Report on California's Climate Law Remains Intact After Legal Battle
California's new laws requiring large companies to disclose their greenhouse gas emissions and report on climate-related risks have taken a step forward, as U.S. District Judge Otis Wright II denied a motion to block their enforcement.
The laws in question, SB 253 and SB 261, were approved by Governor Newsom in 2023 and signed into law in October 2024 as SB 219. SB 253 requires companies with revenues greater than $1 billion that do business in California to report annually on their direct Scope 1 and 2 emissions, and Scope 3 value chain emissions. On the other hand, SB 261 applies to U.S. companies that do business in California and have revenues greater than $500 million, requiring them to prepare a report disclosing their climate-related financial risk and measures to reduce and adapt to that risk.
The disclosures of Scope 1 and 2 emissions under the new law are scheduled to begin in 2026, covering the previous fiscal year. Meanwhile, Scope 3 emissions reporting will begin in 2027, while the first climate-related risk reports are to be published by January 1, 2026.
The U.S. Chamber of Commerce and other business groups filed a lawsuit against California, challenging the new climate disclosure laws. The lawsuit argues that the new rules would violate the first amendment by compelling businesses to engage in subjective speech. It also claims that supply chain emissions are difficult to accurately calculate and that the laws would obligate companies to subjectively report their worldwide climate-related financial risks and proposed mitigation strategies.
However, the court previously ruled against two motions to block enforcement of these laws, earlier this year and late last year. In the latest ruling, Judge Wright II declined to alter the court's prior finding that the laws are subject to First Amendment review, but also denied the Chamber of Commerce's motion.
The plaintiffs may still appeal the ruling. The trial is currently scheduled for October 2026. If upheld, these laws will mark a significant step in California's efforts to combat climate change and promote transparency in corporate environmental practices.
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