A new California law requiring large corporations to disclose value chain emissions and climate-related financial risks survived an initial legal challenge by the U.S. Chamber of Commerce. This decision by U.S. District Judge Otis Wright II allows regulations SB 253 and SB 261, signed by Governor Newsom in October 2024, to move forward. However, the judge left the door open for future challenges if further evidence is presented.
The climate disclosure laws apply to companies with over $1 billion in revenue for Scope 1, 2, and 3 emissions reporting, and to companies with revenues over $500 million for climate-related risk disclosures. Corporate compliance with these regulations begins in 2026.
The Chamber’s lawsuit argues that the laws violate the First Amendment by requiring companies to report potentially subjective climate impacts and risks, citing difficulties in calculating supply chain emissions. Judge Wright acknowledged these concerns, but noted that further fact-finding is needed to determine whether the law should be subject to a lower standard of scrutiny as commercial speech regulation.
This decision marks an important step in shaping corporate environmental accountability and transparency, and it may set a precedent for climate-related corporate disclosure in the U.S.
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