Regulatory Uncertainty and Corporate Transparency: ESG BROADCAST shares key takeaways.
The landscape of California’s landmark Climate Disclosure Legislation was abruptly reshaped this month after the Ninth Circuit Court of Appeals intervened. On November 18, 2025, the court issued a surprise injunction halting the California Air Resources Board’s (CARB) enforcement of Senate Bill (SB) 261. SB 261 requires companies exceeding $500 million in revenue to prepare and disclose reports on their climate-related financial risks. This injunction means businesses are no longer bound by the initial January 1, 2026, deadline for submitting these reports, offering a temporary reprieve amid ongoing constitutional challenges.
The injunction, which was granted without explanation, stems from a legal challenge brought by the U.S. Chamber of Commerce and other business groups. Challengers argue that both SB 261 and the related emissions reporting law, SB 253, are unconstitutional. While the Ninth Circuit’s decision to enjoin SB 261 suggests a possible agreement with the challengers’ view, legal experts caution that the move may simply be an effort to maintain the regulatory status quo while the appeal is considered. The ultimate constitutionality of this aggressive remains a high-profile question that may eventually reach the U.S. Supreme Court.
In separate but related developments, the implementing body, CARB, provided crucial updates on both SB 253 and SB 261 during a public workshop held on the same day. Despite the SB 261 injunction, CARB reiterated the required content for SB 261 reports, including disclosures on governance, strategy, and risk management. CARB emphasized that early-stage reporters may initially disclose gaps, limitations, or assumptions identified during their initial climate risk assessments.
For SB 253, which mandates the reporting of Scope 1, Scope 2, and eventually Scope 3 greenhouse gas emissions, CARB announced a minor but significant extension. The deadline for initial Scope 1 and Scope 2 reporting has moved from June 30, 2026, to August 10, 2026. The agency also outlined a policy of enforcement discretion for the first cycle of SB 253. Companies that were not already collecting emissions data when the enforcement notice was issued in December 2024 can submit a formal statement confirming this, instead of an actual report in 2026.
CARB further clarified the applicability criteria for this comprehensive Climate Disclosure Legislation, defining both the revenue threshold and the definition of “doing business in California”. The revenue definition relies on “gross receipts” and includes the consolidated revenue of subsidiaries if the group files California taxes as a unitary business. The “doing business” criteria includes entities whose sales in California exceeded $735,019 or twenty-five percent of total sales. Exemptions cover non-profit organizations, government entities, and companies already regulated by the Department of Insurance.
Strategic significance lies in the heightened Regulatory Uncertainty now surrounding US-based Climate Disclosure Legislation. While the SB 261 injunction provides a reporting delay, companies subject to SB 253 must continue preparation for the August 2026 deadline, factoring in the defined thresholds and CARB’s enforcement discretion. The ongoing legal battle underscores the need for global companies to maintain flexible, robust data collection systems capable of adapting quickly to fluid regulatory environments across different jurisdictions.
Image Credit: The Wall Street Journal
