On August 13, the U.S. District Court for the Central District of California denied the U.S. Chamber of Commerce’s motion for a preliminary injunction seeking to halt enforcement of SB 253 and SB 261, requiring disclosure of greenhouse gas emissions and climate-related financial risks, respectively.
SB 253 requires business entities — formed under the laws of California, the laws of any other state of the United States or the District of Columbia, or under an act of Congress — with total annual revenues in excess of one billion dollars that do business in California (reporting entities) to annually disclose their scope 1, 2, and 3 greenhouse gas (GHG) emissions for the prior fiscal year.
Scope 1 emissions are direct GHG emissions that occur from sources controlled or owned by an organization (e.g., emissions associated with fuel combustion in boilers, furnaces, vehicles). Scope 2 emissions are indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling. Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain (e.g., business travel, employee commuting, waste generated in operations, leased assets). Scope 3 emissions, also referred to as value chain emissions, often represent the majority of an organization’s total GHG emissions.
SB 261 applies to both public and private U.S. companies that do business in California with annual revenues of $500 million or more. Notably, SB 261 requires companies to file their first climate-risk reports by January 1, 2026.
On August 20, the plaintiffs filed a notice of appeal with the Ninth Circuit Court of Appeals, challenging the district court’s denial of preliminary relief. Plaintiffs also asked the district court to pause enforcement of both SB 253 and SB 261 while the appeal is pending.
On September 11, the district court again declined to grant that relief, reaffirming its prior reasoning that the plaintiffs had not shown a likelihood of success on the merits of their First Amendment challenges to either statute, thus denying the request for preliminary injunction. The district court has stayed further proceedings until the Ninth Circuit rules.
While proceedings are on hold pending appeal, companies impacted by SB 253 and SB 261 should continue their compliance efforts absent a directive to the contrary from the courts or the California Air Resources Board.