SBs 253 and 261, two key parts of California’s broader Climate Accountability Package, were signed into law in October of 2023. SBs 253 and 261 mandate that companies doing business in California at $500m and $1b annual revenue thresholds, respectively, provide public climate‑related disclosures. Under SB 253, covered companies must annually disclose greenhouse gas emissions (Scopes 1, 2, and 3) and, under SB 261, must disclose biennially climate-related fiscal impacts to the California Air Resources Board (“CARB”). These disclosure requirements are currently set to go into effect beginning in 2026. See our prior client alert for detailed discussion on the two laws.
In a January 30, 2024, complaint against CARB, the U.S. Chamber of Commerce (the “Chamber of Commerce”) and a collection of other business groups challenged SBs 253 and 261, arguing the laws: (1) compel speech in violation of the First Amendment by forcing covered entities to disclose climate-related information; (2) are preempted by the federal Clean Air Act because they attempt to regulate greenhouse gases (“GHG”s) outside of California’s borders and therefore violate the Supremacy Clause of the U.S. Constitution; and (3) unduly burden interstate commerce in violation of the dormant commerce clause. See our prior client alert for more discussion of this lawsuit.
The Chamber of Commerce moved for a preliminary injunction on February 25, 2025, seeking to enjoin CARB from implementing and enforcing SBs 253 and 261 while the litigation is pending. The Chamber of Commerce specifically relied on its compelled speech theory, arguing that, because litigation is certain to continue beyond the two laws’ 2026 effective dates, companies would be compelled to speak on the “controversial issue” of climate change absent an injunction preventing enforcement. The court’s August 13 ruling denied the Chamber of Commerce’s motion, allowing CARB to move forward with implementation and enforcement efforts.
A detailed summary of the Court’s decision and the parties’ respective arguments is below.
Summary of the Court’s Decision on Plaintiffs’ Preliminary Injunction Motion
At the preliminary injunction stage, a court looks at several factors, including how likely it is that the plaintiffs will ultimately win their case. In this case, the court denied the Chamber of Commerce’s request to block California Senate Bills 253 and 261, signaling that it does not believe the laws are likely to be struck down under the First Amendment.
To reach that conclusion, the court went through a step-by-step analysis. First, it considered whether the First Amendment even applies to these laws. Then, it determined what level of constitutional scrutiny to apply. Finally, it assessed whether the laws meet that standard.
First Amendment Applicability
CARB, in defense of the laws, argued that the required disclosures are like the financial reports public companies already have to file with the government—rules that usually don’t trigger First Amendment concerns. But the court disagreed. It noted that SBs 253 and 261 go beyond purely factual financial reporting and apply broadly to all large companies doing business in California, not just publicly traded ones, and concluded that the First Amendment does apply.
Level of Scrutiny
Next, the court had to decide how closely it should review the laws under the First Amendment. The court found that both laws involve “commercial speech” (business-related speech), which gets less protection than political or personal speech. But even within commercial speech, there are different levels of scrutiny.
For SB 253, the court said the law only requires companies to disclose straightforward, factual information—specifically, their greenhouse gas emissions (Scopes 1, 2, and 3). This kind of data has standardized definitions and calculation methods. The court said that, even though climate change is a controversial issue, reporting emissions data is not “controversial speech” because companies are not required to express an opinion about whether their emissions are good or bad. Because the disclosures are purely factual and not controversial, the court applied the lowest level of scrutiny.
For SB 261, the court reached a different conclusion. This law requires companies to report on the risks they face from climate change. The court said these disclosures are not purely factual because they require companies to make judgments about the future—something inherently uncertain. Because of that, the court concluded that a higher level of scrutiny, intermediate scrutiny, applied.
Do the Laws Pass Constitutional Scrutiny?
Once the court set the appropriate level of scrutiny for each law, it evaluated whether the laws met those standards.
For SB 253, CARB identified three government interests justifying the law:
- Helping investors and consumers get reliable information about how companies are affected by climate change;
- Encouraging companies to cut emissions and help fight climate change; and
- Preventing misleading climate-related claims (greenwashing).
The court found that the first two interests—informing investors and reducing emissions—were strong enough to justify the law. There was evidence that investors care about emissions data and that disclosures could lead companies to reduce emissions. However, the court rejected the greenwashing justification, finding that CARB had not shown enough evidence that misleading speech on emissions is a widespread problem.
For SB 261, CARB offered the same three justifications. The court again accepted the first (informing investors) but rejected the other two. In particular, it said CARB had not shown that climate risk disclosures (unlike emissions data) would actually reduce emissions. And, as before, there was not enough evidence of widespread misleading speech to support that justification.
Based on this reasoning, the court concluded that the Chamber of Commerce is not likely to win its argument that either SB 253 or SB 261 violates the First Amendment.
No Irreparable Harm or Imbalance of Harms
Finally, the court said that the Chamber of Commerce had not shown that the laws would cause it irreparable harm if enforced. It also found that blocking the laws would harm the public by delaying California’s efforts to address climate change and protect consumers and investors. For those reasons, the court refused to block the laws from going into effect.
Takeaways
This decision has two major takeaways. First, companies should be prepared to comply with the 2026 reporting deadlines for the information required by SBs 253 and 261, as the court gave CARB the green light to begin enforcement. Second, the fight to get these laws struck down is not over. Though the court ultimately held that the Chamber of Commerce was unlikely to succeed on the merits of its First Amendment challenge, the court also pointed out serious flaws in CARB’s arguments in favor of the laws and confirmed that SB 261 is subject to a more searching level of constitutional review for First Amendment purposes. Moreover, the Chamber of Commerce may amend its complaint to replead its arguments that SB 261 impermissibly burdens interstate commerce in violation of the dormant Commerce Clause, which would continue to be litigated, likely for months or years to come.[1]
[1]The Court previously held that challenges to SB 253 on grounds other than First Amendment ground were not ripe for adjudication because SB 253 does not directly require emissions disclosures, dismissing them without prejudice, and that the Chamber of Commerce failed to state a claim with its argument that SB 261 violated the Supremacy Clause, dismissing that claim with prejudice.
