ExxonMobil Sues California Over Climate Disclosure Laws, Citing First Amendment Violation

The Core Conflict: Free Speech vs. Climate Transparency

ExxonMobil, one of the world’s largest oil and gas producers, has filed a federal lawsuit against the State of California, challenging the constitutionality of the state’s landmark climate disclosure legislation. The company argues that the new rules, which mandate extensive public reporting of greenhouse gas emissions across the entire value chain, violate its First Amendment rights by compelling it to disseminate subjective and controversial information.

This legal challenge places the corporate giant directly against California’s aggressive push for climate transparency, setting up a high-stakes legal battle that could redefine the scope of environmental, social, and governance (ESG) reporting requirements for thousands of large companies operating in the U.S. and globally.

The Mandates at the Center of the Dispute

The lawsuit targets two specific pieces of legislation signed into law in 2023, which are scheduled to take effect in the coming years. These laws are the first of their kind in the United States, requiring detailed, public disclosure of climate impact and risk.

Senate Bill 253: The Climate Corporate Data Accountability Act

SB 253 mandates that all public and private companies with annual revenue exceeding $1 billion that do business in California must publicly disclose their annual greenhouse gas emissions. The most contentious element of this law is the requirement to report Scope 3 emissions.

Senate Bill 261: The Climate-Related Financial Risk Act

SB 261 requires companies with revenue over $500 million to prepare and disclose reports detailing their climate-related financial risks, aligning with established frameworks like the Task Force on Climate-Related Financial Disclosures (TCFD).

The Scope 3 Controversy: Why ExxonMobil Is Suing

ExxonMobil’s primary objection centers on the requirement to report Scope 3 emissions under SB 253. To understand the severity of the requirement, it is essential to distinguish between the three scopes of emissions reporting:

• Scope 1: Direct emissions from sources owned or controlled by the company (e.g., fuel burned in company vehicles or manufacturing facilities).
• Scope 2: Indirect emissions from the generation of purchased energy (e.g., electricity used to power offices).
• Scope 3: All other indirect emissions that occur in the company’s value chain, both upstream and downstream. For an oil company, this includes the emissions generated when consumers burn the gasoline or jet fuel they purchase.

ExxonMobil argues that calculating and reporting Scope 3 emissions is inherently speculative, subjective, and beyond the company’s direct control. In its legal filing, the company asserts that forcing them to publish these numbers constitutes compelled speech—a violation of the First Amendment.

“By requiring ExxonMobil to calculate and publicly report these highly subjective and controversial Scope 3 emissions figures, California is forcing the company to speak on a matter of public debate, violating its constitutional right not to be compelled to endorse a specific, non-factual viewpoint,” the lawsuit contends.

Furthermore, the company argues that the laws are overly broad and attempt to regulate activities that occur entirely outside of California’s borders, imposing massive compliance costs on businesses worldwide.

Broader Implications for Corporate America

This lawsuit is not an isolated incident; it is part of a larger corporate pushback against increasing ESG mandates. California’s laws are seen as a bellwether, potentially influencing federal regulations or similar laws in other states.

The Precedent of Compelled Speech

Legal experts note that the success of ExxonMobil’s claim hinges on whether the required disclosures are viewed by the court as purely factual and non-controversial commercial speech (which the government can generally compel) or as subjective, policy-laden statements (which are protected from compulsion).

Because Scope 3 emissions require complex, often estimated methodologies to calculate the environmental impact of consumer behavior, ExxonMobil has a strong basis to argue that the data is not purely factual but rather a form of subjective environmental advocacy being forced upon them.

Regulatory Landscape

The legal challenge mirrors similar opposition faced by the U.S. Securities and Exchange Commission (SEC) over its proposed federal climate disclosure rules. The SEC’s rules, which also included Scope 3 reporting for some companies, were significantly watered down due to intense political and corporate pressure, highlighting the sensitivity surrounding these reporting requirements.

If ExxonMobil prevails, it could severely limit California’s ability to enforce the most powerful provisions of SB 253, potentially crippling the state’s efforts to achieve comprehensive corporate climate accountability.

Key Takeaways and Next Steps

This landmark case will have significant ramifications for the future of corporate climate reporting and the balance between state regulatory power and constitutional protections.

• Core Dispute: ExxonMobil claims California’s SB 253 and SB 261 violate the First Amendment by compelling subjective speech, specifically regarding Scope 3 emissions.
• Scope 3 Focus: The difficulty and subjectivity involved in calculating emissions from consumer use (Scope 3) is the central point of the constitutional challenge.
• High Stakes: The outcome will determine whether California can enforce its groundbreaking climate transparency laws and will influence ongoing debates over federal ESG reporting standards.
• Legal Precedent: The court must decide if Scope 3 reporting constitutes purely factual commercial speech or protected, subjective expression.

What’s Next

The case is expected to move through the federal court system throughout 2025. Given the constitutional nature of the challenge and the massive economic impact of the laws, the case is likely to be appealed regardless of the initial ruling, potentially reaching the Ninth Circuit Court of Appeals or even the Supreme Court.

Companies currently preparing for compliance with the 2026 reporting deadlines for Scope 1 and 2 (and 2027 for Scope 3) are closely monitoring the litigation, as a ruling in favor of ExxonMobil could lead to a stay or permanent injunction against the most burdensome disclosure requirements.