Ninth Circuit Limits California Climate Disclosure Laws; November 10 SB 253 Reporting Deadline Remains in Effect

In a divided 2–1 decision in Chamber of Commerce v. Sanchez, No. 25-5327 (9th Cir. 2026), the U.S. Court of Appeals for the Ninth Circuit held on November 9 that California’s requirements to disclose Scope 3 greenhouse gas (GHG) emissions under SB 253 and climate-related financial risks under SB 261 likely violate the First Amendment. The court allowed SB 253’s Scope 1 and Scope 2 reporting requirements to proceed, leaving the November 10, 2026 reporting deadline for SB 253 in effect. The case returns to the U.S. District Court for the Central District of California for further proceedings on preliminary injunctive relief and, ultimately, the merits of the constitutional challenges. The decision is also subject to further appellate review.

SB 253

The court declined to enjoin Scope 1 and 2 reporting under SB 253, which generally applies to U.S. companies doing business in California with more than $1 billion in annual revenue. The court held that mandatory disclosure of direct emissions (Scope 1) and emissions from purchased energy (Scope 2) constitutes commercial speech because it compels disclosure of factual emissions data relevant to companies’ operations, investment, and other capital transactions. Applying intermediate scrutiny, the court found the requirements sufficiently tailored to California’s interests in informing investors and reducing emissions.

In contrast, the court found that Scope 3 reporting under SB 253 is likely unconstitutional because emissions generated by suppliers, customers, and other independent third parties are insufficiently connected to a reporting company’s own operations and commercial transactions to constitute commercial speech. Applying strict scrutiny, the court found the requirement insufficiently tailored to California’s objectives. The court remanded for the district court to determine whether the Scope 3 provisions can be severed from the remainder of SB 253. Scope 3 reporting was initially scheduled to begin in 2027. SB 253 expressly provides for severability if any provision of the law or its application is found invalid.

In a partial dissent, Judge Bennett concluded that all of SB 253 should be enjoined, reasoning that company-level emissions disclosures do not become commercial speech merely because investors might find the information useful. The dissent highlights a broader constitutional dispute over compelled corporate disclosures that could attract en banc or Supreme Court review.

SB 261

The court likewise found that SB 261’s climate-related financial risk disclosure requirements likely violate the First Amendment because the law requires companies to make predictive, subjective, and potentially ideological judgments about climate risks, business strategy, and future operations. The court concluded that these disclosures constitute noncommercial speech and fail strict scrutiny because they are not sufficiently tailored to California’s objectives. The court therefore found that SB 261 should be enjoined, reversing the district court’s contrary ruling.

Next Steps

Covered companies should meet the November 10, 2026 deadline for Scope 1 and Scope 2 emissions reporting under SB 253. Enforcement of SB 261 was previously enjoined pending appeal, and the Ninth Circuit’s decision now provides for preliminary relief against both SB 261 and Scope 3 emissions reporting requirements. Companies should monitor further district court proceedings concerning severability and injunctive relief, any additional appellate review, and subsequent guidance from the California Air Resources Board. Any petition for panel rehearing or rehearing en banc is due, absent an extension, by November 23, 2026.