Ninth Circuit Narrows California Climate Disclosure Rules as Scope 1 and 2 Deadline Arrives

SAN FRANCISCO, November 10, 2026: A federal appeals court has dealt a major setback to California’s climate disclosure rules, but it has not stopped companies from having to report their direct greenhouse-gas emissions and emissions tied to purchased electricity. In a ruling issued Monday, the US Court of Appeals for the Ninth Circuit said business groups were entitled to preliminary relief against the state’s climate-risk reporting law and the value-chain emissions provisions of its corporate emissions law. The court left the direct-emissions and purchased-energy reporting requirements in place.

The distinction is important for companies facing the first reporting deadline under California’s Climate Corporate Data Accountability Act, known as SB 253. The California Air Resources Board has set November 10 as the deadline for the first Scope 1 and Scope 2 disclosures. The appeals court did not block those parts of the law, so the filing obligation remains in force while the wider case continues.

The panel’s decision is also not a final judgment striking down the statutes. It reversed a district court’s refusal to grant preliminary relief on parts of the laws and sent the case back for further proceedings, including a decision on whether the Scope 3 provisions can be separated from the rest of SB 253. The ruling nevertheless gives the business groups challenging the measures a significant First Amendment victory and raises fresh uncertainty over how far states can go in requiring companies to publish climate-related information.

The case, brought by the US Chamber of Commerce and other business organisations, concerns two laws signed by California in 2023. SB 253 requires large companies doing business in the state to report greenhouse-gas emissions. SB 261 requires companies above a separate revenue threshold to publish reports describing climate-related financial risks to their businesses.

The Ninth Circuit drew a line between different kinds of information. It treated Scope 1 emissions, which come directly from a company’s operations, and Scope 2 emissions, which are associated with purchased electricity, heating, cooling and steam, as factual disclosures tied to commercial activity. The majority concluded that those requirements could remain in place at this preliminary stage because California had substantial interests in obtaining emissions data and informing investors and the public.

Scope 3 is different. It covers indirect emissions across a company’s value chain, including suppliers, transport, product use and other activities that may occur outside the reporting company’s direct control. The panel concluded that the requirement reaches beyond the company’s own commercial transactions and compels statements that do not fit the same category as the direct and purchased-energy data. It therefore found that the challengers were likely to succeed in arguing that the Scope 3 mandate fails the more demanding First Amendment test applied to non-commercial speech.

SB 261 faced a broader problem in the court’s analysis. It requires covered companies to describe climate-related financial risks, including risks that may depend on future regulation, technology, markets, weather patterns and economic conditions. The majority viewed those reports as requiring predictive and evaluative judgments on a politically contested subject, rather than simply factual disclosures about a company’s own products or services. It found that the challengers were likely to show the requirement could not survive strict scrutiny.

The court reversed the district court’s denial of preliminary relief as to SB 261 and the Scope 3 provisions of SB 253. It remanded the case so the district court can address whether the Scope 3 provisions are severable from the rest of SB 253. That procedural step matters: the appeals court did not announce that every part of the corporate emissions law had been invalidated, and it did not erase the Scope 1 and Scope 2 reporting obligations.

SB 261 had already been subject to a separate injunction since November 18, 2025. The new decision strengthens the challengers’ position on the merits of their preliminary-injunction request, but the litigation remains active. The state may seek further review, and the district court still has work to do on the effect of the ruling on the remaining provisions.

SB 253 applies to companies with annual revenue above $1 billion that do business in California. It is designed to produce a consistent public record of corporate greenhouse-gas emissions, beginning with direct emissions and purchased energy and extending to value-chain emissions. The law gives the California Air Resources Board responsibility for developing the reporting framework and administering the programme.

SB 261 has a lower revenue threshold of $500 million and focuses on climate-related financial risk. Covered companies are required to describe the ways climate change could affect their business, including physical risks to facilities and supply chains, transition risks linked to changes in policy and technology, and the steps they are taking to manage those exposures.

California has argued that the information is needed by investors, customers, regulators and the public. Emissions data can help identify where greenhouse gases are produced and where reductions may be possible. Risk reports can help financial markets understand whether companies are exposed to extreme weather, changing insurance costs, supply-chain disruption or shifts in demand and regulation. The state has also argued that a common reporting framework is more useful than a patchwork of voluntary disclosures that differ from company to company.

The business groups have argued that the statutes impose costly and legally uncertain reporting duties, particularly where companies are asked to collect information from suppliers and other third parties. Their challenge says the laws compel speech on contested policy questions and go beyond what California can require from companies simply because they operate in the state. The Ninth Circuit’s opinion focused on those First Amendment arguments rather than deciding every dispute about the laws’ costs or implementation.

The majority’s approach leaves California with a narrower route than the state sought. It can still require factual reporting about emissions directly associated with a company’s operations and purchased energy, at least while the case proceeds. The court was less persuaded that the state could compel companies to publish broad value-chain estimates and climate-risk assessments in the form the statutes prescribe.

For companies preparing their first SB 253 filings, the immediate task is to distinguish the reporting duties affected by the ruling from those that remain. Scope 1 and Scope 2 disclosures are still required by the November 10 deadline set by the Air Resources Board. Companies should not treat the appellate decision as a blanket suspension of California’s emissions-reporting programme.

The status of Scope 3 reporting is more complicated. The Ninth Circuit found that the challengers were entitled to preliminary relief against that requirement, but the case has been remanded for the district court to address severability. Companies with large supplier networks may need to watch the next court order closely before making decisions about the extent of their value-chain data collection and submission.

SB 261 is also in a different position from SB 253’s direct-emissions provisions. Its enforcement has been blocked by the earlier injunction, and the new appellate decision reinforces the challengers’ argument that the law is likely unconstitutional. Companies should follow the court docket and any guidance from California before assuming that a climate-risk report is due under the original timetable.

The ruling may also influence companies operating in multiple states. Climate-disclosure proposals elsewhere have drawn on similar arguments about investor protection, emissions transparency and the cost of gathering supplier data. A decision that distinguishes factual emissions figures from broader value-chain and financial-risk statements could shape how lawmakers draft future rules and how courts review them.

Investors, meanwhile, face the possibility that information about corporate climate exposure will become less standardised just as extreme weather, insurance costs and energy-transition investment are increasingly relevant to financial decisions. Supporters of the California laws say a common reporting baseline helps compare companies. Opponents say the state cannot force businesses to publish estimates and judgments that they believe are uncertain or politically framed. The court has not resolved that policy debate; it has set constitutional limits on the requirements before it.

The next steps are likely to turn on the district court’s severability analysis, the response from California and any attempt by the parties to seek further review. Until then, the most consequential practical point for businesses is narrow but clear: the November 10 Scope 1 and Scope 2 filing deadline remains in place, while the future of Scope 3 and SB 261 is subject to the continuing litigation.