California Climate Laws (SB 253, SB 261)
California's landmark corporate climate disclosure laws have reached a major legal turning point. On November 9, 2026, the U.S. Court of Appeals for the Ninth Circuit issued a significant ruling in Chamber of Commerce v. Sanchez, allowing certain greenhouse gas emissions reporting requirements to proceed while finding that other disclosure mandates are likely unconstitutional under the First Amendment.
The decision creates a divided regulatory landscape for companies subject to California's Climate Corporate Data Accountability Act (SB 253) and Climate-Related Financial Risk Act (SB 261).
While Scope 1 and Scope 2 emissions disclosures remain mandatory for covered entities, the future of Scope 3 emissions reporting and climate-related financial risk disclosures is now substantially more uncertain.
For businesses navigating these requirements, understanding what remains enforceable—and what may change—is essential.
What Did the Ninth Circuit Decide?
The court's decision distinguishes between three categories of climate disclosure requirements.
SB 253: Scope 1 and Scope 2 Emissions
The Ninth Circuit affirmed the lower court's denial of a preliminary injunction against Scope 1 and Scope 2 greenhouse gas emissions reporting.
The court concluded that these disclosures, which concern emissions associated with a company's own operations and purchased energy, were likely to withstand the constitutional challenge at this stage.
What this means: Covered companies remain subject to California's Scope 1 and Scope 2 reporting requirements. The November 10, 2026 deadline was not suspended by the ruling.
SB 253: Scope 3 Emissions
The court reached a different conclusion regarding Scope 3 emissions, which encompass indirect emissions throughout a company's value chain, including suppliers, transportation, product use, and other activities.
The Ninth Circuit found that the Scope 3 disclosure provisions are likely unconstitutional under the First Amendment and reversed the lower court's denial of preliminary relief.
The case has been returned to the district court to address further proceedings, including whether the Scope 3 requirements can be separated from the remainder of SB 253.
What this means: California's planned introduction of Scope 3 reporting in 2027 now faces significant legal uncertainty. However, the court has not permanently invalidated the requirement, and further proceedings remain necessary.
SB 261: Climate-Related Financial Risk Reporting
The court also found that SB 261's mandatory climate-related financial risk disclosures are likely unconstitutional under the First Amendment.
Unlike standardized emissions reporting, SB 261 requires companies to assess and disclose climate-related financial risks, including forward-looking judgments about potential impacts and measures taken to address those risks.
The Ninth Circuit reversed the lower court's denial of preliminary relief, strengthening the legal basis for blocking enforcement.
What this means: Enforcement of SB 261 remains paused. Companies are not currently required to submit mandatory climate-related financial risk reports under the law, although voluntary reporting remains an option.
California Climate Disclosure Requirements: Current Status
RequirementStatus Following November 9 RulingSB 253 — Scope 1 and 2Remains enforceable; November 10, 2026 deadline unaffectedSB 253 — Scope 3Preliminary relief warranted; further district court proceedings pendingSB 261 — Climate Risk ReportingEnforcement remains paused; preliminary injunction proceedings continueFurther LitigationRehearing requests and additional proceedings remain possible
Importantly, the ruling addresses preliminary injunctive relief rather than providing a final judgment on the constitutionality of either law.
What Does This Mean for Companies Doing Business in California?
1. SB 253 Compliance Remains a Priority
Companies with more than $1 billion in annual revenue that meet California's doing-business criteria remain subject to SB 253's Scope 1 and Scope 2 reporting requirements.
CARB's implementing regulations provide further clarification on applicability, including the use of gross receipts and the lesser of the previous two fiscal years' revenue figures for determining whether a company meets the reporting threshold.
For companies within scope, accurate emissions inventories, reliable underlying data, and documented calculation methodologies remain essential.
The first reporting cycle does not require limited third-party assurance, although companies should continue strengthening their data management and internal controls in anticipation of future requirements.
Explore TBG's SB 253 Compliance Solutions
2. Scope 3 Reporting Faces Uncertainty, but Data Collection Still Has Value
Although the Ninth Circuit's decision creates uncertainty surrounding California's Scope 3 reporting mandate, companies should not necessarily abandon their Scope 3 data collection programs.
Value-chain emissions remain relevant to corporate sustainability reporting, supplier engagement, decarbonization strategies, and other regulatory and voluntary frameworks.
Organizations that have already invested in Scope 3 inventories can continue leveraging those datasets to identify emissions hotspots, evaluate supplier performance, and inform longer-term climate strategies.
Explore TBG's Carbon Accounting Solutions
3. Climate Risk Assessment Remains Strategically Important
The pause in SB 261 enforcement does not eliminate the financial and operational risks associated with climate change.
Companies continue to face potential exposure to physical climate hazards—including flooding, extreme heat, storms, and water stress—as well as transition risks associated with regulation, technology, markets, and changing stakeholder expectations.
Climate risk assessments can help organizations understand these exposures, evaluate potential financial consequences, and strengthen business resilience.
For companies already preparing SB 261-aligned disclosures, existing assessments may also support other reporting frameworks and future disclosure requirements.
Explore TBG's Climate Risk Assessment & CVaR Solutions
What Happens Next?
The Ninth Circuit's ruling is a significant development, but the litigation is not over.
The case returns to the district court for additional proceedings, including consideration of the severability of SB 253's Scope 3 requirements. The parties may also seek rehearing or further appellate review.
Meanwhile, the California Air Resources Board (CARB) may issue additional guidance clarifying the practical implications of the decision.
Companies should monitor three developments in particular:
Further judicial proceedings: Whether preliminary injunctions are entered and how the courts address the remaining constitutional questions.
CARB guidance: Any changes to reporting instructions, enforcement policies, or implementation schedules.
Future reporting obligations: Whether Scope 3 and climate-related financial risk disclosure requirements are reinstated, modified, or further delayed.
For now, the most important distinction is that Scope 1 and Scope 2 reporting remains enforceable, while Scope 3 and SB 261 face substantial legal uncertainty. It is critically important to continue monitoring the legal process.
How The Bassiouni Group Can Help
At The Bassiouni Group (TBG), we help companies navigate evolving sustainability regulations while developing practical, data-driven approaches to emissions management, climate risk assessment, and corporate disclosure.
Our capabilities include:
SB 253 Compliance: Applicability assessments, greenhouse gas inventories, reporting preparation, and compliance readiness.
Carbon Accounting: Scope 1, 2, and 3 emissions measurement, data collection, and methodology development.
Climate Risk Assessment & CVaR: Physical and transition climate risk assessments, climate value-at-risk analysis, and financial impact evaluation.
Sustainability Reporting & Disclosure: Alignment with relevant disclosure frameworks, including IFRS S1 and S2, TCFD, CDP, and other reporting standards.
As regulatory requirements continue to evolve, companies benefit from maintaining flexible compliance strategies that address immediate obligations while preserving readiness for future developments.
Need help assessing your company's obligations under SB 253 or SB 261?
Connect with The Bassiouni Group to discuss your reporting requirements, emissions data, and climate risk assessment needs.
This article reflects legal and regulatory developments as of November 12, 2026, and is intended for informational purposes only. It does not constitute legal advice.
November 12, 2026 | Regulatory Updates | The Bassiouni Group