California and the SEC Are Being Sued for Their Climate Reporting Requirements

Recently, both the Securities and Exchange Commission (SEC) and California have passed climate-related disclosure mandates for certain types and sizes of companies. In March of 2024, the SEC approved its final rule after almost two years since the initial proposal, while California got ahead of the game and enacted SB 253 and SB 261 in October of 2023 as part of the state’s larger Climate Accountability Package. The SEC’s final rule and California’s mandates share a lot of similarities such as requirements to report on Scope 1 and Scope 2 greenhouse gas emissions, disclosures on climate-related risks, measures companies have taken to reduce those risks, and third-party assurance for these disclosures. However, there is one key difference between California and the SEC in that California is also mandating disclosure of Scope 3 greenhouse gas emissions. This was a major point of contention when the SEC published its rule proposal in 2022 and was eventually omitted from the final rule.

As was expected, both the SEC and California’s climate-disclosure requirements are facing litigation. Below is a summary of the legal challenges.


On January 30, 2024, several major business groups including the U.S. Chamber of Commerce, the California Chamber of Commerce, and the American Farm Bureau Federation filed a lawsuit challenging California’s first-in-the-nation climate-related disclosure laws. The two laws being challenged are the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261). SB 253 requires companies to annually disclose Scope 1, Scope 2, and Scope 3 greenhouse gas emissions if they conduct business in the state and have an annual revenue of $1 billion. SB 261 requires biennial disclosure of climate-related risks in accordance with the Taskforce on Nature-Related Financial Disclosures (TNFD) if the company conducts business in the state and has an annual revenue exceeding $500 million. It is important to note that the Voluntary Carbon Market Disclosures Act (AB 1305), which took effect January 1, 2024, and requires companies, of any size, making emissions reduction claims to disclose certain information on their website, is not being challenged in this lawsuit.

The business groups bringing the lawsuit allege that the mandates will impose massive costs on businesses, violate free speech, and are invalid because they act as de facto national emissions regulations. The lawsuit states that SB 253 and SB 261 violate first amendment rights because “It forces thousands of companies to engage in controversial speech that they do not wish to make” and that it does this “for the explicit purpose of placing political and economic pressure on companies to ‘encourage’ them to conform their behavior to the political wishes of the state.” The lawsuit also contends that the Clean Air Act preempts the state’s ability to regulate emissions in other states and according to the plaintiffs SB 253 and SB 261 do this by mandating reporting on emissions that occur outside the boundaries of California. The lawsuit states that “Because the new disclosure requirements of SB 253 and SB 261 operate as de facto regulations of greenhouse gas emissions nationwide, they are precluded by the Clean Air Act and are invalid under the Dormant Commerce Clause and principles of federalism.” The plaintiffs in the lawsuit are asking the court to declare both laws null and void.

In response to the lawsuit, California has asked the court to dismiss most of the lawsuit that seeks to overturn SB 253 and SB 261 on the basis that it was brought too early and alleges that the harm to businesses is speculative. The state argues that the business group’s allegation that the laws would impose major economic burdens on businesses is speculative because the California Air Resources Board (CARB) has not yet proposed any specific regulations related to enforcing SB 253 and SB 261 and therefore the lawsuit was filed too early. The state also refuted the lawsuits claim that the laws are preempted by federal statutes, like the Clean Air Act. They say this is because SB 253 and SB 261 do not actually regulate emissions, only information on those emissions and therefore, there is no conflict.

Supporters of SB 253 and SB 261, which were endorsed by major companies like Microsoft, Apple, and Ikea, argue that they are necessary to provide investors and stakeholders with transparency on how large corporations are contributing to climate change and point to the fact that many of those companies have already been voluntarily disclosing some of this information.


Soon after the SEC approved its final climate-related disclosure rule, a flurry of lawsuits was filed in multiple jurisdictions, including the 5th, 6th, 8th, 11th, and D.C. U.S. Circuit Courts of Appeals. Initially, the 5th Circuit Court issued an administrative stay, or temporary halt, on the rule pending review. However, because lawsuits were filed in multiple courts, the U.S. judicial panel on multidistrict legislation consolidated them and decided by lottery to assign the case to the 8th U.S. Circuit Court of Appeals. Due to this reassignment the 5th Circuit Court dissolved its administrative stay.

On the opposition side are several states including West Virginia, Ohio, and Texas along with several businesses, oil trade groups, and lobby groups like Liberty Energy, the Texas Alliance of Energy Producers, and the U.S. Chamber of Commerce. Similar to the lawsuit against the California climate-related disclosure laws, opponents argue that the SEC’s new rule will create unnecessary burdens for businesses and force them to reveal information that they may want to keep confidential. They also claim the rules to be unconstitutional because they amount to back-door environmental regulations which are beyond the SEC’s scope of authority. Liberty Energy and Nomad Proppant Services asked the 8th Circuit Court to reinstate the administrative stay ordered by the 5th Circuit Court that was dissolved when all cases were consolidated into the 8th Circuit Court.

On Thursday April 4, 2024, the SEC announced it would implement a voluntary stay on the rule. They did this because of the complex legal procedures around the consolidation and litigation of the case. Additionally, the agency stated that the stay would ensure that no litigants would be subject to the rule while litigation is ongoing. However, in the order the SEC stated that despite issuing the stay the agency still believe that the rule is consistent with all applicable laws and that it is “within the Commission’s long-standing authority to require the disclosure of information important to investors making investment and voting decisions.”

Several environmental groups who were initial supporters of the SEC’s climate-related disclosure rule have also filed a lawsuit claiming that the rule does not go far enough because the SEC is not including Scope 3 greenhouse gas emissions disclosures. The Sierra Club and the Natural Resources Defense Council (NRDC) are being represented by Earthjustice, a nonprofit organization dedicated to litigating environmental issues. In their lawsuit they claim that the rules do not provide investors with enough information about a company’s potential climate risks. In a statement the Sierra Club stated that investors “cannot adequately manage investments without complete information on publicly-traded companies’ vulnerabilities to climate-related risks, including greenhouse gas emissions profiles.” They also said that the SEC rule allows “companies to selectively report their emissions” because of the SEC’s decision to tie disclosures to materiality.” However, unlike the opponents of the rule, the environmental groups firmly believe the SEC does have the authority to mandate such disclosures.

Possible Conflicting Obligations

The SEC’s and California’s climate-related mandates have some key differences that could be difficult to manage. In contrast to the SEC’s rule, which only applies to certain publicly traded companies, California’s laws also apply to private companies that “do business in California.” This has been broadly interpreted to mean that it covers any company within the respective revenue thresholds that derive financial value or gain in the state, even if they are not headquartered there. This means that SEC registrants not based in California could be subject to their far-reaching climate-related disclosures which are significantly more stringent than the SEC’s. If both of California’s laws and the SEC’s final rule survive the legal challenges against them, many companies will be subject to report under both. It is also important to note that CARB has not yet promulgated implementation regulations and it is unclear if they will be parallel to or conflict with the SEC. One thing that is certain is that California’s laws will require Scope 3 emissions disclosures. Regardless, these circumstances breed uncertainty for companies tasked with complying with both the SEC’s recent climate regulations and California's upcoming reporting standards. Put simply, a one-size-fits-all approach may not suffice, necessitating affected companies to take measures to meet California's climate disclosure mandates, distinct from those required to comply with the SEC's new climate-related rule.

Impact on Printing Operations

Although most printing companies are not publicly traded, some are, and they will need to determine how their SEC filings are affected as a result. Many printers will not be directly affected by California’s climate-related disclosure laws, but many are expected to be indirectly affected because of the Scope 3 disclosures mandated under the laws. Printers are part of many companies’ supply chains and therefore, are also part of their Scope 3 emissions. The Alliance is closely monitoring the SEC’s and California’s actions, as well as the associated lawsuits and will provide updates as they come.

In this article, Sara Osorio, Coordinator, EHS Affairs, PRINTING United Alliance, reviews the lawsuits filed against the SEC’s and California’s climate-related disclosure mandates. More information about this and other sustainability issues can be found at Business Excellence-EHS Affairs or reach out to Sara directly if you have questions about how these issues may affect your business:   
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Sara Osorio Environmental, Health and Safety Affairs Coordinator

Sara Osorio is the Environmental, Health and Safety (EHS) Affairs Coordinator at PRINTING United Alliance. Her primary responsibility is to assist members with EHS regulatory compliance, sustainability, and EHS consulting. Sara also monitors the EHS regulatory activities at the federal and state-level that impact the printing industry including those occurring at Environmental Protection Agency (EPA), the Occupational Health and Safety Administration (OSHA), the Department of Transportation (DOT), and other agencies. She develops guidance material for members, gives presentations, and writes articles on EHS regulations and sustainability issues. She also supports the Sustainable Green Printing Partnership and Alliance members in their efforts to certify printing operations in sustainable manufacturing.

Sara received a Bachelor of Science in Environmental Studies from Florida International University and is pursuing and Master of Science in Sustainable Management from the University of Wisconsin – Green Bay.

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