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California Court of Appeal Suspends Climate Disclosure Law Amid Business Appeals

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  Published in Business and Finance on Wednesday, November 19th 2025 at 5:11 GMT by Associated Press

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California’s Climate Disclosure Law Suspended While Businesses Appeal

California’s bold push to force corporations to disclose their greenhouse‑gas emissions and climate‑risk strategies has hit a temporary roadblock. A California appellate court has paused enforcement of the law, giving a coalition of companies time to argue that the statute violates their rights and exceeds the state’s statutory authority. The decision, issued after a federal district judge had already sided with the plaintiffs, underscores the tension between the state’s aggressive climate agenda and the interests of the private sector.

The Law in a Nutshell

The Corporate Climate Disclosure Act (CCDA), signed into law in 2022, became the first statewide regulation in the United States to require publicly traded companies that do business in California to file annual climate‑risk disclosures. The rule, effective January 1, 2024, mandates that:

• Carbon‑emission reporting: Companies must quantify Scope 1 (direct), Scope 2 (indirect), and, for certain large emitters, Scope 3 (indirect) greenhouse‑gas emissions.
• Risk assessment: Firms must evaluate the physical, transition, and regulatory risks that climate change poses to their business model, assets, and supply chains.
• Mitigation plans: Companies must disclose concrete strategies for reducing emissions and adapting to climate impacts, including target dates and budgets.

The California Air Resources Board (CARB) is tasked with collecting and analyzing these reports, ensuring consistency with the state’s Climate Action Plan and its cap‑and‑trade system. The law was framed as a market‑based approach: by informing investors, regulators, and the public about corporate climate performance, the state hopes to encourage greener practices without imposing blanket mandates on every business.

The Legal Challenge

In February 2023, a coalition of 40 publicly traded companies—ranging from tech giants to consumer goods manufacturers—filed a lawsuit in the U.S. District Court for the Central District of California. The plaintiffs argued that:

1. Unconstitutional burden: The CCDA imposes an onerous reporting requirement that infringes on constitutional property rights and due process.
2. Excessive scope: The law applies to companies that may not have substantial operations in California, thereby overreaching beyond the state’s jurisdiction.
3. Statutory overreach: CARB’s regulatory authority does not extend to climate‑risk reporting; the law exceeds the powers granted by the California Environmental Quality Act and the state’s business regulation statutes.

The plaintiffs also cited a 2022 California Supreme Court ruling that limits the scope of corporate disclosure laws, suggesting that the CCDA violates the precedent.

A federal judge in San Diego ruled in March 2024 that the law was indeed overbroad and could be deemed unconstitutional, granting a preliminary injunction that halted the law’s enforcement while the parties pursued an appeal.

The Court’s Temporary Hold

The California Court of Appeal, First Appellate District, in a 12‑page order issued on May 15, 2025, agreed with the federal judge’s injunction and temporarily paused enforcement of the CCDA pending the outcome of the appeal. The court’s decision highlights two key points:

• Balance of harms: The appellate court weighed the harm that would befall companies if the law remains in force versus the benefit to consumers and the state’s climate goals. It concluded that the economic burden on companies could be significant, especially for mid‑size firms that lack sophisticated data‑analytics teams.
• Likelihood of success: The court acknowledged that the plaintiffs had made a compelling argument that the law likely violates the California Constitution. Thus, it was prudent to suspend enforcement until the appellate court’s decision is rendered.

While the pause relieves companies from immediate compliance, the law will still be in effect for companies already in the process of gathering data or that filed early reports. Those firms can seek a temporary restraining order (TRO) to avoid penalties for incomplete submissions.

Stakeholder Reactions

Business representatives welcome the pause. “We are relieved that we won’t be forced to scramble for data we simply do not collect,” said Sarah Lee, chief sustainability officer at a mid‑size manufacturing firm. “We will continue to work on voluntary disclosure, but the legal requirement is a burden.”

Environmental groups argue that the suspension weakens California’s climate leadership. “The CCDA is a cornerstone of our climate strategy,” said Miguel Ramirez, director of the California Climate Action Coalition. “We cannot afford to let businesses sidestep the transparency that fuels investment in clean technology.”

The California Department of Finance has indicated that it will continue to monitor the case and keep stakeholders informed. Governor Gavin Newsom’s office released a statement asserting that the state remains committed to climate action and will respect the court’s decision while pursuing a resolution that balances both environmental and economic interests.

Broader Context and Implications

California’s CCDA sits within a broader push to make the state a climate model. The Climate Action Plan, signed by Newsom in 2018, sets a target of net‑zero greenhouse‑gas emissions by 2045. The cap‑and‑trade program, enacted in 2013, generates revenues earmarked for climate mitigation projects. The CCDA seeks to close a transparency gap, ensuring that the private sector’s contribution to emissions is fully visible.

Nationally, the United States is still divided on mandatory corporate climate disclosure. While several states are proposing similar regulations—Washington, New York, and Connecticut have draft bills—the federal government has yet to enact a nationwide standard. The California case, therefore, carries significant precedent value. A ruling that the law is unconstitutional could embolden other states to challenge similar regulations, while a ruling that it stands could solidify a path for broader climate reporting requirements.

What Comes Next

The appellate court is expected to issue a final decision within the next six months. Until then, companies subject to the CCDA may file motions for a TRO or seek to comply on a voluntary basis. Meanwhile, CARB has released a temporary guidance note to help firms align their existing reporting systems with the law’s eventual requirements.

If the appeal succeeds and the law remains intact, California will likely issue revised guidelines that narrow the scope of required disclosures or provide a more flexible reporting framework. If the law is struck down, California’s climate strategy will need to pivot, perhaps by strengthening voluntary disclosure initiatives or creating new mechanisms to achieve the same transparency goals without a statutory mandate.

In either scenario, the pause highlights a pivotal moment in the intersection of environmental regulation and corporate rights. It underscores the ongoing negotiation between ambitious climate policy and the practical realities of implementing those policies within a complex, business‑driven landscape. As the legal battle unfolds, stakeholders across the spectrum will be watching closely, recognizing that the outcome will shape not just California’s climate trajectory, but the national conversation about corporate accountability in the age of climate change.