From the SEMA Washington, D.C., office
On November 9, 2026, a federal appeals court issued a significant ruling affecting two California laws that require large businesses to publicly report information about climate risks and greenhouse gas emissions.
In a split decision, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit ruled that portions of California's climate reporting laws likely violate the First Amendment's protections against government-compelled speech.
The decision affects two laws: Senate Bill (SB) 253 and Senate Bill (SB) 261.
SB 261: Climate Financial Risk Reporting Blocked
SB 261 requires companies with more than $500 million in annual revenue that do business in California to publicly report how climate change could affect their finances and what steps they are taking to address those risks. The court blocked California from enforcing this law.
The judges found that requiring companies to make public statements about potential climate-related financial risks likely violates their First Amendment rights, particularly because these reports involve predictions and opinions about a politically controversial issue.
As a result, businesses are not currently required to submit reports under SB 261 while the court's order remains in effect.
SB 253: Some Emissions Reporting Requirements Remain in Effect
SB 253 requires companies with more than $1 billion in annual revenue that do business in California to publicly report their greenhouse gas emissions.
The court allowed some of these reporting requirements to move forward while temporarily blocking others.
Here's what businesses need to know:
- Scope 1 emissions––Still required: Emissions produced directly by a company's operations, such as fuel burned in company-owned vehicles or facilities.
- Scope 2 emissions––Still required: Emissions associated with the electricity and other purchased energy a company uses.
- Scope 3 emissions––Blocked: Emissions associated with a company's broader supply chain, including suppliers, transportation, product use and other activities outside its direct operations.
The court found that requiring companies to report Scope 3 emissions likely violates the First Amendment. However, it allowed California to continue enforcing the Scope 1 and Scope 2 reporting requirements.
What Businesses Need to Do Now
Companies covered by SB 253 must still comply with the reporting requirements for Scope 1 and Scope 2 emissions.
The initial reporting deadline was November 10, 2026. California is providing some flexibility for companies making their first submissions, recognizing that businesses may need additional time to establish reporting systems and collect the necessary information.
The California Air Resources Board (CARB) oversees implementation and enforcement of SB 253. Companies that fail to comply could face penalties of up to $500,000 per year.
What Happens Next?
The court's decision does not permanently strike down either law. Instead, it blocks enforcement of certain requirements while the legal challenges continue.
Further court proceedings could determine whether California can ultimately enforce the disputed provisions.
Bottom Line: California's climate disclosure requirements remain partially in effect. Large businesses covered by SB 253 must continue reporting their direct and purchased-energy emissions, but reporting requirements for supply chain emissions and climate-related financial risks are currently blocked by the court.
Image courtesy of Shutterstock | Robert Schlie
