The Ninth Circuit Court of Appeals on Nov. 9 halted California’s enforcement of key climate disclosure provisions, striking down mandatory reporting of indirect emissions and climate‑related financial risk. The decision marks a major win for business groups and a setback for the state’s aggressive climate agenda.
What the Ruling Means
The three‑judge panel upheld the lower court’s permission for California to enforce SB 253’s requirements that large firms report direct emissions and the energy they purchase. It simultaneously blocked the rule that would force companies to disclose Scope 3 emissions across their entire value chains, saying the mandate was not narrowly tailored.
The panel also stopped SB 261, which required firms earning over $500 million annually to biennially reveal climate‑related financial risks, finding the law overly broad and not the least restrictive means. The court said the state could achieve its information‑gap goals through less restrictive measures.
Industry Response
Industry associations that sued to block the laws hailed the decision as a victory for regulatory certainty, arguing that the state’s rules exceeded the scope of commercial speech. They contend the mandates impose heavy compliance costs without clear environmental benefit.
Circuit Judge Jacqueline Nguyen wrote that Scope 3 disclosures involve diffuse third‑party conduct and therefore fall outside the commercial speech doctrine, making the mandate unconstitutional. She emphasized that the state could achieve its information‑gap goals through less burdensome measures.
The blocked provisions would have applied to companies with annual California revenues above $1 billion for Scope 3 and over $500 million for SB 261. The threshold covers a broad segment of the state’s corporate sector.
Legal experts say the ruling could reshape how companies approach ESG reporting while the state considers alternative disclosure mechanisms. The decision may set a precedent for other states’ climate disclosure attempts.
The decision is already being appealed, and California may revise the rules to comply with the court’s narrowing. Stakeholders are watching closely for the next legal move.
This story develops rapidly; updates will follow as the litigation progresses.
