ExxonMobil has launched a federal lawsuit against the State of California, escalating a confrontation that could shape the future of corporate climate transparency across the United States. The oil and gas major filed its complaint in the U.S. District Court for the Eastern District of California, seeking to block two state laws that require large companies to disclose their greenhouse-gas emissions and climate-related financial risks.
A direct challenge to California’s disclosure regime
The suit targets Senate Bill 253 and Senate Bill 261, enacted in 2023 as part of California’s broader climate accountability framework. SB 253 obliges public and private firms with more than $1 billion in annual revenue to report both direct and indirect emissions beginning in 2026, using the Greenhouse Gas (GHG) Protocol standard. SB 261 requires companies with revenues above $500 million to disclose climate-related financial risks and mitigation strategies aligned with the Task Force on Climate-related Financial Disclosures (TCFD).
Exxon argues that both statutes violate its First Amendment rights by compelling speech it does not endorse and by forcing adoption of what it calls California’s “preferred framing” of corporate climate responsibility. The company also contends that SB 261 conflicts with the National Securities Markets Improvement Act, which prevents states from imposing investor-reporting requirements that go beyond federal rules.
“The First Amendment bars California from pursuing a policy of stigmatization by forcing ExxonMobil to describe its non-California business activities using the State’s preferred framing,” the lawsuit states.
Exxon’s defense: existing disclosures and “flawed” protocols
Exxon says it already provides extensive climate-related information through its Advancing Climate Solutions report and its annual 10-K filings to the U.S. Securities and Exchange Commission.
It argues that the GHG Protocol required under SB 253 is a “flawed reporting standard” that overstates responsibility by including emissions from suppliers and customers (so-called Scope 3 emissions). The firm says it has previously offered “alternative means” of compliance under SB 261, but has not received a response from California regulators.
The company’s broader position challenges the premise that state-mandated disclosures serve the public interest.
“California has no constitutionally adequate justification for the speech burdens SB 253 and SB 261 impose,” Exxon’s filing says.
A broader legal and political backdrop
California’s attorney general and the California Air Resources Board (CARB), both named defendants, have declined to comment on pending litigation. The state—long known for pioneering environmental policy—has faced similar suits before. Earlier this year, a coalition of business groups led by the U.S. Chamber of Commerce and the American Farm Bureau Federation filed a separate challenge to the same laws, also citing compelled-speech concerns.
In August, a California judge refused to grant those plaintiffs a preliminary injunction, ruling that they were unlikely to succeed on the merits and that compliance would not cause irreparable harm. The Exxon case, however, introduces new arguments around federal preemption that could reopen the question.
Corporate counsel and ESG specialists say the ruling could carry national consequences. Michael Littenberg, partner at Ropes & Gray and global head of its ESG practice, noted that “the lack of injunctions and CARB’s unwillingness to delay compliance mean companies will likely continue their preparations.” He also warned the Exxon filing could trigger a “pile-on effect” as other large corporations consider similar suits.
California’s position—and global ripple effects
California’s 2023 laws have been hailed by climate advocates as the strongest in the world, effectively extending disclosure requirements to any major company doing business in the state. Supporters include Apple, Ikea, and Microsoft, which view consistent, public emissions data as essential to investor transparency. If upheld, the California framework could become a de facto U.S. standard ahead of comparable federal Securities and Exchange Commission rules.
Legal experts now see the case as a bellwether for the balance between state climate leadership and corporate constitutional claims—a test that could determine whether U.S. states can mandate ESG-related disclosures that reach beyond their borders.
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