California Corporate Climate Disclosures Partially Enjoined – Next Steps For Compliance?

Today's post took an unexpected turn. We were planning to write about yesterday's California Air Resources Board (CARB) public workshop on SB 253 and SB 261, which require subject companies to report on greenhouse gas emissions and climate risk. However, within minutes of the start of the CARB workshop, the Ninth Circuit Court of Appeals published an order preliminarily enjoining the enforcement of SB 261 pending an ongoing appeal being considered by the court. In this post, we discuss the order and several "no regrets" actions that companies should consider during this period of uncertainty.

Yesterday's order pertains to the lawsuit challenging SB 253 and SB 261 brought by the US Chamber of Commerce and other plaintiffs against CARB. Among other things, the Chamber is challenging the statutes on First Amendment grounds.

The Court's order preliminarily enjoins enforcement of SB 261, but not SB 253. The Court declined to enjoin SB 253. SB 261 reports are required to be published by January 1, 2026. In contrast, as proposed by CARB, SB 253 reports are not due until August 10, 2026. Accordingly, there was not the same urgency for the Court to address SB 253.

Previously, the District Court for the Central District of California denied the plaintiffs' request for a preliminary injunction. That decision was appealed to the Ninth Circuit, which has scheduled oral arguments for January, after the first SB 261 disclosures are otherwise required to be made. Yesterday's order gives the Court of Appeals breathing room to consider the appeal without potentially prejudicing reporting companies.

What should companies do now, when there is no visibility on whether or when the injunction will be lifted? For many companies, this will unfortunately seem somewhat similar to the dilemma they faced when the EU Corporate Sustainability Reporting Directive Omnibus proposal was announced – whether to go pencils down or continue preparing for compliance.

Pending any intervening developments, such as a stay by CARB (which we think is unlikely), companies should consider at least the following "no regrets" actions:

• Companies should firm up their scoping analysis based on the November 18 CARB workshop (we will address the workshop in a subsequent post). The scoping proposals described by CARB at the workshop will inform compliance requirements.
• Companies that already publish voluntary climate risk disclosure or that will need to do so pursuant to another regulatory mandate (such as the UK or Australia) should prepare that disclosure with an eye toward how it will synch up with any SB 261 disclosures that may be required.
• Many companies are far along in their SB 261 preparation. In many cases, draft reports are at an advanced stage. Some companies are completing climate risk assessments or scenario analysis. Companies will in many cases want to finish up that work, or at least get it to a place that is organized and easy to pick back up. This is consistent with the approach that many companies decided to take for CSRD.
• As earlier noted, enforcement of SB 253 has not been enjoined at this time. Companies will need to decide how to approach SB 253 compliance, i.e., whether to do the work and how much work to do. Factors to take into account will include CARB's December 2024 enforcement guidance and November 17 FAQs (we also will address the FAQs in a subsequent post).
• CARB is expected to continue moving ahead with its rulemaking process. These regulatory mandates have been controversial and the November 18 CARB proposals are unlikely to allay the concerns many companies have. As CARB noted at the November 18 workshop, they have thus far received over 500 comment letters on SB 253 and SB 261. Many companies will want to stay engaged in the regulatory process, either directly or through their trade associations.
• Continue monitoring this space closely. If/when the injunction is lifted, it will be off-to-the-races again for SB 261 (and SB 253). In addition, there will be other developments coming out of CARB in the next few months, including the release of first-round proposed regulations, the likely launch of CARB's public docket for SB 261 reporting and publication of an updated SB 253 reporting template.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.