Disclosure Standards Don’t Bend to Corporate Preferences

When Exxon filed its lawsuit challenging California’s new climate disclosure laws, it framed the issue as a constitutional one: the state is compelling the company to “tell a story” it disagrees with. According to Exxon, requirements to report greenhouse gas (GHG) emissions under SB 253 force it to adopt a narrative about emissions and climate risk that violates its First Amendment rights.

At first glance, this argument seems to align with the standard for judging the constitutionality of compelled speech. Under Zauderer v. Office of Disciplinary Counsel (471 U.S. 626, 1985), the government can compel disclosure of “purely factual and uncontroversial information” as long as the speech is reasonably related to a government interest. But if the information is not “factual and uncontroversial,” the government must prove that the law is narrowly tailored to achieve a compelling interest–the “strict scrutiny” standard of review.

Here, Exxon is asking the court to define GHG emissions disclosures as “controversial” not because it disagrees with carbon accounting generally, but because of the implications of the particular metric California requires. This argument ignores a basic fact about the regulatory disclosures. Companies are routinely required to report standardized metrics, even if they run counter to their preferred narrative. This is particularly true in financial markets, which rely on consistent information to function.

The timing of Exxon’s lawsuit is interesting. Just days before, Exxon helped launch Carbon Measures, an industry coalition to develop new carbon accounting standards. Exxon’s CEO called for better emissions data, saying “if you can’t measure it, you can’t manage it.” The company is now simultaneously arguing that California’s measurement requirements are unconstitutional compelled speech while advocating for different measurement requirements it prefers. The First Amendment doesn’t protect a right to be measured only by metrics of your own choosing.

Further complicating the matter is that it’s not clear what the goal is of Carbon Measures. If its objective is voluntary adoption, then it’s likely that some companies will adopt it and others won’t. It’s possible that this initiative may lead other companies to propose yet other measures to their preference if they don’t like the Carbon Measures approach. This will lead to a proliferation of different ways to report on carbon. Yet if the ultimate objective of Carbon Measures is to replace the GHG Protocol with an “E-Ledgers Approach” the irony is obvious. ExxonMobil doesn’t support compelled speech unless the speech is something it wants others to be compelled to do.