Washington, D.C. – A significant shift in the regulatory landscape concerning climate disclosure is emerging as the Securities and Exchange Commission (SEC) withdraws its support for a controversial rule established in March 2024. This departure has left companies grappling with an inconsistent array of state and international mandates, creating uncertainty in compliance efforts due to the absence of coherent national standards.
Initially, the SEC’s Climate Disclosure Rule required publicly traded companies to report greenhouse gas emissions and disclose material risks related to climate change. However, the rule faced immediate legal challenges, notably from Liberty Energy, a company previously led by Energy Secretary Chris Wright. Liberty Energy contested the SEC’s authority to impose such requirements, arguing that they represented compelled speech and excessive compliance burdens.
In response to the legal pushback, the Fifth Circuit Court quickly intervened, issuing an emergency stay on the rule shortly after Liberty Energy’s challenge. Following this, the SEC itself paused the rule’s implementation as the case moved to the Eighth Circuit in a consolidated appeal involving multiple states.
The political climate shifted significantly with the change in administration. On March 27, 2025, the SEC, in a narrow 2-1 vote, decided to cease defending the Climate Disclosure Rule. This decision, which drew criticism from the Commission’s lone Democratic member, Caroline Crenshaw, signaled a move toward deregulation, reflecting broader administration priorities. Acting Chairman Mark T. Uyeda and Commissioner Hester Peirce, both Republicans, supported the ruling, contributing to concerns about reduced transparency around climate-related corporate risks.
Despite the SEC’s withdrawal from enforcement, the Eighth Circuit has kept the case in abeyance, leaving the rule technically in place but practically unenforceable. This development follows a trend of growing inconsistency in climate disclosure regulations as state and international initiatives continue to advance.
In California, two comprehensive climate disclosure laws enacted in 2023 stand poised to reshape reporting requirements. The Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act will apply to numerous companies operating within the state, including those based outside California. These laws demand extensive emissions reporting and impose penalties for noncompliance, which could significantly impact business operations across multiple jurisdictions. Legal challenges are already underway, questioning the constitutionality and viability of these state-level regulations.
Simultaneously, the European Union is solidifying its own framework for climate disclosures. The Corporate Sustainability Reporting Directive, enacted in 2022, alongside the Corporate Sustainability Due Diligence Directive launched in 2024, mandates extensive disclosures regarding emissions and sustainability practices for large firms, including foreign companies operating within the EU. However, proposals to simplify these regulations have emerged, suggesting potential modifications to accommodate business concerns.
Amidst this regulatory patchwork, the current federal administration has taken a strong stance against new climate disclosure initiatives. In April 2025, President Trump issued an Executive Order aimed at curbing what he described as overreach by state climate policies, indirectly targeting California’s disclosure laws. Concurrently, proposed legislation, such as the PROTECT USA Act, seeks to shield essential industries from compliance with foreign climate regulations, enforcing a dichotomy between domestic and international standards that may complicate compliance for multinational corporations.
As companies face this multifaceted regulatory environment, uncertainty looms over compliance strategies. The interplay between the various mandates could lead to conflicting obligations, raising questions about how to adhere to one jurisdiction’s rules without infringing upon another’s. As deadlines loom, businesses are urged to remain vigilant regarding legal developments while preparing for a landscape where disclosure requirements may increasingly diverge.
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