By Edward Smith on February 1, 2024
A coalition of business advocacy groups has challenged California’s new climate-impact reporting requirements for major corporations in federal court.
The U.S. Chamber of Commerce, California Chamber of Commerce, American Farm Bureau, Central Valley Business Federation, Los Angeles County Business Federation, and Western Growers Association filed a lawsuit this week against the state of California in the U.S. District Court for the Central District of California.
“This lawsuit marks the first time BizFed’s Board of Directors has voted to front legal action challenging climate-related laws,” said Central Valley Business Federation CEO Clint Olivier in a news release.
“We signed on as a co-plaintiff in this case because the new laws in question compel speech in violation of the First Amendment. Both laws go far beyond the federal government’s proposed climate disclosure rules.”
Gov. Gavin Newsom signed Senate bills 253 and 261 into law Oct. 7, 2023. The two bills require large companies to not only report their greenhouse gas emissions, but also how climate change could affect their business.
The bills’ authors say companies produce an outsized level of emissions, contributing to climate change, and investors need to know different companies’ financial exposure to climate threats.
At the same time, business advocates say large businesses are already moving forward on climate reporting and mitigation. California’s laws force businesses to report objectively on something they say is subjective. It also creates overreach by putting rules on a business’ out-of-state operations.
“California’s laws usurp the role of federal regulators, opening the door for other states to take an opposite approach to disclosure, leaving businesses and their investors caught in the middle of a political scrap between states,” said Tom Quaadman, U.S. Chamber of Commerce Center for Capital Markets Competitiveness executive director.
Corporations Already Reporting on Climate Change Exposure: Wiener
SB 253 requires companies with gross annual revenues over $1 billion to disclose their direct and indirect emissions to the California Air Resources Board.
SB 261 requires companies with gross annual revenue over $500 million to report the financial risks associated to climate and develop a plan to address those risks.
State Sen. Anthony Wiener (D-San Francisco) said investors have a right to know how companies are handling climate change.
“The Chamber is taking this extremist legal action because many large corporations — particularly fossil fuel corporations and large banks — are absolutely terrified that if they have to tell the public how dramatically they’re fueling climate change, they’ll no longer be able to mislead the public and investors,” Wiener said.
Wiener said several corporations are already pursuing the kind of reporting mandated by the two bills.
Climate Law Oversteps California’s Authority: Chamber
In its legal complaint, the Chamber says the pair of bills compel “thousands of businesses to make costly, burdensome, and politically fraught statements about ‘their operations, not just in California, but around the world.’”
The two bills stand in opposition to the authority Congress has over interstate commerce, according to the complainants.
“It forces thousands of companies to engage in controversial speech that they do not wish to make, untethered to any commercial purpose or transaction,” the lawsuit states. “And it does all this for the explicit purpose of placing political and economic pressure on companies to ‘encourage’ them to conform their behavior to the political wishes of the State.”
