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Energy giant ExxonMobil filed a lawsuit in a U.S. federal court challenging new California laws […]]
Exxon Sues California to Stop New Climate Reporting Laws – ESG Today
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Companies/ ESG Reporting/ Government
Exxon Sues California to Stop New Climate Reporting Laws
Mark Segal
October 27, 2025
Energy giant ExxonMobil filed a lawsuit in a U.S. federal court challenging new California laws requiring large companies to disclose their value chain greenhouse gas emissions and report on climate-related risks.
According to the suit, ExxonMobil is asking the court to declare that California’s new climate-related reporting laws violate First Amendment free speech rights – claiming that their main goal is to “embarrass” large companies and compel speech in support of the state’s ideological goals – and to prevent the state from enforcing them.
Notably, the new laws have already survived a series of First Amendment-based court challenges brought by the U.S. Chamber of Commerce, including a recent decision by the court denying a motion to block enforcement of the laws on free speech grounds, although that case is still proceeding to trial, currently scheduled for October 2026.
The new laws, SB 253 and SB 261, were approved by Governor Newsom in 2023, and signed into law in October 2024. SB 253 requires companies with revenues greater than $1 billion that do business in California to report annually on their direct Scope 1 and 2 emissions, and Scope 3 value chain emissions, including those associated with supply chains, business travel, employee commuting, procurement, waste, and water usage. SB 261 applies to U.S. companies that do business in California and with revenues greater than $500 million to prepare a report disclosing their climate-related financial risk, as well as measures to reduce and adapt to that risk.
Disclosures of Scope 1 and 2 emissions under the new law is scheduled to begin in 2026, covering the previous fiscal year, while Scope 3 emissions reporting will begin in 2027, while the first climate-related risk reports are to be published by January 1, 2026.
The new laws will introduce climate-related reporting requirements for most large companies in the U.S., even as other climate disclosure regulations, such as the SEC’s climate reporting rule, appear increasingly less likely to be implemented. The California Air Resources Board (CARB) recently issued a preliminary list of more than 4,000 U.S. companies likely to be required to comply with the new climate reporting laws.
In its lawsuit, ExxonMobil said that it already discloses its greenhouse gas emissions and its climate-related business risks, but the company argued that the reporting frameworks required to be used by companies under the new laws will force the company to “speak in service” of California’s “ideological premise,” that “that large companies are uniquely responsible for climate change no matter how efficiently they satisfy societal demand for energy, goods, and services.”
The suit notes, for example, that SB 253 requires disclosure of Scope 1, 2, and 3 emissions based on the GHG Protocol standards and guidance, which the company argues focuses on absolute emissions rather than emissions intensity, which effectively makes large companies look worse than small companies. ExxonMobil also argues that the GHG Protocol framework fails to account for avoided emissions achieved by making a product more carbon efficient, and that by requiring reporting on all emissions scopes, overcounts emissions, with the lawsuit noting that “an energy producer’s Scope 2 emissions would be the same as its power company’s Scope 1 emissions, and its Scope 3 emissions would be the same as its customers’ Scope 1 emissions.”
SB 261 requires reporting on climate-related financial risk in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) or an equivalent framework, which the suit argues goes beyond the SEC’s requirements to detail all material financial risks, and will require companies to “create and publicly disclose a detailed, speculative risk report.” The suit argues that the law “deprives ExxonMobil of the option not to speak on any of the speculative topics” from the framework, and requires the company to explain why it chooses not to publish climate targets.
Additionally, the lawsuit argues that the National Securities Markets Improvement Act (NSMIA) preempts SB 261 from requiring disclosure of more detailed information on risks than those already covered by SEC requirements.
The suit asks the court to declare that each of the new laws violate the First Amendment, and that SB 261 is preempted by the NSMIA, and to enjoin California from enforcing the laws.
Mark founded ESG Today following a 20 year career in investment management and research. Prior to founding ESG Today, Mark worked at Delaney Capital Management (DCM) in Toronto, Canada, most recently as the firm’s head of U.S. equities. While at DCM, Mark was part of the firm’s ESG team, responsible for evaluating and tracking the sustainability factors impacting portfolio companies, and assessing the suitability of companies for portfolio inclusion. Mark also spent several years in the sell-side research industry, covering the technology and services sectors. Mark holds an MBA from Columbia University in New York, a BBA from the Schulich School of Business at York University in Toronto, and is a CFA charterholder.
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