On Aug. 13, 2025, a federal court in California denied a request to temporarily block California's Climate Corporate Data Accountability Act (SB 253) and Climate-Related Financial Risk Act (SB 261). The decision came in response to a lawsuit challenging these climate disclosure laws, and the plaintiffs have since appealed to the Ninth Circuit Court of Appeals. The laws remain in effect as the legal process continues, with initial compliance deadlines approaching in 2026.
Legal Challenge to California's Climate Disclosure Laws: Key Issues and Arguments
Since their introduction, SB 253 and SB 261 have faced significant scrutiny from industry groups (see previous GT Alerts). In January 2024, the U.S. Chamber of Commerce, the California Chamber of Commerce, the American Farm Bureau Federation, and other business groups filed a lawsuit against the California Air Resources Board (CARB). The plaintiffs challenged the laws on multiple constitutional grounds, including the First Amendment, federal preemption, and extraterritoriality. The court dismissed the preemption (Supremacy Clause) and extraterritoriality claims, leaving only the First Amendment claim standing.
Court Decision: Why the Preliminary Injunction Was Denied
The plaintiffs sought a preliminary injunction to halt enforcement of SB 253 and SB 261, claiming that the required climate-related disclosures of emissions data violate the First Amendment by compelling speech. They also argued that the regulatory reporting requirements are impractical for businesses. The court denied the request, finding that the disclosure requirements serve a substantial government interest in promoting transparency and addressing climate risks, and that the laws are tailored to those interests.
Potential for Future Legal Challenges: As-Applied Claims
While the court rejected the broad challenge to the laws, it noted that specific businesses might have grounds for future legal challenges based on how the laws are applied to them. For example, companies facing disproportionate compliance costs, or those for whom compelled disclosure could reveal sensitive proprietary information not directly related to climate risk, could potentially bring successful as-applied challenges. The court also mentioned that businesses that are not publicly traded, not reliant on third-party investments, not marketing products as green, or not making relevant advertisements might have unique circumstances for future litigation.
Next Steps: Legal Process and Regulatory Updates
The plaintiffs have appealed to the Ninth Circuit Court of Appeals and requested an injunction to pause enforcement of SB 253 and SB 261 while the appeal is considered. The hearing on this request is scheduled for Sept. 15, 2025, and the trial is set for Oct. 20, 2026.
CARB continues to prepare for the 2026 reporting obligations under SB 253 and SB 261. On Aug. 21, 2025, CARB held a public workshop to discuss updates and proposed compliance initiatives. CARB announced a proposed June 30, 2026, implementation deadline for SB 253's Scope 1 and 2 initial reporting, with draft reporting templates expected in September 2025 for public feedback. The compliance deadline for SB 261 remains Jan. 1, 2026.
Companies subject to SB 253 and SB 261 should monitor regulatory developments and ongoing legal proceedings, as these may affect future compliance obligations.
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