Do I need to comply with SB 253 if my company is under $1 billion in revenue?

If your company's total annual revenue is under $1 billion, you are not directly covered by California SB 253. The law defines a reporting entity as a business with more than $1 billion in total annual revenue that does business in California, so below that line the statute itself does not require you to report Scope 1 and Scope 2 emissions. That is the short answer. The longer answer is that the threshold is measured in a specific way, and being under it does not mean you will never be asked for the same number.

Roughly 5,400 companies are expected to fall under SB 253, and the cutoff decides which side of a real compliance deadline you sit on. So it is worth getting the test right rather than guessing from your headline sales figure. This guide walks through how the threshold is actually read, the traps in the "doing business in California" test, and the reasons a sub-$1 billion company still ends up producing an emissions inventory.

How the $1 billion revenue threshold is measured

SB 253 uses total annual revenue, not California revenue, and not profit. A company with $1.2 billion in worldwide revenue and only a modest sales presence in California is over the line; a company with $700 million in revenue that is entirely Californian is under it. The figure is your whole top line, and for a corporate group it is generally read at the consolidated level, so a parent's revenue can pull the group in even when no single subsidiary would qualify alone.

That consolidated reading is where most surprises happen. If you are a mid-sized subsidiary of a larger parent, your own $300 million in revenue is not the test; the parent's total is. Before you conclude you are exempt, pin down the exact entity whose revenue counts and confirm the consolidated number. It helps to have clean, board-ready financials for the group, and if your accounting exports need tidying first you can convert the PDF statements into a clean spreadsheet so the revenue picture is easy to total and defend.

What "doing business in California" actually means

The second half of the test catches more companies than people expect, because "doing business in California" is read broadly. It is not limited to companies headquartered in the state. Selling products or services to California customers, maintaining an office, or having employees in California can each establish the nexus. California's Revenue and Taxation Code also sets dollar and property thresholds that, if you cross them, count as doing business in the state. So a company based in Texas or New York with meaningful California sales can be a covered entity if it also clears the revenue threshold.

Practically, if you are over $1 billion in total revenue and you have any real commercial footprint in California, assume you are in scope until a careful review says otherwise. The combination of a broad nexus test and a whole-company revenue figure is what produces the 5,400-company estimate.

Are you sure you are under the threshold? A quick self-check

• Take total annual revenue for the whole consolidated group, not one entity and not just US sales.
• Include all revenue lines, not net profit and not California-only revenue.
• Confirm whether a parent or holding company's revenue is the figure that applies to you.
• Then test the California nexus: sales into the state, offices, employees, or property there.
• If both are yes, you are almost certainly a covered entity and should read the deadline detail on our SB 253 reporting software page.

Under $1 billion but over $500 million? Check SB 261

SB 253 is not California's only climate disclosure law. Its companion, SB 261, applies at a lower threshold: companies over $500 million in total annual revenue doing business in California must publish a biennial climate-related financial risk report. So a company that is comfortably under the SB 253 line can still be caught by SB 261. The two laws ask for different things, an SB 253 measured emissions number versus an SB 261 narrative risk report, and they have different enforcement status right now. We compare them directly in SB 253 vs SB 261, which is the page to read if your revenue sits between $500 million and $1 billion.

Why smaller companies still get asked for an emissions number

Even if neither California law reaches you, the request for an emissions inventory often arrives from a different direction: your customers. When a large customer is itself reporting under SB 253, CSRD or a science-based target, your emissions become their Scope 3, and they will send a supplier questionnaire asking for your Scope 1 and Scope 2 figures. A vendor that can answer with a real, documented number wins the renewal; one that cannot becomes the risk the procurement team flags. This value-chain pressure is why plenty of sub-$1 billion companies build an inventory before any law forces them to, and it is the theme of our wider climate disclosure software overview.

The reassuring part is that the work is the same whichever request lands first. Whether the trigger is SB 253, SB 261, a customer questionnaire or a European buyer's CSRD ask, the deliverable is a defensible Scope 1, 2 and 3 number with evidence behind it. Build it once and you can answer all of them.

What to do next, whichever side of the line you are on

If you are clearly over $1 billion with California business, treat the November 10, 2026 Scope 1 and Scope 2 deadline as real and start now; our 90-day plan lays out the weeks. If you are under the threshold, do not file it away as irrelevant. Check SB 261, ask whether your biggest customers are reporting, and consider building a lightweight inventory from the accounts payable and utility data you already have, so you are ready the day a questionnaire arrives. Our carbon accounting software is designed for exactly that: it classifies the records you already keep into a scope-by-scope inventory with the invoice behind every figure, and you can run it on your own data in the demo without signing up.

Regulatory thresholds and deadlines can change, and this is general information rather than legal advice. Confirm your specific status with CARB guidance and your own advisors before deciding you are out of scope.