ExxonMobil Challenges California’s Climate Disclosure Laws in Federal Court

ExxonMobil has filed a lawsuit against the State of California, challenging the state’s climate disclosure mandates. The case, filed in the U.S. District Court for the Eastern District of California, targets two laws: Senate Bills 253 and 261 which require large companies to publicly report greenhouse gas emissions and climate-related financial risks.

SB 253 compels companies with over $1 billion in annual revenue to report their direct and indirect greenhouse gas emissions, including so-called “Scope 3” emissions, which are those generated throughout the company’s supply chain and by customers using its products.

SB 261, meanwhile, requires firms earning more than $500 million to assess and disclose climate-related financial risks and explain how they plan to manage them.

ExxonMobil’s lawsuit argues that these requirements are unconstitutional and exceed California’s authority. The company contends that the rules violate the First Amendment by forcing businesses to adopt and publicly promote the state’s view that companies are the primary drivers of climate change. Exxon calls this “compelled speech,” arguing that the state is attempting to make corporations serve as “mouthpieces” for its political ideology on climate.

Beyond free speech concerns, Exxon takes issue with how the laws define and measure emissions. The company argues that using the World Resources Institute’s “Greenhouse Gas Protocol” exaggerates emissions by double-counting and penalizing large firms over smaller or less efficient ones. It also asserts that California is overstepping its jurisdiction by demanding disclosure of worldwide emissions from companies that simply do business within the state.

Exxon further claims that SB 261 conflicts with existing federal securities laws, which already require climate risk reporting under national standards overseen by the Securities and Exchange Commission. The company argues that California’s framework creates costly overlap, compliance confusion, and potential liability.

If Exxon succeeds, it could curb other states from imposing sweeping climate mandates that reach beyond their borders. If it fails, California’s model could become a blueprint for other states seeking to expand environmental oversight of corporations.

While CIPA members are not directly subject to his disclosure, we are keeping an eye on this legal fight to see whether it leads to further disclosure legislation.