What this means for your company:
- Scope 3 and climate-risk disclosure mandates face a significant constitutional setback. The Ninth Circuit found these requirements likely unconstitutional. Their future depends on further court proceedings, including whether Scope 3 can be severed from the emissions reporting law. Scope 3 reporting had been scheduled to begin in 2027, and enforcement of the Climate-Related Financial Risk Act remains paused.
- Scope 1 and 2 reporting requirements remain in place. The decision allows California to continue requiring reports of direct emissions and emissions associated with purchased energy. It did not change the initial November 10, 2026 filing deadline. Companies should continue planning for applicable Scope 1 and 2 obligations under California Air Resources Board (CARB) guidance.
- The decision matters beyond California. Its published First Amendment analysis binds federal courts throughout the Ninth Circuit and could support challenges to similar disclosure mandates within the circuit. It may also persuade courts elsewhere.
Coverage can extend to companies headquartered outside California. The Climate Corporate Data Accountability Act generally covers U.S.-formed public and private business entities doing business in California with more than $1 billion in total annual revenue; the Climate-Related Financial Risk Act uses a $500 million threshold. CARB evaluates each entity separately using the lesser of the two preceding fiscal years’ revenue.
In its November 9, 2026 decision in Chamber of Commerce v. Sanchez, No. 25-5327, the divided court concluded that Scope 3 disclosures about suppliers and customers are insufficiently connected to the reporting company’s own operations and capital transactions to qualify as commercial speech. The court also found that mandatory climate-risk assessments compel subjective, forward-looking judgments. It concluded that both requirements likely fail strict scrutiny, while allowing reporting of direct emissions (Scope 1) and emissions associated with purchased energy (Scope 2) to proceed. The case returns to the district court, including to determine whether Scope 3 can be severed from the emissions reporting law. For energy companies, Scope 3 can include customers’ use of sold products and require third-party data or estimates. The same emissions may appear in multiple companies’ value-chain inventories. This decision addresses preliminary relief and does not finally resolve the constitutional challenge. Read the decision and CARB’s reporting guidance.
Please contact Gillian Wilkin or Bret Sumner with questions.