In 2023, California enacted two companion climate-disclosure statutes. The Climate Corporate Data Accountability Act, known as SB 253 and codified at Health and Safety Code § 38532, applies to entities doing business in California with more than $1 billion in annual revenue. It requires them to report their greenhouse gas emissions each year under the Greenhouse Gas Protocol in three categories: Scope 1 (direct emissions from sources the company owns or controls), Scope 2 (emissions from energy the company purchases), and Scope 3 (indirect upstream and downstream emissions across the company’s value chain, from sources it does not own or control). The Climate-Related Financial Risk Act, known as SB 261 and codified at Health and Safety Code § 38533, applies to companies with more than $500 million in annual revenue doing business in California. It requires a biennial report on the company’s “climate-related financial risk” under the framework of the Task Force on Climate-related Financial Disclosures, along with the measures the company has adopted to reduce and adapt to that risk. According to the dissent, both laws carry administrative penalties and annual fees payable to the California Air Resources Board (CARB).

The U.S. Chamber of Commerce, the California Chamber of Commerce, the American Farm Bureau Federation, the Los Angeles County Business Federation, the Central Valley Business Federation, and Western Growers Association sued the CARB chair and executive officer and the California Attorney General in the Central District of California. They alleged that both statutes facially violate the First Amendment by compelling speech. Other, non-First Amendment claims were not part of this appeal.

The district court denied the business groups’ motion for a preliminary injunction. It concluded that both laws regulate commercial speech, so strict scrutiny did not apply. It reviewed SB 261 under intermediate scrutiny and SB 253 under the more deferential standard of Zauderer v. Office of Disciplinary Counsel (1985) 471 U.S. 626, and found that the plaintiffs had not shown a likelihood of success, irreparable harm, or that the equities and public interest favored them. The plaintiffs appealed under 28 U.S.C. § 1292(a)(1). On November 18, 2025, the Ninth Circuit enjoined enforcement of SB 261 pending appeal, but declined to do the same for SB 253.

In the published case of Chamber of Commerce of the United States of America v. Sanchez, No. 25-5327 (November 2026), the Ninth Circuit Court of Appeals affirmed in part, reversed in part, and remanded the district court’s order denying a preliminary injunction. The panel affirmed the denial as to SB 253’s Scope 1 and Scope 2 emissions disclosures, which may therefore proceed. It reversed the denial as to SB 253’s Scope 3 disclosure requirement and as to SB 261 in its entirety, finding both likely unconstitutional. It remanded for the district court to decide in the first instance whether the Scope 3 provision can be severed from the rest of SB 253, which contains a severability clause.

The court began with the governing framework. Content-based compelled speech is presumptively unconstitutional and draws strict scrutiny, as in X Corp. v. Bonta (9th Cir. 2024) 116 F.4th 888 and National Institute of Family & Life Advocates v. Becerra (2018) 585 U.S. 755. Commercial speech generally receives intermediate scrutiny under Central Hudson Gas & Electric Corp. v. Public Service Commission (1980) 447 U.S. 557, and purely factual, uncontroversial disclosures may receive the lighter Zauderer review. The preliminary-injunction factors came from Winter v. Natural Resources Defense Council (2008) 555 U.S. 7.

Scope 1 and Scope 2. Relying heavily on Pharmaceutical Research & Manufacturers of America v. Stolfi (9th Cir. 2025) 153 F.4th 795, the majority held that these provisions compel factual emissions information bearing on a company’s own operations and its risk profile in capital markets, and therefore regulate commercial speech. It rejected the argument that commercial speech is limited to speech proposing a transaction. The court did not decide whether Zauderer or intermediate scrutiny applied, because the provisions likely survive the tougher intermediate test. The State had substantial interests in giving investors better information and in reducing emissions, though the court found no record support for a separate anti-“greenwashing” rationale. Studies showing that mandatory Scope 1 and 2 reporting produced emissions reductions of roughly 7 to 8 percent persuaded the court that the requirements directly advance those interests and are not more extensive than necessary. The facial challenge also failed under Moody v. NetChoice, LLC (2024) 603 U.S. 707, because most covered companies are publicly traded, so any unconstitutional applications do not substantially outweigh the lawful ones. On the remaining factors, the plaintiffs showed no irreparable harm, and the equities favored the State.

Scope 3. The court reached a different result for value-chain emissions. Because Scope 3 concerns diffuse conduct by third parties rather than the company’s own operations, the panel held it is not tethered closely enough to the company’s commercial transactions to qualify as commercial speech, so strict scrutiny applies. The State could not carry that burden. Companies do not hold Scope 3 data the way they hold their own emissions data, and the record did not show their estimates would be more reliable than the State’s own. The link to investor decisions was too attenuated, and no study examined mandatory Scope 3 reporting, so the emissions-reduction evidence did not support it.

SB 261. The court held that climate-risk reports require predictive and normative judgments, under a state-prescribed framework, on a politically charged subject. That makes them noncommercial speech subject to strict scrutiny, which the majority said the State had “all but concede[d]” it could not satisfy. Even assuming compelling interests, SB 261 was not narrowly tailored, because less restrictive options existed, such as publicizing voluntary disclosures or regulating emissions directly. For both SB 261 and Scope 3, the loss of First Amendment freedoms constituted irreparable harm, and the equities and public interest favored the plaintiffs.

The partial dissent. Judge Bennett would have treated both statutes as compelling noncommercial speech and enjoined them both. In his view, commercial speech requires a close tie to a specific product or service, and firm-level emissions data informs readers about companies, not particular products. He warned that equating investors’ interest in companies with consumers’ interest in products could justify broad compelled disclosures, including ones aimed at people in employment markets, citing Valle del Sol Inc. v. Whiting (9th Cir. 2013) 709 F.3d 808.

In a same-day client alert, Foley & Lardner observed that SB 253’s Scope 1 and 2 filing deadline remains November 10, 2026, the day after the ruling, and said it expects the district court to enter a preliminary injunction against the Scope 3 and SB 261 requirements in line with the opinion. That November 10 date reflects CARB’s extension of the original August 10, 2026 first-year deadline, as described in CARB’s rulemaking materials. Further review, either by the full Ninth Circuit or the U.S. Supreme Court, remains possible.

9th Cir. Blocks California Climate-Risk Law and Scope 3 Reporting