ExxonMobil sues California over climate disclosure laws

ExxonMobil is suing California over the state's climate risk and greenhouse gas disclosure laws, saying the mandates are burdensome and impede free speech.

The two California laws were enacted in 2023 and became the nation's first mandates requiring companies to disclose their entire carbon footprint — including third-party supply chain emissions — along with climate change-related business risks. The California legislature estimated the laws would cover thousands of companies operating in the world's fifth-largest economy.

"The statutes compel ExxonMobil to trumpet California's preferred message even though ExxonMobil believes the speech is misleading and misguided," the oil company told the US District Court for the Eastern District of California in an Oct. 24 complaint, citing case law. "But the Constitution does not permit a state to use speech mandates to turn private parties into 'instrument[s] for fostering public adherence to an ideological point of view [they] fin[d] unacceptable.'"

A similar lawsuit filed in early 2024 by the US Chamber of Commerce and several other business groups is pending in the US Court of Appeals for the Ninth Circuit. In September, a federal district court in California turned down those plaintiffs' request for an injunction. First Amendment arguments were also raised in the Chamber lawsuit.

California Governor Gavin Newsom's office said Oct. 27 it was confident the state's laws will prevail.

"Truly shocking that one of the biggest polluters on the planet would be opposed to transparency," said Tara Gallegos, a spokesperson for the governor, said in a statement. "These laws have already been upheld in court, and we continue to have confidence in them."

Under Senate bill 253, known as the Climate Corporate Data Accountability Act, companies that do business in California and have at least $1 billion in annual revenue will be required to estimate and report all Scope 1 and 2 emissions, starting in 2026, and indirect Scope 3 emissions a year later. The legislation applies to an estimated 5,344 companies.

The climate risk disclosure bill, S.B. 261, requires companies with annual revenue of $500 million or more to disclose climate-related financial risks. An estimated 10,000 companies are expected to fall under that rule, which is expected to be adopted in the first quarter of 2026.

"Surprise, surprise — Exxon doesn't want to disclose its carbon emissions as required by a climate action law I authored, S.B. 253," California State Senator Scott Wiener posted on the social media platform Bluesky. "Exxon is making an extreme, dangerous free speech argument that would cast doubt on SEC disclosure requirements."

Company seeks injunction

In its lawsuit, ExxonMobil argues that the National Securities Markets Improvement Act of 1996 bars states from imposing "enhanced investor reporting requirements" beyond what federal law already requires public companies to file with the US Securities and Exchange Commission. In asking for an injunction, the company also contends that California cannot compel speech to try to reduce greenhouse gases outside state borders.

"While California might believe that making ExxonMobil report historical emissions for an oil refinery acquired in Canada or speculative business risks for a Kazakhstan pipeline is the best way to spur climate solutions, ExxonMobil disagrees," the lawsuit said.

In addition, the company calls into question California's requirement that businesses rely on the Greenhouse Gas Protocol to calculate their emissions. The accounting and reporting standards were developed by the World Resources Institute and the World Business Council for Sustainable Development over 25 years ago to help companies and governments measure greenhouse gas releases.

ExxonMobil argued in its complaint that it is being penalized for being a large corporation because the Greenhouse Gas Protocol focuses on absolute emissions, rather than on efficiency. The protocol therefore pressures large companies to cut production while letting smaller and less efficient companies to step in to meet demand, the complaint said.

In 2023, 97% of S&P 500 companies used the Greenhouse Gas Protocol to report their emissions, according to the initiative's website.