Industry groups ask Supreme Court to block California's climate disclosure laws

The U.S. Chamber of Commerce and other business groups filed an emergency application with the U.S. Supreme Court on November 10, 2025, asking the Court to block enforcement of California's SB 253 and SB 261 while litigation proceeded. California Governor Gavin Newsom had signed both laws in October 2023 as part of a 'Climate Accountability Package.' SB 253, the Climate Corporate Data Accountability Act, requires U.S. companies with annual revenues above $1 billion that do business in California to disclose their Scope 1, 2, and 3 greenhouse gas emissions. SB 261, the Greenhouse Gases: Climate-Related Financial Risk law, requires companies with annual revenues above $500 million to disclose climate-related financial risks in biennial reports.

The Chamber framed its challenge as a First Amendment compelled-speech claim, arguing that requiring companies to research, calculate, and publicly disclose climate information forces them to speak on a contested political topic in violation of the Free Speech Clause. The case in the Ninth Circuit was styled Chamber of Commerce v. Sanchez, No. 25-5327.

The Ninth Circuit Court of Appeals acted quickly after the Supreme Court application was filed. On November 18, 2025, a Ninth Circuit panel issued an injunction pending appeal blocking the California Air Resources Board from enforcing SB 261, which required companies to disclose climate-related financial risks. The injunction was specifically granted for SB 261 and denied for SB 253. The November 18 ruling came just days before the January 1, 2026, deadline for companies to publish their first climate-related financial risk reports under SB 261.

The injunction meant companies that would have faced SB 261 compliance deadlines in early 2026 no longer needed to publish the required reports while the appeal proceeded. The Chamber of Commerce withdrew its emergency Supreme Court application after receiving the favorable Ninth Circuit injunction, meaning the Supreme Court did not have to rule on the emergency request.

SB 253's Scope 3 requirement is the most legally and practically contested element of the California climate disclosure package. Scope 1 emissions are those a company generates directly; Scope 2 are emissions from purchased energy. Scope 3 encompasses all indirect emissions throughout the value chain, including those from suppliers, business travel, employee commuting, waste, and the use of sold products by customers. For a large retailer, Scope 3 can account for more than 90 percent of total emissions.

Business groups argued that Scope 3 reporting is particularly burdensome because companies can't directly control or verify emissions from thousands of independent suppliers and customers. Measuring Scope 3 accurately requires data collection from every entity in the supply chain, and the methodology for calculating it is contested among scientists and accountants. CARB was still conducting pre-rulemaking workshops on the Scope 3 framework when the litigation reached the Ninth Circuit.

California's approach pioneered state-level corporate climate disclosure at a scale that effectively reaches a large portion of the S&P 500. Because both laws apply to companies 'doing business in California,' the practical reach extended well beyond California-headquartered firms. Any company with a California employee, office, or customer relationship could be covered if it met the revenue thresholds. CARB approved the climate transparency regulation for SB 253 at its February 2026 board hearing, setting the first Scope 1 and 2 reporting deadline for August 10, 2026.

The SEC had separately proposed its own federal climate disclosure rules, which were also contested in court. The concurrent federal and state litigation created a complex regulatory environment in which companies faced potential obligations from both Washington and Sacramento while both sets of rules were under judicial review.

The First Amendment arguments at the center of the litigation produced a nuanced Ninth Circuit oral argument on January 9, 2026. The three-judge panel focused on whether the climate disclosure statutes compel speech and, if so, whether that speech qualifies as commercial speech subject to intermediate scrutiny rather than strict scrutiny. The plaintiffs argued for strict scrutiny, contending the laws required companies to express views on contested climate science. California argued the laws required only factual commercial disclosures that are closely tethered to commercial transactions, qualifying for the more permissive Zauderer standard.

The distinction matters enormously for the outcome. Under strict scrutiny, California would need to show the laws serve a compelling government interest and are narrowly tailored, a very high bar. Under Zauderer, California only needs to show the disclosures are reasonably related to a substantial government interest and not misleading, a much easier standard to meet. The panel repeatedly returned to the 'tethered to commercial transactions' question during oral argument.

The broader policy stakes extend well beyond California. If the Ninth Circuit upholds both laws, other states may enact similar mandatory climate disclosure requirements, creating a de facto national standard even without federal action. If the court strikes down either law on First Amendment grounds, it could limit states' ability to require any corporate disclosure of politically contested factual information, with implications beyond climate to areas like nutrition labeling, pharmaceutical disclosures, and financial reporting.

The Morgan Lewis analysis noted that the Ninth Circuit's November 18 injunction of SB 261 but not SB 253 suggested the panel saw meaningfully different First Amendment profiles between the two laws. SB 261's requirement to disclose 'climate-related financial risks' was seen as more likely to compel opinion-like statements about the materiality of climate risks, while SB 253's requirement to report factual emissions data was seen as more plainly factual.

CARB continued its implementation work on SB 253 even as litigation proceeded, holding workshops on the Scope 3 framework, organizational boundaries, and assurance standards. The ISS Corporate analysis published in April 2026 noted that CARB's initial regulation adopted at its February 2026 board hearing set the first Scope 1 and 2 reporting deadline for August 10, 2026. Scope 3 reporting would not be required until 2027.

Non-compliance with SB 253 carries penalties of up to $500,000 per reporting year. CARB's continued implementation work, parallel to the litigation, put companies in a difficult position: they needed to build compliance infrastructure for a law whose enforcement could be enjoined on appeal, while also defending against the argument that the law compelled unconstitutional speech.

The Silicon Valley Leadership Group, the Business Roundtable, and the American Farm Bureau joined the Chamber of Commerce in the litigation, reflecting a broad coalition of industry interests opposed to the disclosure requirements. Environmental groups including the Sierra Club and California-based climate advocacy organizations filed amicus briefs supporting the state. The Harvard Law School Corporate Governance Forum noted that the outcome of Chamber of Commerce v. Sanchez would likely set the template for how states can legislate corporate climate accountability in the absence of federal action.