As the Ninth Circuit Court of Appeals prepares to rule on California's groundbreaking climate disclosure laws, Senate Bill (SB) 253 (greenhouse gas emissions reporting) and SB 261 (climate-related financial risk reporting), the business community stands at a critical juncture. The outcome could fundamentally reshape corporate climate accountability across the United States.
The Current Landscape
Following oral arguments on January 9, 2026, the Ninth Circuit is expected to rule on challenges brought by the U.S. Chamber of Commerce. These laws represent the most comprehensive state-level climate disclosure mandates in the nation. Against the backdrop of the U.S. formally exiting the Paris Agreement for the second time, California's laws have emerged as a crucial bulwark in the fight against climate change and a potential model for other states looking to mandate climate-related disclosures.
Potential Outcomes
While full nullification of both laws by the 9th Circuit is possible, that seems like the least likely outcome. A more likely outcome is that the court strikes down SB 253’s scope 3 emissions reporting requirements (the most burdensome provision covering value chain emissions) while upholding the rest of the law, and completely invalidate SB 261. This would preserve some climate disclosure while acknowledging concerns about the difficulty of measuring value chain emissions and compliance burdens.
A second feasible outcome is that the court upholds both laws entirely as written, validating California's authority to regulate corporate climate disclosures and setting a powerful precedent for other states.
In either scenario, the Chamber of Commerce is expected to appeal to the U.S. Supreme Court. Given the significant constitutional questions at stake, including interstate commerce implications and federal preemption issues, the Court would likely grant review. If the Supreme Court takes the case, the current conservative majority would likely strike down both laws in their entirety, which would have national implications.
Why These Laws Matter
Greenhouse gas emissions transparency drives reductions. When companies must publicly report their greenhouse gas emissions, they face market pressure to reduce them. In addition, climate change poses material risks through physical impacts, transition risks, and liability exposure that investors and communities, and the businesses themselves would be well-served by understanding.
Business Benefits
Companies that systematically assess climate risks are better positioned to adapt to supply chain disruptions and extreme weather, among other risks. Institutional investors managing trillions in assets increasingly demand climate data, giving companies with robust disclosures better access to capital. Major corporations like Microsoft, Apple, and Unilever already voluntarily report comprehensive climate data. California's laws simply extend these best practices.
What Businesses Should Do Now
Regardless of the judicial outcome, companies should prepare for a future where climate disclosure is increasingly expected. Start measuring now. Investor and customer demand amid climate change's advancement will continue driving disclosure forward. View climate disclosure as an opportunity to identify operational improvements, strengthen resilience, and build stakeholder trust.
The Ninth Circuit's ruling is expected in the coming months, with any Supreme Court review likely extending into 2027 or beyond.
About Full Scope Insights and Our GHG Emissions Accounting Services
Full Scope Insights specializes in developing and executing value-add sustainability strategies for public and private organizations in a cost-efficient manner, including California regulatory compliance. FSI provides scope 1, scope 2 and scope 3 GHG emissions accounting required by California’s SB 253 as well as various types of reporting, including California’s SB 261 climate risk reporting.
For more information on Full Scope Insights, contact us today.
Marisa Flower,
Sustainability Director
Full Scope Insights