Introdcution

California’s SB 253 requires manufacturers with over $1 billion in annual revenue doing business in California to disclose Scope 1 and 2 greenhouse gas (GHG) emissions by August 10, 2026. Before any emissions figure can be calculated or submitted, however, every reporting entity must resolve a foundational question: which facilities, joint ventures, and contract manufacturing operations fall inside its organizational boundary? CARB’s February 26, 2026 initial regulations established the August 10 deadline, and at its March 23, 2026 workshop CARB proposed — as pre-rulemaking concepts for the 2027 formal framework — that companies select either the equity share approach or the control-based approach, document that choice in writing, and apply it consistently. For manufacturers with shared-ownership plants, tolling arrangements, or partially-owned overseas facilities, this boundary decision determines the entire scope and cost of the filing.

Key Takeaways

• The boundary election precedes emissions data collection — companies that gather Scope 1 and 2 data before resolving the boundary question risk collecting the wrong dataset and restarting
• Two GHG Protocol-aligned methods are available — the equity share approach (proportional to ownership) and the control-based approach (proportional to authority), each producing materially different emissions scopes
• Joint ventures and contract manufacturers are the highest-ambiguity cases for industrial companies — treatment depends entirely on ownership percentage, governance structure, and degree of operational direction exercised
• Silence is not a compliant response by August 10 — companies not collecting data as of December 2024 must file a formal company letterhead statement; those collecting data must file emissions data with their boundary method explained
• The 2026 boundary carries forward into 2027 Scope 3 — CARB’s phase-in proposals explicitly prioritize manufacturing sectors, making the 2026 election a multi-year strategic decision, not a one-time filing choice

What Is an SB 253 Organizational Boundary and Why Does It Matter for Manufacturers?

The core question

An organizational boundary defines which legal entities, production facilities, joint ventures, and operations a company includes within its GHG inventory for SB 253 reporting. It answers a deceptively simple question — whose emissions count as yours? — with answers that vary dramatically by corporate structure.

Why manufacturers face the most complexity

• Fully integrated manufacturers with wholly-owned plants in a single jurisdiction face a relatively straightforward boundary determination
• Global industrial companies with minority joint venture stakes, contract manufacturing agreements, and subsidiaries at varying ownership levels across multiple countries require weeks of legal and operational analysis before the boundary can be established
• The GHG Protocol — with which CARB’s framework is aligned — requires the boundary to be established before any emissions data is collected. It cannot be determined retroactively from available data

What CARB has signaled on disclosure

As part of its pre-rulemaking proposals for the 2027 formal framework, CARB has indicated it expects reporting entities to explain their chosen boundary method as part of each filing. This means the boundary decision is not simply internal guidance — it is a disclosed, reviewable compliance position that is expected to become a formal legal requirement when the 2027 rulemaking is finalized.

The cost of getting it wrong

• A boundary set too broadly — including facilities the company does not control — may overstate emissions and create regulatory exposure
• A boundary set too narrowly — excluding joint ventures where the company exercises operational authority — risks an incomplete filing that draws CARB scrutiny and requires correction ahead of the 2027 mandatory annual cycle
• CARB estimates average annual compliance costs at $135,000 to $152,000 per reporting entity; rebuilding an inventory under a corrected boundary adds to that figure materially

Equity Share vs. Control-Based: The Two Boundary Methods CARB Allows

CARB’s framework offers two GHG Protocol-aligned approaches. The choice must be made — and documented — before any facility mapping or emissions data collection begins.

What is required before filing

Under CARB’s pre-rulemaking proposals for the 2027 framework, every reporting entity would be required to select one method and provide a written explanation of its choice — identifying the approach, stating the rationale, and applying it consistently. While the formal regulatory text codifying this requirement is still being developed, manufacturers that resolve this question now will be better positioned for the August 10 filing and will avoid a disruptive boundary correction when annual reporting begins in 2027.

Do Joint Ventures Count Toward Your SB 253 Scope 1 and 2 Emissions?

For manufacturers, joint ventures are the most common and consequential boundary question. The answer depends on the approach selected and the specifics of each arrangement.

Under the equity share approach

• Every joint venture in which the manufacturer holds a stake contributes a proportional share of Scope 1 and 2 emissions
• A 25% stake in a cement plant means 25% of that plant’s direct combustion and process emissions are attributed to the reporting entity — regardless of operational involvement

Under the control-based approach

• A minority-stake joint venture where the manufacturer does not exercise financial or operational control is generally excluded from the Scope 1 and 2 boundary — and instead appears as Scope 3 Category 1 (purchased goods and services) in 2027
• A majority-owned joint venture where the manufacturer appoints operating management or has contractual authority over production and energy policies falls inside the boundary under both financial and operational control variants
• A 50/50 joint venture is the most ambiguous case: the operational control variant may include it (if the reporting company implements its operating policies at the site), while the financial control variant may exclude it (if no single party has unilateral financial authority). CARB has not yet issued specific guidance on 50/50 structures

When Does a Contract Manufacturer Fall Inside Your SB 253 Boundary?

Contract manufacturing — engaging a third-party facility to produce goods under specifications set by the principal — is widespread across automotive, consumer goods, specialty chemicals, electronics, and food processing. Whether a contract manufacturer’s Scope 1 and 2 emissions fall inside a principal’s SB 253 boundary is one of the most practically significant and least resolved aspects of the current framework.

Under the equity share approach

• Contract manufacturers are generally excluded from Scope 1 and 2 — there is no ownership stake to attribute proportionally
• Their production emissions appear instead as Scope 3 Category 1 (purchased goods and services) when that reporting cycle begins in 2027

Under the operational control variant

• If a manufacturer specifies raw material sourcing, production process parameters, energy use requirements, or facility-level standards that the contract manufacturer is contractually obligated to follow, there is a substantive argument that the principal exercises operational control — placing that facility’s Scope 1 and 2 emissions inside the principal’s boundary
• In practice, most manufacturers applying the control-based approach exclude contract manufacturers from Scope 1 and 2 and treat their production as Scope 3 Category 1 — a convention broadly accepted under the GHG Protocol
• CARB has not issued definitive guidance on this question as of the August 10, 2026 reporting cycle

What manufacturers should do now

• Review production agreements for language specifying operational, energy, or process standards the contract facility is required to follow
• Assess whether the degree of operational direction exercised constitutes authority to implement operating policies under the GHG Protocol definition.
• Document the boundary determination and the reasoning, regardless of which conclusion is reached
• Monitor CARB’s forthcoming portal guidance (expected June to July 2026), which may include GHG calculation methodology clarifications relevant to this question

How Your 2026 Boundary Election Shapes Your 2027 Scope 3 Obligation

Why the 2026 decision has a 2027 consequence

The GHG Protocol requires Scope 3 categories to be calculated with respect to the same organizational boundary used for Scope 1 and 2. The boundary a manufacturer establishes in 2026 therefore becomes the foundational perimeter for its 2027 Scope 3 inventory. A boundary set too narrowly in 2026 carries that narrower perimeter into 2027 Scope 3 calculations, potentially understating Category 1 emissions attributable to excluded production operations — and requiring a costly inventory rebuild when the error is discovered.

How CARB’s Scope 3 phase-in proposals affect manufacturers specifically

At the March 23, 2026 workshop, CARB presented three phase-in options for stakeholder feedback. All three create urgency around the 2026 boundary decision for manufacturers:

The strategic case for a correctly scoped 2026 boundary

• A boundary that includes all relevant joint ventures and production operations in 2026 avoids a forced expansion — and inventory rebuild — in 2027.
• CARB’s estimated incremental Scope 3 compliance cost of $9,000 to $26,000 per entity per year is widely regarded by stakeholders as understated; a boundary correction at scale adds to this figure significantly.
• The strategically sound approach is to establish the correct boundary now, even if it increases the 2026 Scope 1 and 2 data collection workload, rather than optimize for filing simplicity at the cost of a more expensive correction in 2027.

SB 253 Key Deadlines for Manufacturers

Manufacturers with non-calendar fiscal years — common in industrial sectors — should confirm which period applies before beginning data collection, as this determines which facilities’ operational records and emissions factors are relevant.

SB 253 Compliance Costs: What Manufacturers Can Expect

CARB’s official cost estimates (from the March 2026 workshop)

Why these figures are likely understated for manufacturers

• The underlying survey covered only 39 early-adopter companies — a group systematically better prepared than the broader in-scope population
• CARB’s estimates cover direct data collection and assurance costs; they do not capture the legal and operational cost of the organizational boundary determination itself, particularly where joint ventures or contract manufacturing arrangements require legal analysis of control relationships
• Manufacturers with complex multi-site structures, global joint ventures, and contract manufacturing networks should budget conservatively and expect actual costs to exceed CARB’s baseline
• Beginning the boundary and data collection process immediately reduces the risk of cost compression in the final weeks before August 10

What Happens If a Manufacturer Misses the August 10 Deadline?

Scenario 1: Company was not collecting data as of December 2024

• Not required to submit emissions data for the August 10 cycle
• Must submit a formal written statement on company letterhead to CARB confirming it did not submit a report and was not collecting data or planning to collect data at the time of CARB’s December 2024 enforcement notice
• This is a formal compliance action — not an informal opt-out. Failure to submit the letterhead statement risks being treated as non-responsive

Scenario 2: Company was collecting data but has not resolved its boundary

• CARB’s good-faith compliance standard applies to companies actively engaging with the reporting process — not those passively delaying
• Manufacturers in this position should complete the boundary analysis immediately, submit whatever data can be compiled within the chosen boundary by August 10, and document the steps taken to resolve ambiguous boundary questions
• Limited assurance is not required for 2026, so the accuracy bar for this first cycle is lower than it will be in 2027 — but the filing itself is not optional for companies that were collecting data

The litigation dimension: SB 253 and SB 261 are not in the same legal position

The two laws face a joint federal legal challenge, but their enforcement status differs materially:

• SB 261: The Ninth Circuit has issued a stay suspending enforcement pending appeal. CARB will not enforce SB 261 while the injunction remains in place
• SB 253: Not subject to any current injunction. The district court denied the plaintiffs’ preliminary injunction motion as to SB 253. The Ninth Circuit appeal was fully briefed and argued as of April 2026, with a decision expected at any time — but the August 10 deadline remains operative unless and until a court orders otherwise

Manufacturers should treat the August 10 SB 253 deadline as active and proceed with compliance preparation while monitoring Ninth Circuit developments.

Conclusion

The August 10 deadline is 67 days away. The boundary election must precede data collection, and data collection must precede filing. Manufacturers with joint ventures, contract manufacturing relationships, or multi-site global footprints need to initiate this analysis now. ASUENE’s GHG data collection platform supports multi-entity Scope 1 and 2 inventory building under GHG Protocol-aligned organizational boundaries — enabling manufacturers to compile audit-ready emissions data efficiently and confidently ahead of August 10. Contact ASUENE to discuss your boundary structure and data collection roadmap.

Why Work with ASUENE Inc.?

ASUENE is a key player in carbon accounting, offering a comprehensive platform that measures, reduces, and reports emissions, including Scope 1-3. ASUENE serves over 50,000 clients worldwide, providing an all-in-one solution that integrates GHG accounting, ESG supply chain management, a Carbon Credit exchange platform, and third-party verification.

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