CalChamber, Allied Groups Sue California Over Climate Disclosure Laws

The California Chamber of Commerce and a coalition of business groups are challenging California’s new climate reporting laws, SB 253 (Wiener; D-San Francisco) and SB 261 (Stern; D-Canoga Park), in a lawsuit in the U.S. District Court for the Central District of California.

The lawsuit, filed on January 30, asserts that both SB 253 and SB 261 unconstitutionally compel speech in violation of the First Amendment and conflict with existing federal law and the Constitution’s delegation to Congress of the power to regulate interstate commerce.

CalChamber Statement

In a statement, CalChamber President and CEO Jennifer Barrera explained that the laws violate the First Amendment “because they compel companies to make public statements that are likely inaccurate or with which they disagree, due to the incredible challenge of accurately reporting or obtaining reliable information regarding the emissions of their entire supply chain.”

She pointed out that the laws are also problematic because they will inflict significant costs on companies doing business in California and will not notably reduce emissions.

“We support cost-effective policies that reduce greenhouse-gas emissions as quickly as possible in order to address climate change,” Barrera said. “However, these new climate reporting laws are far from cost-effective and they will not have any notable impact on climate change. Compelling businesses to report inconsistent and inaccurate information unnecessarily places them at risk for enormous penalties. This will be particularly costly for small businesses who do not have the resources to accurately measure their climate emissions.”

In addition to the CalChamber, plaintiffs include the U.S. Chamber of Commerce, American Farm Bureau Federation, Los Angeles County Business Federation, Central Valley Business Federation and Western Growers Association.

Reporting Requirements

SB 253 and SB 261, signed into law last year, require businesses to report on emissions across their supply chain, including indirect emissions, no matter where they occur despite the fact that such emissions can be nearly impossible for a company to accurately calculate.

The laws also require companies to subjectively report their worldwide climate-related financial risks and proposed mitigation strategies. The laws apply to companies across the U.S. and worldwide on the basis of even minimal operations in California.

The lawsuit also alleges that California is in violation of the federal Clean Air Act, which preempts a state’s ability to regulate emissions in other states — as California seeks to do by mandating reporting on out-of-state emissions.

In a press release, Tom Quaadman, U.S. Chamber of Commerce Center for Capital Markets Competitiveness executive director, warned that SB 253 and SB 261 usurp the role of federal regulators and open the door for other states to take an opposite approach to disclosure, leaving businesses in the middle of a political scrap between states.

“The resulting fragmentation will undermine the competitiveness of American capital markets, ushering in an era of duplicative and conflicting state-imposed requirements,” he said.