• Federal appeals court pauses SB 261, delaying climate-risk disclosures for thousands of companies operating in California.
• SB 253, the state’s emissions-reporting law, continues toward its 2026 rollout despite industry legal challenges.
• The ruling intensifies a national debate over state-led climate governance as federal rules face uncertainty.
Ninth Circuit Halts California’s Climate-Risk Disclosure Law
A federal appeals court has temporarily stopped California from enforcing Senate Bill 261, a law that would require large companies operating in the state to publicly disclose their climate-related financial risks. The brief order from the Ninth Circuit Court of Appeals arrived only weeks before the first corporate preparations for the 2026 reporting deadline were expected to begin.
The injunction follows an emergency request filed last week by the U.S. Chamber of Commerce and several business groups. The Chamber asked the U.S. Supreme Court to intervene after the Ninth Circuit initially declined to pause the law earlier this year, choosing instead to hear the full case in 2026.
The latest ruling grants a halt to SB 261 alone. SB 253 — California’s sweeping emissions-reporting mandate for companies earning over $1 billion annually — remains in force and continues on its regulatory timeline. The court provided no explanation beyond the one-page injunction order.
A High-Stakes Challenge to State Climate Governance
The case is shaping up as one of the most consequential legal battles over state climate authority in a decade. The U.S. Chamber of Commerce, joined by the California Chamber of Commerce, the American Farm Bureau Federation, the Los Angeles County Business Federation, the Central Valley Business Federation, and the Western Growers Association, argues that California’s disclosure laws compel “subjective speech” in violation of the First Amendment.
In a statement released after the Ninth Circuit decision, Daryl Joseffer, executive vice president and chief counsel at the U.S. Chamber of Commerce’s Litigation Center, said:
“The U.S. Chamber welcomes the Ninth Circuit’s decision to pause California’s unconstitutional climate disclosure law, pending appeal. Stopping this law before its January 1 deadline was critical to businesses and the protection of their First Amendment rights. We look forward to continuing our appeal and securing an injunction of both climate disclosure laws, which result in massive compliance costs for companies and their supply chains. One state should not have the ability to impose this kind of burden on the entire country.”
The Chamber’s litigation strategy reflects its broader concern that California’s rules could effectively become de facto national standards. Many companies that do business in the state but are headquartered elsewhere would still be required to comply.
Regulators Press Ahead With Emissions Reporting Under SB 253
The ruling arrived on the same day the California Air Resources Board (CARB) hosted a public workshop to advance the implementation framework for both laws. CARB remains responsible for enforcement and has been preparing for the first reporting cycles.
SB 261 — now paused — would have required U.S. companies with more than $500 million in annual revenue doing business in California to disclose climate-related financial risks and adaptation measures beginning January 1, 2026.
SB 253, which remains active, requires companies exceeding $1 billion in annual revenue to report Scope 1 and Scope 2 emissions by June 30, 2026. Scope 3 value-chain disclosures begin in 2027. Covered emissions include supply-chain impacts, business travel, employee commuting, waste, water usage, and procurement.
CARB’s early list of potentially affected companies spans more than 3,100 businesses, and the agency has acknowledged that the list is incomplete. Entities not named are still responsible for determining whether they qualify.
RELATED ARTICLE: California Air Resources Board Issues Guidance for Companies Preparing Climate Risk Reports
Corporate America Caught Between State and Federal Divergence
The injunction adds complexity for C-suite leaders who have been preparing for an increasingly fragmented U.S. disclosure environment. With the SEC’s climate-risk rule now uncertain, California’s legislation had become the most significant regulatory force shaping national expectations.
SB 253’s continued path toward enforcement means most large U.S. companies must still build emissions-reporting systems, seek verification partners, and prepare to report value-chain emissions that many have resisted for years. Even with SB 261 paused, companies may not unwind their planning. The risk-reporting law could be revived as early as January 2026 depending on the appeal outcome.
What Executives and Investors Should Watch
The Ninth Circuit’s partial injunction provides temporary relief to companies concerned about the breadth of SB 261, but it also heightens uncertainty. Executives will need to track three developments closely:
The January 2026 appeal hearing, which will determine whether SB 261 returns before the first risk reports are due.
CARB’s ongoing rulemaking for SB 253, which continues uninterrupted and will establish methodologies, verification expectations, and penalties.
Potential federal responses, as Congress, regulators, and other states assess whether California’s model will expand across the country.
A Regional Ruling with National Consequences
California’s climate accountability package was designed to set a new baseline for corporate transparency in the absence of federal mandates. The Ninth Circuit’s ruling has now opened a legal and political window that may shape U.S. climate governance for years.
For global investors, the partial pause does not diminish the broader shift toward mandatory climate reporting across major markets. For U.S. companies, it underscores a new reality: climate disclosure obligations may increasingly be determined by state courts and regional politics, not Washington.
Follow ESG News on LinkedIn
