A federal appeals court has split California’s corporate climate disclosure laws, allowing the state’s first direct and purchased-energy emissions reporting requirements to proceed while temporarily blocking broader value-chain and climate-risk disclosures at the preliminary injunction stage. The U.S. Court of Appeals for the Ninth Circuit issued the Nov. 9 opinion in United States Chamber of Commerce v. Sanchez.
What remains in effect
SB 253, the Climate Corporate Data Accountability Act, applies to U.S.-formed business entities doing business in California with total annual revenue above $1 billion. CARB’s corporate disclosure page says the law authorizes the state’s reporting program and requires covered entities to disclose Scope 1, Scope 2 and Scope 3 greenhouse gas emissions for the prior fiscal year.
The panel affirmed the denial of a preliminary injunction against reporting requirements for Scope 1 emissions, from sources a company owns or controls, and Scope 2 emissions, from purchased energy. CARB’s corporate disclosure page listed Nov. 10, 2026, as the deadline for 2026 Scope 1 and Scope 2 reports.
CARB’s September reporting guidance also sets narrower first-year expectations. The agency said it would exercise enforcement discretion for 2026, allowing reporting entities to submit Scope 1 and Scope 2 data they already had or were collecting when CARB issued its December 2024 enforcement notice. Entities that were not collecting or planning to collect that data at that time were not expected to submit Scope 1 and Scope 2 data for the first cycle. CARB asked those entities to submit a statement of non-reporting on company letterhead.
The panel reversed the denial of a preliminary injunction against SB 253’s Scope 3 requirement, temporarily blocking it. That category covers indirect emissions in a company’s value chain, including supplier and customer activity. CARB had been developing rules for 2027 and later reporting, but the court found the plaintiffs were likely to succeed against the Scope 3 mandate.
Why the court treated Scope 3 differently
The lawsuit was brought by chambers of commerce and business associations, including the U.S. Chamber of Commerce and the California Chamber of Commerce. They argued the laws compelled speech in violation of the First Amendment.
The majority drew a line between emissions data tied to a reporting company’s own operations and disclosures that reach across outside actors in the value chain. For Scope 1 and Scope 2, the court held that the disclosures regulate commercial speech because they require factual emissions information connected to the reporting entity’s own operations and capital-market transactions.
Applying intermediate scrutiny, the panel said California had shown substantial interests, including reducing information asymmetries for investors and reducing emissions, at this stage of the case.
Scope 3 failed under a stricter analysis. The court said value-chain emissions involve diffuse third-party conduct and are not sufficiently tied to the reporting company’s own operations to qualify as commercial speech. Because the court treated the requirement as compelled noncommercial speech, strict scrutiny applied, and California did not meet that standard.
SB 261 remains paused
SB 261, the Climate-Related Financial Risk Act, applies to U.S.-formed covered entities with total annual revenue above US$500 million that do business in California. The law excludes businesses regulated by California’s Department of Insurance and those in the insurance business in another state. CARB’s financial-risk page says the program concerns biennial reports on climate-related financial risk, and CARB had already said it would not enforce the Jan. 1, 2026, statutory deadline while a Ninth Circuit injunction was in place.
The Nov. 9 decision deepens that pause. The panel held that SB 261 requires companies to make predictive, subjective and normative judgments about climate-related financial risk. The court concluded that SB 261 compels noncommercial speech and fails strict scrutiny, reversing the district court’s refusal to preliminarily block the law.
Business and environmental groups read the decision differently
The California Chamber of Commerce, one of the plaintiffs, welcomed the ruling and described the blocked provisions as legislative overreach. Environmental Defense Fund, which supported the laws as an amicus, said the decision preserves public access to direct and energy-use emissions information but delays the broader benefits of California’s disclosure package.
Those reactions reflect the dispute at the center of the case: whether mandatory climate disclosure is an investor-information rule, a corporate speech mandate, or both.
The wider disclosure fight is still unsettled
The ruling lands during a broader shift in U.S. climate disclosure policy. In May 2026, the U.S. Securities and Exchange Commission proposed rescinding its federal climate-related disclosure rules in their entirety. That makes California’s state-level fight more closely watched by companies, investors and policy groups tracking large-company reporting expectations in the U.S.
The case now returns to the district court for further proceedings consistent with the Ninth Circuit’s opinion, including whether SB 253’s Scope 3 provisions can be severed from the rest of the statute. Further appellate review is also possible, so companies covered by SB 253 or SB 261 will likely continue tracking CARB guidance and the litigation calendar before making long-term reporting decisions.
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