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California's Climate Disclosure Mandates Face Legal Challenges

In a landmark legal challenge, a coalition led by prominent business federations is challenging California's pioneering climate disclosure laws, Senate Bill 253 (the Climate Corporate Data Accountability Act) and Senate Bill 261 (the Climate-Related Financial Risk Act). These regulations mandate unprecedented disclosure of climate-related financial risks and greenhouse gas emissions by large companies, both public and private, operating in California. Critics argue these mandates force businesses into politically charged disclosures, infringing on First Amendment rights and overstepping state jurisdiction, potentially conflicting with federal authority such as the Clean Air Act.

This battle at the intersection of environmental accountability and free speech raises high stakes for corporate America. With penalties for non-compliance reaching up to $500,000 per reporting year, the controversy underscores a pivotal moment for climate change transparency. It would be prudent for companies to take this time to begin implementing, or at a minimum, considering a climate data collection process and updating their capacities for making these disclosures. Whether the case is successful or not, many companies, including smaller companies in the supply chain, will likely have some climate change disclosure requirements in the near-term.

Read our article published by Corporate Compliance Insights to learn more.

Categories: Prop 65