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California's Scope 3 reporting rule stalls in court: what the Ninth Circuit decided
California's Scope 3 reporting requirement is on hold. On 9 November 2026 the Ninth Circuit ruled, by two votes to one, that the Scope 3 part of SB 253 likely breaches the First Amendment. Scope 1 and 2 reporting goes ahead, and the 10 November filing deadline stood.
What did the Ninth Circuit decide on SB 253 and SB 261?
The case is Chamber of Commerce v. Sanchez, an appeal against the district court's refusal to block California's two climate disclosure laws while the challenge is heard.
- Scope 1 and 2 under SB 253 stay in force. The court declined to block reporting of a company's own operational emissions. It treated that disclosure as commercial speech, applied intermediate scrutiny and found the rules sufficiently tailored. Companies doing business in California with revenue above $1 billion remain covered, and their first filing, covering 2025 emissions, was due on 10 November 2026.
- Scope 3 under SB 253 is likely unconstitutional. The majority held that emissions from suppliers, customers and other third parties are not tied closely enough to the reporting company's own operations to count as commercial speech. Under strict scrutiny, the requirement was not narrowly tailored. Scope 3 reporting had been due to start in 2027.
- SB 261 climate risk reports are to be blocked. The court found that the climate-related financial risk reports, which apply to companies with revenue above $500 million, likely violate the First Amendment because they require predictive, subjective judgements. It directed that SB 261 be enjoined. Enforcement had already been paused pending the appeal.
Judge Bennett dissented in part. He would have blocked all of SB 253, arguing that company-level emissions data does not become commercial speech just because investors may find it useful.
Is Scope 3 reporting in California finished?
No. This is a decision on a preliminary injunction, and the merits are still to be heard. The case returns to the US District Court for the Central District of California, which must decide whether the Scope 3 provisions can be severed from the rest of SB 253. Either side can ask for a rehearing by the panel or by the full Ninth Circuit, and those petitions are due by 23 November 2026 unless the deadline is extended. The California Air Resources Board (CARB) is still developing its rules for 2027 reporting and beyond.
What does the ruling mean for companies covered by SB 253?
The Scope 1 and 2 obligation is unchanged. SCS Engineers advises covered companies to prepare for the next cycle now: close data gaps, document calculation methods and keep records ready for limited assurance.
Scope 3 work done only to meet the SB 253 timetable is the part in question, and other rules still ask for the same numbers. Scope 3 disclosure applies under ESRS E1 to companies that remain in scope of the CSRD, under Australia's AASB S2 from a reporter's second year, and to Singapore's largest listed companies from FY2026. UK listed companies have their own timetable, set out in UK listed companies must disclose Scope 3 from 2027.
Will suppliers still be asked for emissions data?
Yes. Buyers with science-based targets need supplier data to track progress against their Scope 3 targets, and the reporting rules outside California still apply. Neither is affected by this ruling. Our guide to SBTi progress tracking covers how those targets turn into requests.
