to identify physical risks, describing how events like sea level rise, flooding, extreme heat, hurricanes, and wildfires could impact supply chains and operations. They’re also looking at the potential financial impact of transition risks like climate regulations, carbon pricing, technological developments, market shifts, and legal pressures.?
The Risks of Waiting?
Data Gaps, Increased Costs, Compliance Risk.
It’s important to report as transparently and thoroughly as possible. You should aim to incorporate measurable performance and targets, specificity about risks and financial impacts, and clarity about governance and strategy. Waiting until the last minute can expose organizations to several risks, including:?
Data Gaps
To perform the risk assessment needed for SB 261 disclosure, you need dependable emissions data, supply chain information, and scenario analysis—all of which take time. Teams that are rushed may find that they’re missing critical information, like emissions and energy use data, maps of facilities and supply chains, scenario modeling inputs, and more. Collecting data is one of the most labor-intensive steps in the disclosure process. Building in enough lead time helps ensure you have the information necessary to report in a compliant and consistent manner. It also allows you to establish repeatable processes that will streamline future reporting for SB 261 and other climate disclosure frameworks.?
Increased Costs?
Organizations that wait too long often end up racing to collect data, conduct legal reviews, and secure the tools and resources they need to identify and report on risks. Delays can trigger premium pricing for services and technology; vendors often inflate prices during high-demand periods. Mistakes from hastily produced disclosures can force teams to spend time and money on revisions and remediation. Reports that are misleading, incomplete, or inconsistent can also lead to legal challenges, regulatory inquiries, and reputational threats, all of which drain resources and add to costs—it’s typically more expensive to repair damage after the fact than to prevent it.?
Compliance Risk?
Deferred action will impede your ability to create a cohesive narrative that is compliant and consistent with your other public disclosures. If a disclosure is deemed inadequate, the reporting company could face penalties for non-compliance. SB 261 that if an entity can’t fully meet disclosure requirements, it should provide as much information as possible, explain reporting gaps, and outline the steps it will take to achieve compliance in the future.?
that good faith efforts to comply will be considered during enforcement. Companies should clearly explain any reporting limitations and outline a timeline or plan to close gaps. In addition to increasing the likelihood of non-compliance, last-minute scrambling can threaten reputational standing and investor confidence.
How 麻豆原创 Supports a Phased Approach
A Custom-Built SB 261 Disclosure.?
Every organization is on its own climate disclosure journey, with varying access to resources, internal capacity, and knowledge. To meet teams where they are, 麻豆原创 offers climate-related financial risk reports as a service, custom-built for SB 261 compliance. Here’s how we support a phased approach to reporting:?
Readiness Assessment
Our team of climate disclosure experts starts by gathering basic information about your sector and location, then performs an initial assessment using risk models across multiple climate scenarios. This aligns with the expectation under TCFD and SB 261 that companies describe their strategy resilience under a range of climate scenarios, including at least a 2°C or lower pathway.
Some companies may already be tracking emissions and developing transition plans, while others may not yet be taking climate action or assessing risks. We support clients all along this spectrum.?
Drafting Services?
The process requires minimal effort on your part. After you provide basic facility data, we handle research, writing, analysis, and quality assurance—then deliver a customized SB 261 disclosure, ready for submission and publication on your website.?
Most companies don’t need to boil the ocean and write an expensive 100-page report. CARB has acknowledged that it may be reasonable for companies to report using FY 2023–2024 or FY 2024–2025 data for their initial SB 261 reports, depending on what’s available. Our experts will produce a narrative that is fit for purpose and satisfies regulator and stakeholder expectations without being overly burdensome.?
Internal Education and Alignment
While we build your report, we help you align internally and expand your long-term reporting capabilities. We’ll compare your report to your other public disclosures (e.g., SEC filings, PR statements, and CDP disclosures) to ensure that data and narratives are consistent. Most importantly, our SB 261 service pairs with 麻豆原创’s SB 253 reporting platform for a cohesive California compliance strategy.?
