Ninth Circuit Approves California’s Core Carbon Emissions Reporting Rules (Scope 1 and Scope 2) But Rejects Scope 3 Reporting & Climate-Risk Reports as Likely Unconstitutional

On November 9, 2026, one day before companies’ first reporting deadline under California’s new climate disclosure laws, the US Court of Appeals for the Ninth Circuit issued its long-awaited decision in Chamber of Commerce of the United States of America v. Sanchez, No. 25-5327, slip op. (9th Cir. Nov. 9, 2026) (Sanchez).^[1] Passed in 2023, California’s two climate disclosure laws are the first in the nation to require large private and public companies doing business in the state to publicly report their greenhouse gas (GHG) emissions (SB 253) and the financial risks that climate change poses to their businesses (SB 261). Shortly after its enactment, the US Chamber of Commerce and other business groups challenged these laws in court, arguing that the laws violate the First Amendment by forcing companies to make statements they would not otherwise make. Sanchez, slip op. at 12. The appeals court partly agreed and partly disagreed with the trial court’s refusal to put the laws on hold while the case moves forward. Id. at 7–8.

For now, the Ninth Circuit left in place SB 253’s requirement that companies report Scope 1 emissions (those from sources a company owns or controls) and Scope 2 emissions (those from the energy it buys). Id. at 7. But the court found that SB 253’s Scope 3 requirement (emissions across a company’s value chain, such as suppliers and customers) and SB 261’s climate-risk reports likely violate the First Amendment. Id. at 8. The ruling has significant, immediate implications for entities subject to the disclosure laws and signals that California’s climate disclosure regulations will be significantly more constrained than originally intended.

Background: First Amendment Challenges

As we previously reported, on September 24, 2025, the California Air Resources Board (CARB), the state agency that enforces the climate disclosures laws, released a preliminary list of about 4,100 companies that it identified as encompassed by the regulations.^[2] SB 253 requires companies doing business in California with more than $1 billion in yearly revenue to report their Scope 1, 2, and 3 emissions.^[3]See Cal. Health & Safety Code § 38532(b)(2), (c)(1). SB 261 requires companies with $500 million or more in yearly revenue to publish a report every two years on the financial risks they face from climate change.^[4]See Cal. Health & Safety Code § 38533.

On August 13, 2025, the trial court denied the business groups’ request to preliminarily enjoin the laws.^[5] The court found that both laws regulate business-related speech, which the Constitution protects less strongly than political or personal speech, although the court applied a more stringent standard to SB 261. Sanchez, slip op. at 12–13. However, on November 18, 2025, the Ninth Circuit placed SB 261 on hold during the appeal process, although it permitted SB 253 to move forward. Id. at 13.^[6] CARB then moved the Scope 1 and 2 deadline from August 10, 2026 to November 10, 2026.^[7]

What the Appeals Court Decided

Scope 1 and 2 Reporting: Still Required

Relying heavily on its recent decision in Pharmaceutical Research & Manufacturers of America v. Stolfi, 153 F.4th 795 (9th Cir. 2025), the court found that Scope 1 and 2 reports are a form of business-related speech. Sanchez, slip op. at 15–24. They require factual information about emissions from a company’s own operations, which is information that matters to investors. Id. at 16–17. As the court stated, “emissions disclosures function like product warnings in capital markets: higher emissions may signal a greater risk of diminished returns.” Id. at 17. The court stressed, however, that the law does not require any company to “attribute culpability, assign moral significance to its emissions, or endorse the State’s climate-policy positions.” Id. at 22. Companies simply report their emissions “as a matter of historical fact,” not as an opinion. Id. at 23 (quoting Stolfi, 153 F.4th at 824).

Because this is business-related speech, the court applied the test drawn from Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557 (1980), which asks whether a law serves an important government goal and is reasonably tailored to it. The court found that the reporting rules likely serve California’s important goals of providing better information to investors and reducing emissions. Sanchez, slip op. at 24–32. But the court rejected the state’s argument that the law prevents “greenwashing” (companies overstating their environmental record), finding no evidence that this was happening and noting that “[a] state may not [burden] speech to prevent something that does not appear to occur.” Id. at 28. It also rejected the business groups’ argument that the law should cover only publicly traded companies, reminding the Chamber that lawsuits seeking to strike down a law in every situation are “hard to win.” Id. at 29–30.

Scope 3 Reporting: Likely Unconstitutional

Yet the court described Scope 3 as “different” from the laws’ other requirements. Sanchez, slip op. at 8. Scope 3 requires companies “to collect, synthesize, and report information about the conduct of independent actors across complex commercial networks,” including suppliers, customers, and distributors. Id. at 33. Because these reports concern “diffuse third-party conduct,” they are “insufficiently tethered to the reporting entity’s own operations and capital transactions to qualify as commercial speech.” Id. Applying a more stringent test, which a law satisfies only if it is truly necessary to serve a critical government goal, the Scope 3 requirement was determined to likely fail, as its link to a company’s own financial risk is “too remote” to be germane to investors. Id. at 33–36. The court remanded the case to the trial court to determine whether the Scope 3 reporting requirement can be severed while the rest of SB 253 survives; the law itself says that if one part is struck down, the rest should stand. Id. at 36, 43; see Cal. Health & Safety Code § 38532(i). The majority noted that if Scope 3 cannot be severed, the constitutional problem would taint “every application” of SB 253. Sanchez, slip op. at 41.

Climate-Risk Reports (SB 261): Blocked

SB 261 is intended to generate information about how climate change could affect companies’ finances by requiring covered entities to publish, every two years, reports on their climate-related financial risks and the steps taken to reduce and adapt to those risks. See Sanchez, slip op. at 6–7, 10–11. The court held SB 261 goes beyond ordinary business speech as it requires “subjective ideological assessments.” Sanchez, slip op. at 36. In practice, the law forces companies to answer “a speculative and contested policy question: ‘How should climate change shape the company’s future operations and economic planning?’” Id. at 38. The court found this rule compelled companies to “share value-laden judgments on a politically fraught subject.” Sanchez, slip op. at 39. That means that SB 261 is judged according to “a [stringent] standard which the State all but concedes it cannot satisfy.” Id. at 8.

A Narrower Law, and a Mixed Message

The result of this decision is that a much narrower climate disclosure law than the one originally envisioned by California is now in effect. With SB 261 blocked, companies with $500 million to $1 billion in revenue, which were covered only by SB 261, currently have no reporting obligation. See Sanchez, slip op. at 8, 42–43. The only requirement that remains in force is Scope 1 and 2 reporting by companies with more than $1 billion in revenue. Id. at 7, 42.

Both parties have characterized aspects of the Ninth Circuit’s decision as a victory. The Chamber of Commerce described the ruling as an “important victory” and said it will ask the court to block the laws permanently.^[8] The California Attorney General’s Office said it was pleased that part of the emissions law can be enforced and is weighing its next steps.^[9] Note, though, that this is an early-stage ruling on whether to enjoin the laws while the challenge proceeds, and not a final decision on whether the climate disclosure laws are constitutional (although the analysis here would likely shape future rulings in the case).

The Upshot: What Companies Should Do Now

Companies should not treat this decision as a reprieve. Scope 1 and 2 reports are still required, and the November 10, 2026 deadline still applies unless a court or CARB changes it. SB 253 allows CARB to impose fines of up to $500,000 per reporting year. Cal. Health & Safety Code § 38532(f)(2)(A); see Sanchez, slip op. at 48 (Bennett, J., concurring in the judgment in part and dissenting in part). CARB has, however, signaled that it will accept a good-faith effort to comply in the first year.^[10] Starting in 2027, companies are expected to have a limited review of their Scope 1 and 2 reports by an independent outside firm.^[11]

Companies with more than $1 billion in revenue that do business in California should confirm whether they are covered and file their Scope 1 and 2 reports on time. Companies that have been preparing to report Scope 3 emissions in 2027 should wait to see whether the trial court allows Scope 3 to be separated from the rest of the law, as well as how CARB responds, and whether either side asks the full Ninth Circuit or the US Supreme Court to review the decision, before investing further. Mintz will continue to monitor these developments.

ENDNOTES

[1] See https://law.justia.com/cases/federal/appellate-courts/ca9/25-5327/25-5327-2026-11-09.html.

[2] Jacob H. Hupart, “California Identifies 4,100+ Companies Subject to Mandatory Climate Disclosures,” Mintz (Sept. 26, 2025).

[3] Jacob H. Hupart & Will G. McKitterick, “ESG During the Second Trump Administration: California Leads the Charge on Climate Disclosure,” Mintz (Mar. 5, 2026).

[4] Id.

[5] Order Denying Plaintiffs’ Motion for Preliminary Injunction, Chamber of Commerce of the U.S. v. Cal. Air Res. Bd., No. 2:24-cv-00801-ODW-PVC, ECF No. 112 (C.D. Cal. Aug. 13, 2025).

[6] See also J. Hupart, “California’s Mandatory Climate Reporting Stayed Pending Appeal,” Mintz (Nov. 18, 2025).

[7] Jacob H. Hupart & Will G. McKitterick, “CARB Workshop for California Climate Disclosure Rule (SB 253): Key Takeaways from July 21, 2026 Workshop,” Mintz (July 24, 2026).

[8] Jonathan Stempel, “Court Blocks California from Enforcing Climate Disclosure Laws,” Reuters (Nov. 9, 2026).

[9] Id.

[10] Hupart & McKitterick, “ESG During the Second Trump Administration,” supra note 3.

[11] Hupart & McKitterick, “CARB Workshop,” supra note 7.

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