After a series of ongoing litigation, the Ninth Circuit Court of Appeals has ruled to stop the enforcement of California’s Senate Bill 261 – also known as the Climate-Related Financial Risk Act. This bill requires high-revenue companies to report on their business risks as they relate to ongoing climate change concerns. Let’s take a look at the Court’s ruling and its implications for entities that need to comply.
What is California SB 261?
The Climate-related Financial Risk Act (SB 261) and the Climate Corporate Data Accountability Act (SB 253) were passed in California in 2023 as a joint effort to require high-revenue businesses to publicly disclose their GHG emissions and risks related to climate concerns. SB 261 requires entities that do business in California and make over $500 million in annual revenue to report their climate-related financial risk.
The first SB 261 deadline was set for January 1, 2026 by the California Air Resources Board (CARB). A deadline that is now on pause.
Court-Ordered Injunction
If you weren’t already aware, the U.S. Chamber of Commerce, in association with several other large entities, has been pursuing a lawsuit against CARB, claiming that these disclosure laws violate the covered entities’ First Amendment rights by compelling them to report. After initially denying the motion to stop the enforcement of SB 261, the Court of Appeals granted the motion to halt enforcement until the case is settled.
Implications of the injunction
You may be wondering what this really means. Well, for the covered entities who were set to comply with SB 261 in 2026, they no longer need to do so until the case has concluded or a further appeal is approved.
It’s worth pointing out that while the court has halted SB 261, SB 253 is still very much in effect. In CARB’s recent public workshop, they reported updated deadlines for SB 253. Scope 1 and 2 emission reports will be due on August 10, 2026. Scope 3 reports will be due sometime in 2027.
Preparing for Upcoming Climate Reporting
It’s important to remember that while these laws are under litigation, they are part of a larger global movement of businesses managing their climate-related risk. With emissions disclosure laws like the European Corporate Sustainability Reporting Directive (CRSD) already in effect, it’s clear that a large part of managing business risk includes managing the entity’s sustainability initiatives.
If your business isn’t already preparing for climate disclosures, it needs to be. Learn more about sustainability consulting or contact us to begin mitigating your risk.
