A coalition of business groups sued California to overturn a state law that would require thousands of companies to publicly report their greenhouse-gas emissions.
Signed by Democratic Gov. Gavin Newsom in October, the law directs companies to calculate and disclose a range of emissions from their own operations, as well as those of their suppliers and customers. Thousands of publicly traded and private firms that do business in California and have at least $1 billion in annual revenue are expected to have to comply.
The U.S. Chamber of Commerce and American Farm Bureau Federation filed the lawsuit in a Los Angeles federal court Tuesday alongside four California business groups. They argue that the law violates First Amendment protections against compelled speech and that California is attempting to act as a national emissions regulator.
“The days of California setting the standard for the rest of the nation are gone,” said Tom Quaadman, executive vice president of the chamber’s capital-markets group. If California’s law is allowed to stand, he said, it could usher in a patchwork of state requirements that could theoretically overlap or even contradict one another.
A spokesman for Newsom said his office is still reviewing the complaint.
California State Sen. Scott Wiener, a Democrat who wrote the law, said the groups’ lawsuit is baseless and denied their claims that implementing the measure would be costly. “While corporate lobby groups continue to wage an unhinged misinformation campaign against these laws, investors and consumers are being deprived of vital information to navigate our rapidly warming planet,” he said.
California’s law is the first of its kind in the U.S., but more jurisdictions around the world are asking companies to estimate their greenhouse-gas outputs. The idea often is to help investors and the public discern which companies are acting to address climate change and positioning themselves for a future in which emissions are regulated more tightly.
The Securities and Exchange Commission is working to complete a proposed rule that would require publicly traded companies to disclose their emissions in securities filings, along with other climate-related information. A recent European Union law on corporate sustainability would require thousands of U.S. companies—public and private—to report their greenhouse-gas outputs.
Most large U.S. companies already publish some emissions estimates, which asset managers and other investors often request.
California and Europe will ask them to look beyond their own operations and include the carbon dioxide, methane and other greenhouse gases generated by their suppliers and customers. The information would show any difference between the emissions impacts of, for instance, an electric-car manufacturer and an automaker that sells mostly gasoline-powered vehicles.
Advocates say it would also highlight companies engaged in “greenwashing”—talking a big game on the environment to spruce up their public image without changing their practices.
In Tuesday’s lawsuit, the plaintiffs said California’s law would harm people such as Missouri farmer Garrett Hawkins, who raises cattle and sells them into a supply chain that could lead to companies subject to the emissions disclosures.
“My concern, though, as a farmer would be that company X takes steps necessary that they believe to protect their own liability,” said Hawkins, who is president of the Missouri Farm Bureau. “So I don’t know as a farmer what record-keeping, what technology, what I may have to have.”
The plaintiffs’ lead attorney in Tuesday’s lawsuit is former Labor Secretary Eugene Scalia, a conservative lawyer who has focused his career on challenging government regulations. His father was the late Supreme Court Justice Antonin Scalia.
California’s law requires a state air-quality board to adopt regulations implementing the disclosures by 2025. Companies would have to begin disclosing emissions over the following two years.
Some California business groups had criticized the law when it was being crafted, particularly the requirement for companies to estimate emissions from suppliers and customers. Newsom expressed reservations about its potential costs when he signed the law and said he hoped to work with the legislature and state regulators to streamline it.
A number of leading California-based tech companies, including Apple and Salesforce, supported the requirements. The law’s author, Wiener, said at the time that the added transparency would force companies to shrink their carbon footprints.