The Securities and Exchange Commission regulations on climate disclosure, first proposed in March 2022 and likely to be issued in final form in October 2023,[1] have drawn considerable controversy and face an uncertain fate in the inevitable litigation.[2] Much less attention has gone to two bills that are moving toward adoption in California. They would require that firms doing business in the state (with some exceptions) make climate disclosures similar to those under the expected SEC regulation and in some important ways would go further.[3]

California has long led the nation in adoption of environmental rules, including the first motor vehicle emission standards in 1966, energy efficiency standards for appliances in the 1970s, the Global Warming Solutions Act of 2006, and many others.[4] The new corporate climate disclosure bills may well continue that tradition. If adopted, this legislation would have a global impact, as California is the fifth largest economy in the world, and companies around the world sell into California. The law would mesh with corporate climate disclosure regulations elsewhere, particularly in Europe, and would therefore represent a significant step toward assuring the accuracy, trustworthiness, and transparency of corporate climate performance reporting.

One bill would mandate that firms assess and disclose on an annual basis the financially related climate risks they face and how they are managing these risks. A second bill would require annual reporting of the greenhouse gas (GHG) emissions caused by a covered firm’s operations.

Several leading companies including IKEA Supply, Microsoft, and Salesforce support the reform, and a number of smaller firms do as well.[5] For the reasons discussed below, more firms – and their legal and other advisers– should follow them. Academic readers of this blog should too!

Perhaps we all can agree to the following proposition: It is now obvious that we must address the climate emergency as an existential priority. Record-setting global average high temperatures, deadly heatwaves and flooding, and choking smoke in many places this summer reinforce this urgency.[6] Scientists are alarmed that this year the temperature of the surface of the oceans has reached levels that are much higher,[7] and the extent of Antarctic sea ice is much lower,[8] than ever previously recorded. It’s long past time to stop relegating the climate problem to a narrowly conceived field of “environmental law.” Corporate and securities law – as well as companies and their leaders acting through lobbying and politics – also have major roles to play.[9]

The proposed legislation in California is both legally solid and helpful for making climate progress. Although not a silver bullet, it is likely to have positive consequences of decreasing GHGs, advancing work to prepare for the worsening physical impacts of climate change, and encouraging climate friendly innovations.[10]

The SEC and possibly California are not the only authorities that are expanding their securities and corporate disclosure requirements to encompass more information about climate change. On April 21, 2021, the European Commission adopted the Corporate Sustainability Reporting Directive, which substantially expands the climate information that must be reported by covered companies. It went into effect in January 2023 and will be phased in over the next five years. It is expected that approximately 49,000 firms – including most large multinational corporations – will be subject to these rules.[11] Additionally, on June 30, 2023 the International Sustainability Standards Board, which was established in November 2021 at the UN Climate Change Conference in Glasgow, issued the first iteration of its standards for climate-related disclosures.[12]

Here are some details about the proposed California legislation.

Pending Bills

California’s financial climate risk disclosure bill, known as the Climate-Related Financial Risk Act (SB 261), passed the State Senate on May 30 with a vote of 27-8 and is now before the state Assembly.[13] It would require covered businesses with annual gross revenues of more than $500 million to prepare and make public a “climate-related financial risk report disclosing the entity’s climate-related financial risk and measures adopted to reduce and adapt to climate-related financial risk.”[14] The bill specifies that the standards developed by the Task Force on Climate-related Financial Disclosures must be used.[15] Company reports would also have to be verified by qualified third-party auditors.

SB 261 would embrace a considerably larger universe than the proposed SEC rules because it would cover all large companies, not just the public reporting ones under the SEC’s jurisdiction.[16] Most U.S.-based firms (including subsidiaries) with at least $500 million in annual revenues would likely qualify as “doing business” in California.[17] (Insurance companies, which are covered by other separate legislation in California, are excluded.) According to a report from the California Senate, of the over 10,000 companies that do business in California and exceed the $500 million revenue threshold, only 20 percent are publicly traded.[18] SB 261 also provides that if a new federal law or regulation requires companies to prepare an annual report “disclosing information materially similar” to the information required by SB 261, that report may be used instead. This deferential provision should be sufficient to stem any potential federal preemption challenge.

The GHG emissions disclosure bill, known formally as the Climate Corporate Data Accountability Act (SB 253), also passed the state Senate on May 30 and has moved to the Assembly. The vote on it was 24-9. It would require standardized reporting of GHG emissions (primarily carbon dioxide and methane) by firms doing business in California with total annual revenues more than $1 billion.[19]

The SEC proposal provides in considerable detail that companies must back up any claims they make publicly about their future emission reduction plans. One target of this is the “greenwashing” that underlies many companies’ net zero pledges.[20] SB 261 requires disclosure of companies’ “measures adopted to reduce and adapt to climate-related financial risk.” It directs the California Air Resources Board (CARB) to contract with a nonprofit climate reporting organization that has “experience with climate-related financial risk disclosure by entities operating in California.” One of this contractor’s tasks will be to keep abreast of proposals to update the definition of “climate-related financial risk.” It is likely that CARB’s regulations implementing SB 261 and SB 253 would include more detailed requirements on documenting the bases for emission reduction pledges.

Both bills allow CARB to seek penalties from companies that fail to make the required reports. The maximum yearly penalty under each bill is $500,000. Given the cost of preparing the required reports, it is possible that some firms – especially those that are not worried about the adverse publicity or consumer or investor backlash – will opt to pay the penalty instead, though doing so may open them to reputation damage from nonprofit environmental groups, consumers, and pro-climate companies.

Scope 3 Emissions

SB 253 would direct CARB to develop standards for GHG emissions reporting by January 1, 2025, with covered entities then required to begin annual reports following these standards in 2026 (for scope 1 and scope 2 GHG emissions) and in 2027 (for scope 3 emissions).[21]

Scope 1 emissions are those that come directly from a company’s operations, such as its factories, heating plants, and vehicle fleets. Scope 2 emissions are those attributable to producing the energy (principally electricity) that the company buys. Scope 3 emissions are those from its supply chain, both upstream and downstream.[22]

Perhaps the greatest controversy over the SEC proposal was its inclusion of Scope 3 emissions, and it is still uncertain whether the final rule will include them.[23] The draft rule required them only if they are determined to be “material,” which has led to a considerable amount of confusion.[24]

SB 253 does not require materiality. It defines Scope 3 emissions as “indirect upstream and downstream greenhouse gas emissions, other than scope 2 emissions, from sources that the reporting entity does not own or directly control and may include, but are not limited to, purchased goods and services, business travel, employee commutes, and processing and use of sold products.” CARB will presumably adopt regulations with a more detailed definition and what is and is not included.

Most Scope 3 emissions are someone else’s Scope 1 or 2 emissions, so there have also been complaints about double counting, but the purpose of accounting for Scope 3 emissions is not to come up with an overall national emissions inventory; other programs do that. The principal purpose is to identify the emissions that are attributable directly or indirectly to a company so that the company can be aware of its own impact and can be held accountable by others – and then act to lower its carbon footprint.

Federal and state rules already require reporting of most Scope 1 emissions, including the pollution from power plants that are others’ Scope 2 emissions. The Environmental Protection Agency (EPA) has adopted a Greenhouse Gas Reporting Rule[25] requiring facilities that emit more than 25,000 metric tons of carbon dioxide equivalent to report their direct GHG emissions.[26] About 8,000 facilities are required to report.[27] This rule also requires fuel suppliers to report the emissions attributable to the fuel they sell.[28] It does not cover emissions from the agriculture and land use sectors or other small sources of emissions. EPA estimates that roughly 85 to 90 percent of total U.S. GHG emissions are reported this way.[29]

California has its own Mandatory Reporting of Greenhouse Gas Emissions regulation for electricity generators, industrial facilities, fuel supplies, and electricity importers.[30] Many large companies disclose some of their Scope 3 emissions under a variety of voluntary programs, but as declared in the legislative findings in SB 253, this system “lacks the full transparency and consistency needed by residents and financial markets to fully understand these climate risks.”[31]

In addition, the new European Corporate Sustainability Reporting Directive and the International Sustainability Standards Board climate disclosure standards both require disclosure of Scope 3 emissions in accordance with the Greenhouse Gas Protocol.[32]

In summary, the new California legislation, if adopted, would press forward a general global trend toward requiring Scope 3 emissions disclosures, even if the SEC balks at taking this step.

Informational Regulation

Taken together, the two California bills constitute a significant effort to address the climate challenge through informational regulation.[33] We admit that promises about the efficacy and efficiency of informational regulation can be overblown.[34] And again, informational regulation of climate emissions and their risks will surely not deliver a silver bullet. However, if pacifist readers will forgive the analogy, the climate emergency is sufficiently difficult and complex – a “super wicked problem” – that it requires sustained buckshot from many legal and other social directions to solve.[35] The proposed new California corporate climate disclosure laws would add significantly increased firepower that can be expected to lead to progress in what has been aptly called “the new climate war.”[36]

As informational regulation, the California legislation would follow in the footsteps of similar kinds of law that have been successful. The federal securities laws are the leading example of successful informational regulation designed to deter fraud and enhance the reliability and efficiency (and perhaps sometimes the fairness) of the capital markets.[37] The National Environmental Policy Act and its state equivalents have greatly advanced environmental protection (though there is controversy because they slow down good as well as bad projects).[38] At much smaller scale, the Toxic Release Inventory (TRI), required by the Emergency Planning and Community Right-to-Know Act of 1986,[39] represents a modest success of informational regulation in environmental law.[40] Although the future consequences and outcomes of informational regulation are not easily foreseen or calculated, it is likely that the reform will translate into greater transparency, accountability, and commitment to climate progress by covered business firms.

In addition, the climate financial risk bill in particular carries characteristics of “reflexive” or “management-based” regulation.[41] The main idea is to encourage ongoing internally reflective processes in the deliberations of top management (including CEOs, their executive teams, and corporate boards) about how their firms are dealing with large social and environmental problems which they might otherwise ignore as irrelevant negative externalities. On a more granular scale, as occurred with the TRI, the process of preparing the climate disclosure reports may make management aware of previously unappreciated emissions sources that they can readily and inexpensively address. Another effect of the TRI that would surely be replicated here is that advocacy groups would use the publicly reported data to rate companies by their environmental performance, leading firms to strive to improve their rankings or relative benchmark performances.

Political Opposition

The Western States Petroleum Association is vigorously fighting the bills,[42] and the California Chamber of Commerce has led a group of trade and business associations in opposing them.[43] The chamber’s submissions to the California legislature argued that, while the bills require only large businesses to report their emissions, the small and medium-sized businesses that are part of the large firms’ supply chains would be burdened with providing data.[44] It should be noted that SB 253 in fact proposes to reduce this burden by allowing “the use of industry average data, proxy data, and other generic data in its scope 3 emissions calculations.”[45]

The chamber has also argued that California has “no authority to regulate emissions beyond the California border.”[46] The U.S. Supreme Court weakened this kind of argument considerably on May 11, 2023, in its decision in National Pork Producers Council v. Ross, which upheld a California law that banned the in-state sale of pork from pigs that are “confined in a cruel manner.”[47] Since the great bulk of pork sold in California comes from pigs bred elsewhere, the law was attacked as amounting to extraterritorial regulation and as violating the dormant Commerce Clause. The majority opinion, written by Justice Gorsuch, upheld California’s law, ruling that a state law may have extraterritorial effects so long as it does not discriminate between in-state and out-of-state producers. Neither SB 261 nor SB 253 is discriminatory in this way.[48]

The chamber said that SB 261 “is premature given the amount of activity happening at the federal and international levels,” and that while SB 261 refers to the recommendations of the Task Force on Climate-related Financial Disclosures, these recommendations were designed to be a voluntary framework, while SB 261 would be mandatory.[49] However, the details of the state standards would be set by CARB, SB 261 recognizes and honors federal preemption authority, and to cheer climate progress at the international level as an objection to state legislation is, at a minimum, disingenuous.

Some have argued that the proposed SEC rule is vulnerable to attack in court under the “major questions doctrine,” which the Supreme Court recently declared and then used to invalidate EPA’s (already defunct) Clean Power Plan[50] and President Biden’s student loan forgiveness program.[51] That doctrine only applies to federal regulations, however, not to state statutes, so it does not pose a danger to the two California bills. Moreover, the Supreme Court recently signaled again that states are free to enact environmental laws that may be beyond federal powers.[52]

Conclusions

All things considered, we believe that California’s proposed climate disclosure legislation should be adopted. It is significantly flexible so that changes over time can be made based on experience and new knowledge gained through an intentional dynamic learning and feedback process. A long-term objective would be that, consistent with other environmental legislation in which California has taken a lead, the federal government may eventually take over and establish a comprehensive corporate climate disclosure regulation of its own. In turn, these regimes would gradually lead to coincidences and, to borrow a European legal term, “harmonization” with corporate climate disclosure regulations adopted in European and other nations.

In addition, it is time for many large and powerful businesses that signal climate virtue – such as through environmental marketing and participation in environmental, social, and governance (ESG) strategies and reporting initiatives – to take a serious legal and political stand on California’s climate disclosure initiative that aligns with their aspirational talk.[53] We see no good reason for businesses to oppose the California bills, which have been carefully designed to provide a level playing field for climate information disclosure. Instead, they should strongly support passage of these bills.

If a business that says that it is pro-climate then turns around and either opposes or remains neutral on the California legislation, observers should draw the obvious conclusion. This is no time for a business to hide behind an ESG-inspired pose to oppose needed climate legislation.

ENDNOTES

[1] Andrew Ramonas, “SEC Eyes October for Climate Disclosure Regulations Release”, Bloomberg Law, June 13, 2023, https://news.bloomberglaw.com/esg/sec-eyes-october-for-climate-disclosure-regulations-release.

[2] See, e.g., Jacqueline M. Vallette and Kathryne M. Gray, Mayer Brown LLP, “SEC’s Climate Risk Disclosure Proposal Likely to Face Legal Challenges,” Harvard Law School Forum on Corporate Governance, May 10, 2022, https://corpgov.law.harvard.edu/2022/05/10/secs-climate-risk-disclosure-proposal-likely-to-face-legal-challenges/.

[3] Andrew Oxford, “California Emissions Reporting Bill Would Go Further Than SEC,” Bloomberg Law, July 13, 2023, https://news.bloomberglaw.com/ip-law/california-emissions-reporting-bill-would-go-further-than-sec; Alejandro Lazo, “Corporations and climate change: California may force large businesses to disclose climate impacts,” Cal Matters, June 27, 2023, https://calmatters.org/environment/climate-change/2023/06/california-legislation-corporate-climate-change/.

[4] David Vogel, California Greenin’: How the Golden State Became an Environmental Leader (2018).

[5] Other supporting companies include Avocado Green Brands, Grove Collaborative, REI-Co-op, Seventh Generation, and Sierra Nevada Brewing. Ceres, “Ceres applauds California Senate passage of first-in-the-nation climate risk disclosure legislation,” May 31, 2023, https://www.ceres.org/news-center/press-releases/ceres-applauds-california-senate-passage-first-nation-climate-risk.

[6] NASA confirmed that June 2023 was the hottest month ever recorded, a finding independently confirmed by the European Union’s Copernicus Climate Change Service and the National Oceanic and Atmospheric Agency. “NASA Finds June 2023 Hottest on Record,” July 13, 2023, https://www.nasa.gov/feature/goddard/2023/nasa-finds-june-2023-hottest-on-record. As we write this, brutal heatwaves have gripped large parts of the United States, Mexico, China, and India. Laura Paddison, “Global heat in ‘uncharted territory’ as scientists warn 2023 could be the hottest year on record,” CNN, July 8, 2023, https://www.cnn.com/2023/07/08/world/extreme-global-temperature-heat-records-climate/index.html. See also Denise Chow, “A weekend of misery ahead for millions in the U.S. as record heat takes hold,” NBC, July 14, 2023, https://www.nbcnews.com/science/science-news/excessive-heat-forecast-means-misery-for-millions-weekend-rcna94257 (noting that a July heatwave over large portions of the United States is setting deadly records); Gaia Pianigiani, “Europe is Stuggling to Adapt to Extreme Heat,” N.Y. Times, July 15, 2023 (“Extreme heat has now become a fixture of summer months in many parts of the world, not only in the United States, but especially in Europe. . . .”); Alan Yuhas, “Heat Waves Grip 3 Continents as Climate Change Warms Earth,” N.Y. Times, July 18, 2023.

[7] Climate Change Institute, University of Maine, Climate Reanalyzer, Daily Sea Surface Temperature, https://climatereanalyzer.org/clim/sst_daily/.

[8] Zachary M. Labe, Antarctic: Sea-Ice Concentration/Extent/Thickness, https://zacklabe.com/antarctic-sea-ice-extentconcentration/.

[9] See Sarah E. Light, “The Law of the Corporation as Environmental Law,” 71 Stanford Law Review 137 (2019) (arguing for expanding the boundaries of environmental law); Eric W. Orts, “Climate Contracts,” 29 Virginia Environmental Law Journal 197 (2011) (making the case that business needs to play a more active role in climate solutions at all levels).

[10] In this sense, we believe that this legislation is consistent with persuasive calls for “experimental” legislative and business approaches to the climate challenge. See Charles F. Sabel & David G. Victor, Fixing the Climate: Strategies for an Uncertain World (2022). It is also consistent with the movement embracing climate-forward or “progressive federalism.” See, e.g., Heather K. Gerken, “Distinguished Scholar in Residence Lecture: A User’s Guide to Progressive Federalism,” 45 Hofstra Law Review 1087 (2017).

[11] KPMG, Corporate Sustainability Reporting Directive, https://kpmg.com/nl/en/home/topics/environmental-social-governance/corporate-sustainability-reporting-directive.html; PwC, “What US companies need to know about the EU’s CSRD,” https://www.pwc.com/us/en/services/esg/library/eu-corporate-sustainability-reporting-directive.html; Wolters Kluwer, “What the new European CSRD rules mean for U.S. companies,” May 31, 2023, https://www.wolterskluwer.com/en/expert-insights/csrd-for-us-companies.

[12] IFRS Foundation, “ISSB issues global inaugural IFRS Sustainability Disclosure Standards, updates SASB Standards,” June 30, 2023, https://sasb.org/blog/issb-issues-global-inaugural-ifrs-sustainability-disclosure-standards-updates-sasb-standards/.

[13] The Assembly is expected to return from recess in August to begin consideration of both bills. Governor Gavin Newsom will most likely wait to take a position if and when the bills are adopted by both legislative houses. Telephone interview, Eric Orts with Dave Jones, Director, Climate Risk Initiative, Center for Law Energy & the Environment, July 18, 2023.

[14] California SB 261, Greenhouse gases: climate-related financial risk (2023-24) (legislative counsel’s digest), https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB261.

[15] Id.  See also Task Force on Climate-related Financial Disclosures, 2022 Status Report (Oct. 2022), https://assets.bbhub.io/company/sites/60/2022/10/2022-TCFD-Status-Report.pdf.

[16] The Enhancement and Standardization of Climate-Related Disclosures for Investors, 17 CFR 210, 229, 232, 239, and 249 (Mar. 21, 2022) (proposed rule), https://www.sec.gov/rules/proposed/2022/33-11042.pdf.

[17] The bill does not define what qualifies as “doing business” in California, so the tax law definition would likely be borrowed, which is very broad. It seems likely to apply also to asset managers. See Kirkland & Ellis, “California Climate Disclosure Bills Would Have Far-Reaching Implications for Companies Doing Business in the State,” Apr. 14, 2023, https://www.kirkland.com/publications/kirkland-alert/2023/04/california-climate-disclosure-bills#ref6.

[18] California Senate Rules Committee, Office of Senate Floor analyses, SB 261 (May 23, 2023), p. 5, https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=202320240SB261.

[19] California SB 253, Climate Corporate Data Accountability Act (2023-24) (legislative counsel’s digest), https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB253. The legislative findings declare, “United States companies that have access to California’s tremendously valuable consumer market by virtue of exercising their corporate franchise in the state also share responsibility for disclosing their contributions to global GHG emissions.”

[20] See, e.g., Roshan Krishman et al., “The Problem with Carbon Offsets,” Stanford Social Innovation Review, Spring 2023; Patrick Greenfield, “Revealed: more than 90% of rainforest carbon offsets by biggest certifier are worthless, analysis shows,” Guardian, Jan. 18, 2023; “’We cannot afford greenwashing’: Guterres highlights key role of Net-Zero experts,” Apr. 27, 2022, UN News, https://news.un.org/en/story/2022/04/1117062.

[21] California SB 253, Climate Corporate Data Accountability Act (2023-24) (legislative counsel’s digest), op. cit.; see also Kirkland & Ellis, op. cit.

[22] SB 253 defines Scope 1, 2, and 3 emissions similarly. Scope 1 emissions means “all direct” GHG emissions from “sources that a reporting entity owns or directly controls.” Scope 2 emissions” means “indirect” GHG emissions from “consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity.” Scope 3 emissions means “indirect upstream and downstream” GHG emissions “from sources that the reporting entity does not own or directly control and may include, but are not limited to, purchased goods and services, business travel, employee commutes, and processing and use of sold products.” SB 253, § 1(b)(3)-(5).

[23] Bill Flook, “Scope 3 Emissions Disclosure Emerges as Top GOP Target in SEC Climate  Risk Rules,” Thomson Reuters, August 24, 2022; Business Roundtable Urges SEC to Revise Climate Disclosure Rule (Business Roundtable, June 17, 2022); Declan Harty, “SEC’s Gensler weigh scaling back climate rule as lawsuits loom,” Politico, February 4, 2023. On the Scope 3 controversy regarding the rule, see also John C. Coffee, Jr., “Unpacking the SEC’s Climate-Related Disclosures: A Quick Tour of the Issues,” Columbia Law School Blue Sky Blog, Mar. 22, 2022, https://clsbluesky.law.columbia.edu/2022/03/29/unpacking-the-secs-climate-related-disclosures-a-quick-tour-of-the-issues/.

[24] “The SEC wants me to disclose what? The SEC’s climate disclosure proposal,” PWC In the Loop (July 2022), p. 5, https://viewpoint.pwc.com/dt/us/en/pwc/in_the_loop/assets/secclimate0728.pdf. We omit discussing the important distinction here between “financial materiality” (the likely focus of the SEC) and “double materiality” (as required, though still not exactly clear how, in the new European Union regulations). A key advantage of the California legislation appears to be that it would be flexible enough to accommodate both standards, depending on potential federal preemption requirements, potential international legal developments, and policy assessments.

[25] Mandated by the FY2008 Consolidated Appropriations Act, H.R. 2764, P.L. 110-161, https://www.epa.gov/ghgreporting/ghg-reporters.

[26] 40 C.F.R. §98.2(a)(2).

[27] EPA, Greenhouse Gas Reporting Program, https://www.epa.gov/ghgreporting#:~:text=Approximately%208%2C000%20facilities%20are%20required,in%20October%20of%20each%20year.

[28] 40 C.F.R. §98.2(4).

[29] EPA, Frequently Asked Questions, https: https://ww2.arb.ca.gov/our-work/programs/mandatory-greenhouse-gas-emissions-reporting//ccdsupport.com/confluence/pages/viewpage.action?pageId=141983792.

[30] California Air Resources Board, Mandatory Greenhouse Gas Reporting Regulation, https://ww2.arb.ca.gov/mrr-regulation.

[31] California SB 253, op. cit.

[32] Greenhouse Gas Protocol, New Standards from the International Sustainability Standards Board (ISSB) Requires Disclosure of Scope 3 Emissions (June 26, 2023), https://ghgprotocol.org/blog/statement-new-standard-international-sustainability-standards-board-issb-requires-disclosure; Cynthia Hanawalt, “Global Consensus is Emerging on Corporate Scope 3 Disclosures. Will the SEC Lead or Lag?” Sabin Center Climate Law Blog, March 28, 2023, https://blogs.law.columbia.edu/climatechange/2023/03/28/global-consensus-is-emerging-on-corporate-scope-3-disclosures-will-the-sec-lead-or-lag/.

[33] Paul R. Kleindorfer & Eric W. Orts, “Informational Regulation of Environmental Risks,” 18 Risk Analysis 155 (1998). See also Cass R. Sunstein, “Informational Regulation and Informational Standing: Akins and Beyond, 147 University of Pennsylvania Law Review 613 (1999) (“There can be little doubt that a number of statutes in the last forty years were designed to ensure disclosure of information, and that mandatory disclosure is an increasingly pervasive and important regulatory tool. Indeed, informational regulation, or regulation through disclosure, has become one of the most striking developments in the last generation of American law.”)  Cf. Jody Freeman, “The Private Role in Public Governance,” 75 N.Y.U. Law Review 543, 635-36 (2000) (recognizing the useful role of mandatory informational regulation in the negotiated relationship between private entities and public government). Informational regulation is also used in other significantly different legal contexts, such as in China. Alex L. Wang, “Explaining Environmental Information Disclosure in China,” 44 Ecology Law Quarterly 865 (2018).

[34] See Omri Ben-Shahar & Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure (2014); Katrina Fischer Kuh, “Informational Regulation, the Environment, and the Public,” 105 Marquette Law Review 603 (2022).

[35] See Richard J. Lazarus, “Super Wicked Problems and Climate Change: Restraining the Present to Liberate the Future,” 94 Cornell Law Review 1153 (2009).

[36] Michael E. Mann, The New Climate War: The Fight to Take Back our Planet (2021).

[37] Famously, “a recurrent theme” in federal securities law is “disclosure, again disclosure, and still more disclosure. Substantive regulation has its limits. But ‘the truth shall make you free.”’ 1 Louis Loss & Joel Seligman, Securities Regulation 29 (3d ed. 1998).

[38] Michael B. Gerrard, “A Time for Triage,” Environmental Forum, November/December 2022, https://scholarship.law.columbia.edu/faculty_scholarship/3867/; M. Nolan Gray, “How Californians Are Weaponizing Environmental Law and How to Fix It,” Atlantic, March 12, 2021.

[39] 42 U.S.C. §11023.

[40] William F. Pederson “Regulation and Information Disclosure: Parallel Universes and Beyond,” 25 Harvard Environmental Law Review 151 (2001) (assessing the Toxic Release Inventory as a partially successful instance of informational regulation). Even critics of environmental informational regulation recognize that the Toxic Release Inventory succeeded in reducing the release to toxic chemicals, even if a related goal of educating the public appears to have failed. Kuh, op. cit., 613-24

[41] On reflexive law and governance, see, e.g., Eric W. Orts, Reflexive Environmental Law, 89 Northwestern University Law Review 1227 (1995); Dennis D. Hirsch, “Green Business and the Importance of Reflexive Law: What Michael Porter Didn’t Say,” 62 Administrative Law Review 1063 (2010); John S. Dryzek & Jonathan Pickering, “Deliberation as a Catalyst for Reflexive Environmental Governance,” 131 Ecological Economics 353 (2017).

On management-based regulation, see Cary Coglianese & David Lazer, “Management-Based Regulation: Prescribing Private Management to Achieve Public Goals,” 37 Law & Society Review 691 (2003); Neil Gunningham & Darren Sinclair, “Organizational Trust and the Limits of Management-Based Regulation,” 43 Law & Society Review 865 (2009).

[42] Aaron Cantu, “Oil and Gas Lobbying Threatens California’s Game-Changing Climate Bills,” Capital & Main, June 26, 2023.

[43] Alejandro Lazo, “Corporations and climate change: California may force large businesses to disclose climate impacts,” Cal Matters, June 27, 2023, https://calmatters.org/environment/climate-change/2023/06/california-legislation-corporate-climate-change/.

[44] Brady Van Engelen, Letter from California Chamber of Commerce to Members of the California Senate Committee on Environmental Quality concerning SB 261 (undated), https://sbscchamber.com/wp-content/uploads/2023/03/2023_3_8_SB261OpposeCoalition_CASenateCommitteeEnvironmentalQuality.pdf.

[45] SB 253, § 2, adding Health & Safety Code §38532(c)(1)(A)(ii).

[46] SB-260 Climate Corporate Accountability Act (2021-22) (bill analysis) (previous version), https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=202120220SB260.  See also Cydney Posner, Cooley LLP, “California’s proposed Climate Corporate Accountability Act goes belly up,” Harvard Law School Forum on Corporate Governance, Sept. 25, 2022 (quoting chamber), https://corpgov.law.harvard.edu/2022/09/25/californias-proposed-climate-corporate-accountability-act-goes-belly-up/.

[47] 600 U.S. ___ (May 11, 2023).

[48] We concede that the federal and constitutional questions would not be open and shut. For an account of the fractured reasoning in the opinions in National Pork Producers Council, see Michael S. Knoll & Ruth Mason, “For Now, Court Is Cool with California in Charge,” Regulatory Review, July 11, 2023, https://www.theregreview.org/2023/07/11/knoll-mason-for-now-court-is-cool-with-california-in-charge/. But if the California laws were challenged, we expect that a strong argument would support an extension here too of what scholars have called “the California Effect” in our federal system to include climate information disclosure. See Natasha Singer, “Charting the ‘California Effect’ on Tech Regulation,” N.Y. Times, Oct. 12, 2022.

[49] Van Engelen, op. cit

[50] See, e.g., West Virginia v. Environmental Protection Agency, 142 S. Ct. 2587 (2022) (striking down agency’s assertion of authority to adopt a Clean Power Plan). 

[51] Biden v. Nebraska, 600 U.S. ___ (June 30, 2023).

[52] Sackett v. EPA,  600 U.S. ___  (May 25, 2023), slip op. at 23.

[53] Andreas Rasche, “ESG, Bullshit, and Aspirational Talk,” presentation at Columbia Law School, Executive LL.M. program, course in ESG, Social Impact Investing, and Corporate Responsibility, July 10, 2023.

This post comes to us from Michael B. Gerrard, Andrew Sabin Professor of Professional Practice and founder and faculty director of the Sabin Center for Climate Change Law at Columbia Law School, and from Eric W. Orts, visiting professor of law at Columbia Law School and the Guardsmark Professor of Legal Studies & Business Ethics and professor of management at the Wharton School of the University of Pennsylvania.