For California Climate Disclosure Laws, Ninth Circuit Draws the Line at Scope 3 and Climate-Risk Reporting

One day before California's first mandatory greenhouse gas emissions reporting deadline, the Ninth Circuit issued a consequential decision that could reshape the future of corporate climate disclosure.

In United States of America Chamber of Commerce v. Sanchez, the U.S. Court of Appeals for the Ninth Circuit concluded that California's mandatory Scope 3 emissions disclosures under SB 253 and climate-related financial risk disclosures under SB 261 likely violate the First Amendment. The court nevertheless permitted SB 253's Scope 1 and Scope 2 reporting requirements to proceed.

SB 253 Emissions Reporting

The court distinguished factual reporting about a company's own operations from broader disclosures involving third-party activities and predictive judgments.

• Scope 1 and Scope 2 emissions reporting, the majority reasoned, concerns standardized numerical information sufficiently connected to a company's operations and capital transactions to qualify as commercial speech. Applying intermediate scrutiny, the court concluded that these requirements satisfy the First Amendment.
• Scope 3 reporting presented a different question. Because these emissions arise throughout a company's value chain, the court found these disclosures insufficiently connected to the reporting company's own operations and commercial transactions. It therefore applied strict scrutiny, which the requirements failed.

SB 261 Climate Risk Reporting 

The court applied similar reasoning to SB 261, finding that its climate-related financial risk disclosures require companies to go beyond reporting historical facts.

Under the TCFD-based framework incorporated into SB 261, companies must assess future climate-related risks, their potential impact on business strategies, and measures adopted to address those risks.

The court characterized these requirements as compelling predictive and normative judgments on a politically contested subject. It concluded that the statute failed strict scrutiny because California had not demonstrated that the disclosure mandate was narrowly tailored to its asserted objectives.

What happens next?

The Ninth Circuit remanded the case for the district court to determine whether SB 253's Scope 3 provisions can be severed from the remainder of the statute. Notably, SB 253 includes a severability clause.

The ruling addresses preliminary injunctive relief, not final adjudication of the constitutional challenges.

In the meantime, California's November 10, 2026 deadline for Scope 1 and Scope 2 emissions reporting remains in place. Covered companies should continue to comply with those requirements.

Source: Chamber of Commerce v. Sanchez, No. 25-5327 (9th Cir. Nov. 9, 2026).