Lawsuit filed against California’s disclosure rules

February 7th, 2024

The US Chamber of Commerce has filed a lawsuit against the state of California over its new corporate climate disclosure laws.

The new corporate disclosure laws, which were signed by California governor Gavin Newsom in October, require businesses to report on emissions across their supply chains, including indirect emissions or Scope 3 emissions.

Under the new rules, public and private companies with annual revenue exceeding $1 billion must begin disclosing their Scope 3 emissions by 2027.

The US Chamber of Commerce brought the lawsuit alongside the American Farm Bureau Federation, California Chamber of Commerce, Central Valley Business Federation, Los Angeles County Business Federation and Western Growers Association.

It argued that indirect emissions “can be nearly impossible for a company to accurately calculate”.

The lawsuit said: “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 US and worldwide on the basis of even minimal operations in the state of California, thus attempting to impose essentially a national standard.”

It argued that the laws were violating the Clean Air Act, which pre-empts a state’s ability to regulate emissions in other states.

The laws were passed ahead of the Securities and Exchange Commission’s announcement of its new national disclosure requirements, with experts arguing the laws could set a precedent for the regulator to introduce mandatory Scope 3 emission disclosures as well.

In December, it delayed the expected adoption of its final climate disclosure rules by more than a year after its initial proposed adoption timeframe of April 2024.