The Ninth Circuit’s November 9, 2026, opinion preserves California’s ability to require large companies to disclose operational greenhouse gas emissions while holding that Scope 3 value-chain emissions and climate-related financial risk disclosures likely violate the First Amendment. The practical distinction matters most for businesses with substantial direct emissions, significant purchased energy use, or complex supplier networks. This is a preliminary-injunction decision, not a final judgment resolving all challenges to California’s climate disclosure laws.
What the Decision Preserves—and Puts on Hold
SB 253 applies to companies doing business in California with annual revenue exceeding $1 billion and requires public disclosure of Scope 1,2, and 3 emissions. CARB’s November 10, 2026, deadline for first-year Scope 1 and Scope 2 reporting remained in effect. For companies that report on a calendar-year basis, the filing covers 2025 emissions. Scope 3 reporting was scheduled to begin in 2027. The court affirmed the denial of preliminary relief for Scope 1 and Scope 2 reporting (emissions from owned or controlled sources and purchased electricity, steam, heating, and cooling). It reversed the denial of preliminary relief for Scope 3 reporting (upstream and downstream emissions). The district court must determine whether the Scope 3 provisions can be severed from the remainder.
Under the decision summarized above, reporting depends on company size and emissions category, not industry:
Importantly, this is a preliminary-injunction decision, not a final judgment striking Scope 3 reporting from California law. Reporting deadlines and implementation need confirmation; separate reporting obligations may still apply.
Implications for Operational Emissions Reporting and Supply Chains
Energy, industrial manufacturing, and transportation businesses face particularly significant continuing disclosure exposure because the surviving categories encompass fuel combustion and purchased energy. For covered companies, the central task remains assembling reliable operational emissions inventories, not assuming litigation eliminates reporting obligations. The opinion describes reporting under standardized Greenhouse Gas Protocol methodologies and independent third-party assurance. Those requirements emphasize internal records, organizational boundaries, calculation methods, and verifiable data supporting public disclosures.
Waste management and environmental infrastructure businesses also warrant attention when covered operations own or control emission sources, operate vehicle fleets, or purchase substantial energy. Their relevance follows from the scope definitions; the court does not specifically identify waste facilities or rank their compliance burdens. For these businesses, the decision distinguishes reporting on controlled operations from reporting on independent customers, contractors, and suppliers. It does not exempt environmental services or eliminate separate emissions regulations.
Agriculture, food processing, retail, and consumer-products businesses face a distinct exposure: potentially extensive supplier and customer networks. The ruling offers meaningful prospective relief from California’s Scope 3 mandate, which would require covered companies to collect third-party emissions data or use estimates. Agricultural associations are among the challengers. Smaller suppliers below SB 253’s revenue threshold are not automatically direct reporting entities, but the Scope 3 dispute matters because covered customers could otherwise seek information across their supply chains.
Construction, real estate, and technology businesses illustrate why purchased energy still is important even when direct fuel emissions are not the dominant reporting category. Covered companies must distinguish energy consumed in their own operations from emissions associated with independent value-chain participants. The court’s reasoning supports disclosure of internally documented operational information while rejecting the wider mandate’s justification. However, the opinion provides no sector-specific cost estimates, emissions comparisons, or evidence showing which individual companies will face the greatest burden.
Preliminary Relief for Climate-Risk Reporting
Financial services and other covered businesses receive broader preliminary relief under SB 261, which applies to businesses with annual revenue exceeding $500 million. The law requires biennial public reports on climate-related financial risks and adaptation measures. The majority concluded that mandated assessments of future conditions, strategy, governance, and competing priorities compel noncommercial speech and fail strict scrutiny. Separately, investors, lenders, and insurers remain relevant users of operational emissions information: the court linked those disclosures to risk assessment, profitability, and capital transactions.
What Covered Businesses Should Do Next
Companies subject to SB 253 should prepare for the next Scope 1 and Scope 2 reporting cycle by closing data gaps, documenting calculation methods, and organizing records for potential limited assurance. CARB is still developing its rules for 2027 and later reporting. While the case proceeds, companies can reassess work undertaken solely to comply with California’s Scope 3 and SB 261 disclosure requirements. The district court still needs to decide whether the Scope 3 requirement can be separated from the rest of SB 253.
Separate reporting rules may still require companies to quantify and disclose Scope 3 emissions. Examples include covered entities in Australia under AASB S2 and companies in EU member states such as France and Germany that are subject to the Corporate Sustainability Reporting Directive and applicable European Sustainability Reporting Standards. Applicability depends on the entity, the reporting year, and any available transition relief.
Companies participating in voluntary disclosure programs should check whether independent verification is required or requested, which emissions it should cover, and when it is needed. SCS Engineers can help companies develop or update their Scope 1, Scope 2, and Scope 3 greenhouse gas inventories and prepare for verification. SCS Engineers can also independently verify inventories it did not prepare, subject to applicable independence requirements.
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