California Climate Disclosure Laws Withstand Court Challenge, Paving Way for Landmark Corporate Reporting

California’s sweeping new climate disclosure laws have cleared another legal hurdle after a federal judge rejected an attempt by the U.S. Chamber of Commerce and business groups to block enforcement on First Amendment grounds. U.S. District Judge Otis Wright II denied a motion for preliminary injunction, ruling that plaintiffs had not shown a likelihood of success in their challenge.

The case centers on SB 253 and SB 261, landmark laws signed by Governor Gavin Newsom in 2024 as part of SB 219. SB 253 requires companies with more than $1 billion in annual revenue operating in California to report on their Scope 1, 2, and 3 greenhouse gas emissions, including supply chains, employee commuting, and waste. SB 261 applies to firms with revenues above $500 million, requiring disclosure of climate-related financial risks and strategies to mitigate them.

Business groups argue the rules compel “subjective speech” and force companies to estimate emissions that are “nearly impossible to calculate.” California counters that transparency is essential for accountability in addressing climate change.

The ruling marks the third setback for industry groups, which previously lost motions filed in 2023 and early 2025. However, the fight is far from over, the plaintiffs may still appeal, and a full trial is scheduled for October 2026.

If upheld, the laws will usher in some of the most stringent climate reporting requirements in the U.S., with Scope 1 and 2 reporting beginning in 2026, Scope 3 in 2027, and climate risk disclosures due by January 1, 2026.

SB 253 and SB 261 surviving court challenge means US corporates with California operations effectively have their first mandatory climate-disclosure regime - and it reaches well beyond state boundaries. Our ESG-strategy and sustainability-due-diligence teams help clients scope reporting obligations, build the underlying data infrastructure and align with ISSB S2 so disclosure isn't duplicated across jurisdictions.