On November 9, 2026, the U.S. Court of Appeals for the Ninth Circuit in United States of America Chamber of Commerce et al. v. Sanchez et al., No. 25-5327 (9th Cir. Nov. 9, 2026) declined to block SB 253’s Scope 1 and Scope 2 emissions disclosure requirements but held that its Scope 3 disclosure requirements and SB 261’s climate-related financial risk reporting requirements likely violated the First Amendment.
In the near term, SB 253’s November 10, 2026 reporting deadline for Scope 1 and Scope 2 emissions remains in effect and covered businesses should still make efforts to submit their reports. SB 253’s Scope 3 reporting requirements, which were slated to go into effect in 2027, and SB 261’s requirements, which were enjoined by the Ninth Circuit in 2025, remain paused for the foreseeable future.
SB 253 requires companies doing business in California with more than $1 billion in annual revenue to disclose greenhouse gas emissions annually. For the 2026 cycle, companies are required to report their Scope 1 and Scope 2 emissions. Beginning in 2027, companies also would be required to report their Scope 3 emissions.
SB 261 would require companies doing business in California with more than $500 million in annual revenue to publish biennial climate-related financial risk reports.
In 2024, business groups challenged both laws, arguing that SB 253 and SB 261: (1) compelled speech in violation of the First Amendment; (2) were preempted by the federal Clean Air Act; and (3) unduly burdened interstate commerce in violation of the dormant commerce clause. On August 13, 2025, the U.S. District Court for the Central District of California declined the groups’ motion for a preliminary injunction.
The business groups appealed the district court’s ruling, and on November 18, 2025, the Ninth Circuit enjoined enforcement of SB 261 but left SB 253’s requirements in place, pending appeal.
On November 9, the Ninth Circuit issued its Opinion, which concerned the district court’s denial of the preliminary injunction. The Opinion does not constitute a final ruling on the merits. Instead, the court considered whether the challengers were likely to succeed on their First Amendment claims.
The court affirmed the district court’s denial of the preliminary injunction as to SB 253’s Scope 1 and Scope 2 disclosure requirements. Applying intermediate scrutiny because the disclosures regulate commercial speech, the court held that California’s interest in reducing information asymmetries by providing investors with accurate emissions data and in reducing greenhouse gas emissions was substantial, and that Scope 1 and Scope 2 disclosures directly advanced those interests.
The court, however, found that the State’s third interest—preventing misleading speech—was not supported by the record. The State argued that some companies advertised themselves as environmentally responsible or publicized climate commitments in ways that misled consumers, but the court rejected this argument, reasoning that the record did not show that companies that discussed climate change routinely engaged in misleading speech and that some of the State’s alleged misleading conduct, such as lobbying against climate legislation while using environmentally conscious branding, was not inherently misleading.
The court reached the opposite conclusion for SB 253’s Scope 3 disclosure obligations. Reasoning that Scope 3 disclosures concerned third-party conduct and therefore did not constitute commercial speech, the court applied strict scrutiny, which requires that the challenged obligation further a compelling interest and be narrowly tailored.
The court held that the State’s interest in mitigating information asymmetries as to Scope 3 emissions failed under strict scrutiny. The court reasoned that because Scope 3 emission data was held by third parties, reporting companies would have satisfy their Scope 3 reporting obligations either by collecting data from suppliers, contractors, and other value-chain participants, or by relying on estimates derived from secondary sources, including industry averages and proxy data. Neither option, the court held, provided the accuracy necessary to justify Scope 3 disclosures over less burdensome alternatives, such as voluntary reporting or state-generated estimates. Moreover, the link between Scope 3 emissions and investors’ need for that information was too attenuated to satisfy strict scrutiny, as the court concluded that the effect of Scope 3 emissions on a company’s risk exposure or probability was too remote for them to be relevant to investors.
Similarly, the State’s interest in reducing emissions as to Scope 3 emissions failed because the State had failed to show that Scope 3 disclosures were necessary to reduce emissions, as the State had not submitted any relevant evidence linking Scope 3 reporting and emissions reductions.
SB 261 also failed strict scrutiny. The court held that SB 261 was not narrowly tailored, because the State could pursue its information objectives—mitigating information asymmetries—through less restrictive alternatives, such as incentivizing voluntary disclosures. The State also failed to show that SB 261 would reduce emissions and the court held that the State could have employed less restrictive means to reduce emissions, such as directly regulating emissions.
The court distinguished climate-risk assessments from factual reporting of historical operational emissions. The court reasoned that SB 261 requires companies to make predictive judgments about uncertain future conditions, including potential legislation, litigation, and reputational harm, and normative assessments about how climate change should influence their business models and strategic planning. In the court’s view, those disclosures go beyond economic information tethered to a commercial transaction and instead compel companies to express subjective, value-laden judgments on a politically contested subject within a state-prescribed framework.
The Ninth Circuit affirmed the denial of the preliminary injunction as to SB 253’s Scope 1 and Scope 2 disclosures, reversed the denial of the preliminary injunction as SB 253’s Scope 3 disclosures and SB 261, and remanded to the district court to determine whether SB 253’s Scope 3 disclosure requirements were severable. The trial court’s decision will have significant implications for SB 253: if the court concludes that the Scope 3 requirements are not severable, it is likely that California will be enjoined from enforcing all provisions of SB 253.
The Ninth Circuit’s Opinion is also not a final adjudication on the constitutionality of the laws. Both parties will have another crack at proving their case at the trial court level. And the California Legislature may propose similar legislation in 2027 targeted at carbon footprints and the effects of climate change on businesses operating in California. Companies should continue to monitor the trial court proceedings, California legislative proposals, and California Air Resources Board (CARB) rules and guidance.
Continue Scope 1 and Scope 2 compliance. CARB’s November 10, 2026 reporting deadline for Scope 1 and Scope 2 emissions remains in effect. Covered companies should submit their reports, continue to monitor their Scope 1 and 2 emissions, and monitor CARB regulations regarding future reporting requirements. While the district court may rule that SB 253’s Scope 3 reporting requirements are nonseverable and enjoin enforcement of SB 253, we consider this a remote possibility, and we would not expect a ruling from the trial court in advance of 2027.
Scope 3 obligations uncertain. For the time being, SB 253’s Scope 3 reporting disclosures remain on hold, pending the district court proceedings. SB 261 still enjoined. It is unlikely that companies will have to comply with SB 261’s reporting requirements in the near future, though they should continue to monitor the trial court proceedings. If the trial court issues a final judgment allowing enforcement of SB 261, companies may have limited notice to comply.
MoFo’s environmental and climate teams continue to monitor this litigation, legislative efforts, regulatory guidance, and related disclosure developments in the U.S. and globally. We are available to assist companies in ensuring compliance, including evaluating reporting obligations, assessing compliance strategies, and preparing emissions and climate risk disclosures.