by Kevin Kearney, Director, Corporate Affairs
As if the first quarter of 2025 hasn’t already induced enough uncertainty, today’s business leaders are finding themselves experiencing further whiplash around sustainability reporting regulations.
In March 2024, the U.S. Securities and Exchange Commission (S.E.C.) finalized its highly anticipated Climate Disclosure Rule, expanding and standardizing climate-related reporting for publicly traded companies. However, the S.E.C. has hit pause on enforcing the rule amid scrutiny by the Trump administration. Meanwhile, states are moving forward with their own climate disclosure laws and, in the European Union, proposed major amendments to its Corporate Sustainability Reporting Directive (CSRD) are creating further regulatory swirl.
For businesses operating across multiple countries (and even domestic states), these landscape shifts raise an important question: what actually needs to be disclosed? Unfortunately for execs seeking clarity, the answer largely depends on where operations are being conducted. The below breaks down the latest developments business leaders should know about while providing takeaways for insulating companies against potential compliance risks.
The S.E.C. Climate Rule is Dead
In March 2024, the climate community held its breath ahead of the S.E.C’s scheduled update to its climate disclosure requirements, collectively hoping for greater simplicity and transparency around how companies are mandated to report their respective climate-related risks. While many in the field thought the updates could go further (especially regarding tracking Scope 3 emissions, the greenhouse gasses indirectly emitted by a company’s value chain partners), the resulting standardization was appreciated.
While legal challenges to last year’s mandate were swift (and expected), its implementation was scheduled to take effect next year. However, on March 27, the S.E.C. voted to cease defending its Climate Disclosure Rule in ongoing litigation.
Acting S.E.C. chairman Mark Uyeda – who had recently called the rule “deeply flawed” – cited concerns over its costs and intrusiveness. The decision significantly reduces the likelihood of the rule’s enforcement anytime soon.
Exec Takeaway: For all intents and purposes, the rule is dead. However, with most companies already disclosing Scopes 1 and 2 emissions given demands from investors and other stakeholders, voluntary compliance should be continued to maintain transparency and earn trust.
States Step Up
With the federal government deprioritizing sustainability disclosure, a handful of states aren’t just sitting back twiddling their thumbs.
California passed two major pieces of legislation in late 2023, SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act), mandating companies that operate in the state and meet certain revenue thresholds to disclose their greenhouse gas (GHG) emissions and climate-related financial risks.
Specifically, the former requires public and private companies doing business in the Golden State with annual revenues exceeding $1 billion to disclose their GHG emissions, with SB 261 stipulating that companies exceeding $500 million (and operating in the state) to disclose not only their climate-related financial risks, but the steps being taken to mitigate said risks.
Unlike what’s playing out with the S.E.C., both laws are currently moving ahead and will begin impacting reporting needs next year.
New York and Illinois have also asserted themselves as leaders in the space. Early this year, both put forth similar bills to California’s.
Exec Takeaway: If your company operates in California, the state’s new climate disclosure laws will soon be enforced, with other states likely following suit. Your teams should begin gathering emissions data and structuring reporting processes now to ensure compliance, keeping a close eye on developments in all states where business is conducted.
EU CSRD Relaxation
Meanwhile, the EU has been setting the pace for sustainability reporting with its Corporate Sustainability Reporting Directive (CSRD). Taking effect early last year, CSRD substantially expanded reporting “musts” for companies doing business in the EU – it impacts roughly 50,000 companies, including many non-EU-based organizations.
However, an “Omnibus” package was proposed in February in response to corporate feedback that the original requirements were too burdensome. Most notably, it raises the reporting threshold to companies with over 1,000 employees, excluding approximately 80% of previously covered organizations. The package also includes a two-year postponement for companies that were due to report in 2026 and 2027.
On April 3, 2025, the European Parliament approved the package.
Exec Takeaway: While deadlines have been extended, companies conducting business in the EU should still ready their data and continue preparing for compliance. The core requirements of CSRD remain intact.
What to Do?
The current global sustainability reporting landscape can feel more like a car starting-stopping-and stopping again – throwing your neck around with whiplash – than a foundational framework. Despite the evolving complexity, an overall trend towards greater transparency and standardization in climate-related disclosures remains.
For business leaders, the key to weathering that complexity is to stay informed, be flexible and continue building strong sustainability reporting capabilities. Those who remain malleable and view these developments as an opportunity – rather than a burden – will be better positioned to continue navigating the shifting landscape and meet the growing expectations of consumers, investors and other key stakeholders.