What’s happening: CARB’s preliminary compliance list

On September 24, 2025, CARB released a “Preliminary List of Reporting / Covered Entities” that may be subject to California’s newly-enacted climate-disclosure laws: SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate‑Related Financial Risk Act).

Here are the essentials:

• The list covers 4,000+ companies across sectors (including apparel, retail, beauty, packaging) that CARB estimates may fall under one or both laws.
• The list is preliminary, meaning inclusion does not automatically trigger compliance — and exclusion does not guarantee exemption. 
• The two laws’ core thresholds:
  
  • SB 261: Entities with global annual revenue > US$ 500 million doing business in California must publish a climate-related financial risk report by Jan 1, 2026. 
  • SB 253: Entities with global annual revenue > US$ 1 billion doing business in California must publicly disclose GHG emissions (Scope 1 & 2 starting in 2026, Scope 3 later) under CARB’s rules. 
• “Doing business in California” is broadly interpreted, including companies with sales, property, payroll or other presence in the state. 
• CARB is soliciting feedback via a voluntary survey tool from entities that believe they are mis-listed or omitted. 

Why this matters for retailers and suppliers

For companies in the retail/supply-chain sphere — especially those selling into California or supplying brands/retailers that do — this development has real implications. Here’s why you should care:

1. Indirect exposure through your customers

Even if your brand or supplier business is based outside California, if you supply or partner with an entity that is within scope (or will be imminently), you may face indirect risk: requests for data, scrutiny of your operations, or inclusion in Scope 3 emissions or climate-risk disclosures.

2. Data-collection and transparency expectations will rise

Whether you end up being a “covered entity” or a supplier to one, the pressure is increasing on gathering:

• emissions data (direct & indirect)
• climate-risk exposure (e.g., water/energy disruption, supply-chain dependencies)
• governance/strategy disclosures
  Retailers and suppliers who are prepared with organized data, documented methodologies, and visibility into their operations will have a smoother path.
  

3. Timeline is tight

With the first deadlines looming, there’s limited time to build the capabilities required:

• For SB 261: the climate-risk report is due January 1, 2026 for covered entities. 
• For SB 253: Scope 1 & 2 emissions reporting is projected (per CARB guidance) to begin June/July 2026. Scope 3 comes later. If you’re a retailer or supplier servicing customers that fall under these laws, you’ll likely need to already have supplier/certification/data-flows in motion.

4. Operational and strategic implications

• Supply-chain scrutiny: Suppliers to large entities may receive upstream data requests or audits.
• Product-data commitments: If your products have embodied emissions or climate-risk attributes, you may need to disclose or support downstream disclosure.
• Brand risk: Non-compliance, data gaps or delays can lead to reputational damage, investor/supplier risk and possibly enforcement.
• Competitive advantage: Early movers can position themselves as sustainable, transparent supply-chain partners — which may become a business differentiator.

What to do now: 5 action steps for retailers & suppliers

Here are recommended next steps for any retail/supplier operation aiming to stay ahead of this regulatory wave:

1. Conduct a “scope-check”
   
   • Review whether your company or any of your customers/partners/suppliers are likely caught by SB 253 or SB 261: check revenue thresholds, California business ties, supply-chain footprints.
   • Review the CARB preliminary list to see if you or your customers appear. 
   • Don’t rely solely on that list — perform your own assessment.
     
     
2. Map your supply-chain and data flows
   
   • Identify key upstream suppliers and downstream customers tied to California operations.
   • Start measuring or gathering data on energy use, direct/indirect emissions, material footprint, climate risks (e.g., climate-related supply disruption).
   • Document what you do not yet know — having a “gap-map” is better than no map.
     
     
3. Establish assignment & governance
   
   • Assign responsibility: who in finance, operations, procurement, sustainability owns data, methodology, disclosure.
   • Develop governance structures (review, sign-off, audit trail) even before external assurance is required — this builds readiness.
     
     
4. Engage your customers and suppliers proactively
   
   • If you supply to large retailers or brands that may fall under the laws, ask their expectations.
   • Communicate your data-capabilities, timelines, and any gaps. Position yourself as a partner rather than a laggard.
   • For suppliers: anticipate that customers may require emissions data or climate-risk disclosures from you.
     
     
5. Leverage tools & platforms
   
   • Consider using or building systems to track emissions, climate risks and supplier data.
   • Prepare for third-party assurance (SB 253 likely requires limited assurance early, upgrading later). 
   • Integrate sustainability/data platforms early rather than patching manually at the last minute.

What this means for our customers

As a company focused on product-classification, data enrichment and helping retailers and suppliers manage product & compliance data, Smarter Sorting is well-positioned to add value in this context. Here’s how to think about it:

• Product-level data enrichment: As disclosures expand (especially Scope 3), companies will want richer data about product materials, usage, emissions impacts, and supply-chain origin. Your enrichment services can help feed that data pipeline.
• Supplier data liaison: Retailers/suppliers may need help with organizing and standardizing upstream supplier emissions or risk data. Smarter Sorting can position itself as a bridge technology layer.
• Risk quantification tooling: For your customers running compliance assessments (e.g., which products or suppliers may trigger higher risk or disclosures), you could embed or integrate fine-calculator tools (similar to the ones you’re building) that estimate exposure under SB 253/261.
• Communication & disclosure readiness: Help your clients prepare more coherent disclosures by tying product-classification/enrichment to climate-risk or emissions narratives.
• Competitive differentiation: For your retail/supplier clients, being ready for California’s laws ahead of time can offer a business advantage; you can help them tell that story.

Final thoughts

CARB’s preliminary list is a wake-up call for manufacturers, suppliers and retailers. Even if you’re not yet formally “covered,” the disclosure tide is rising — data demands, transparency expectations and climate-risk accountability will increasingly matter. Whether you sit in California or supply into California-based entities, the sooner you start aligning systems, gathering data and engaging your network, the better you’ll be positioned.

In short: don’t wait until the deadline looms. Start building your readiness now. Smarter Sorting can help translate product and supply-chain data into the disclosures, supplier transparency and climate-risk narratives that the next generation of regulation requires.

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