Regulatory Countdown: What SB 253 and SB 261 Mean for Cannabis and Hemp
California’s landmark climate disclosure laws — SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act) — are ushering in a new era of cannabis compliance for multi-state brands. Beginning in 2026, large companies, including those in the cannabis and hemp sectors that do business in California, will face rigorous emissions and climate-risk disclosure requirements. As the state clarifies guidance through the California Air Resources Board (CARB) workshops, now is the time for cannabis and hemp operators to prepare for sector-specific regulatory expectations and data system buildouts.
Who Must Comply?
- SB 253: U.S.-based public or private companies with over $1 billion in annual gross revenue, doing business in California, must disclose greenhouse gas (GHG) emissions under Scope 1 and 2 by 2026; Scope 3 reporting begins in 2027.
- SB 261: Companies with over $500 million in annual revenue, also doing business in California, must publish a biennial climate-related financial risk report starting January 1, 2026.
- "Doing business" includes cannabis retail, manufacturing, cultivation, or distribution activities and even web-based sales into California.
For more details on thresholds and concepts of revenue, see the Forbes update and guidance from CARB.
In scope: Most multi-state cannabis MSOs, hemp beverage brands, private equity holding companies, and packaging suppliers whose U.S. operations cross these revenue thresholds.
Compliance Timelines and Expectations (2025–2027)
- Q4 2025: Begin building and testing GHG data systems (many providers suggest this quarter as a readiness benchmark).
- By January 1, 2026: First SB 261 climate risk report must be published to your company website — describing physical and transition risks, board oversight, and adaptation strategies.
- 2026: First SB 253 Scope 1 & 2 emissions report (with third-party assurance) due based on prior fiscal year data.
- 2027: Scope 3 emissions (supply chain, upstream, and downstream) required — no assurance mandated yet, but data traceability is key.
For a full picture, see the Persefoni summary and official CARB workshops.
Sector-Specific Plan: Cannabis & Hemp GHG Mapping and Risk Disclosure
The cannabis/hemp sector faces unique disclosure challenges due to intensive energy use, packaging complexity, and evolving distribution. Here’s how leading brands can tackle SB 253 and SB 261 requirements:
1. Energy Mapping at Key Facilities
- Indoor Cultivation: Electricity consumption (HVAC, dehumidification, lighting, fertigation controls) is a major driver of Scope 1 & 2 emissions. Map metered kWh usage, track on-site fossil fuel backup (diesel or gas).
- Extraction & Manufacturing: Measure thermal energy/fuel usage for CO₂/ethanol extraction equipment, solvents, winterization, and decarboxylation.
- Beverage/Edible Production: Capture energy inputs for canning, CO₂ infusion, pasteurization, and cold-chain storage.
Tips:
- Deploy sub-metering at high-load zones. Start reporting 2025 data with quarterly audits for data veracity.
- For outdoor growers, quantify farm machinery and generators.
2. Upstream Packaging and Distribution Emissions (Scope 3)
- Packaging (SB 54 compliant): Calculate embedded carbon in plastics, glass, metals, and compostables; work with upstream suppliers to obtain Product Carbon Footprints (PCFs). Understand SB 54’s packaging rules here
- Distribution: Analyze emissions from third-party logistics, fuel use for last-mile/wholesale delivery networks, direct-to-consumer shipping, and warehousing.
- Supply Chain: Engage major extractors/bottlers to map their energy sources and materials.
Action:
- Implement supplier questionnaires for top-10 vendors.
- Align purchase contracts with GHG data reporting starting in 2025 Q4.
3. Governance & Board Oversight (SB 261)
- Clearly document climate-related responsibilities at the board and C-suite level.
- Ensure enterprise risk committees address transition (regulatory/market) and physical (wildfire, flood, drought) climate risks in their charters.
- Disclose governance processes and oversight frequency as part of climate-risk filings.
Best Practice:
- Leverage frameworks (e.g., TCFD, IFRS S2) endorsed by CARB for climate risk governance. See Harvard guidance here.
4. Assurance Provider Selection and System Buildout
- Identify and contract with a qualified third-party assurance provider (CPA firm, ESG audit specialist) by mid-2025.
- Build GHG data infrastructure in Q4 2025—integrate facility-level consumption, utility bills, and supplier disclosures.
- Prepare for limited assurance of Scope 1 & 2 emissions in first filing; develop internal controls for data quality.
Cross-Jurisdiction Alignment
- For MSOs, align reporting with SEC climate disclosure rules (for public companies) and the EU’s CSRD for global parity. Harmonized data architecture streamlines future compliance.
Key Takeaways for Cannabis and Hemp Operators
- Coverage: If your U.S. operations exceed $500M or $1B in gross revenue, and you do any cannabis/hemp business in California (retail, online, or through vertical suppliers), you are in scope.
- Deadlines: Begin internal GHG emissions data mapping and climate risk analysis in 2025. First reports are due in January 2026 (risk) and during 2026 fiscal year (emissions).
- Cannabis-Specific Hotspots: Prioritize metering indoor grow lights, HVAC, extraction labs, and beverage lines. Get proactive with packaging suppliers on emissions data.
- Governance: Board and executive documentation of climate oversight is not optional; integrate disclosures into broader risk management procedures.
- Supplier Readiness: Make GHG disclosure a contract requirement for major vendors by the end of 2025.
- Assurance: Secure third-party assurance partners early, given the surge in demand statewide.
- Resources: CARB will continue publishing implementing guidance and FAQs—subscribe here for real-time updates.
Enforcement and Penalties
CARB intends to treat climate disclosures with the same seriousness as financial reporting, with civil penalties for misstatements or late filings. Stakeholders expect a fee structure (per filing), and non-compliance may restrict eligibility for state procurement or licensing renewals.
For technical details and evolving enforcement positions, review Frost Brown Todd’s summary.
Conclusion: Strategic Compliance = Competitive Advantage
The rollout of SB 253 and SB 261 represents an inflection point for the cannabis and hemp sectors. Forward-looking companies will treat climate data readiness and transparent risk management as core business priorities for competitive advantage and investor confidence—well beyond “check-the-box” compliance. Early coordination among sustainability, legal, and operations teams can substantially reduce reporting friction and ensure brands are ready for California’s deadlines and for customers demanding credible climate accountability.
Explore detailed regulatory guidance, compliance checklists, and vendor connections at CannabisRegulations.ai. Stay compliant — and stay ahead.
