Companies are facing growing risks from climate change, including worsening natural disasters, changing consumer preferences, and an evolving regulatory landscape. These climate-related risks can create financial risks for companies. At the same time, many companies have set greenhouse gas reduction targets, including net-zero goals, but it is often difficult to obtain information about progress companies are making toward those goals. Globally and domestically, regulators are taking steps to require companies to disclose the climate-related risks they face and to provide more information about target setting and planning within the company.
While there is a shift toward mandatory climate-risk and greenhouse gas (GHG) emissions reporting in many jurisdictions, the net-zero regulatory space is highly dynamic. In this paper, we provide an overview of mandatory reporting schemes relevant to many US companies (including those that may operate internationally): the US Securities and Exchange Commission’s (SEC) climate-related risk disclosure rule, California’s climate disclosure laws, and the European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD).
The SEC finalized its climate-related risk disclosure rule in 2024. However, compliance with the rule is on hold as it is litigated in the Eighth Circuit. California passed new laws in late 2023 that require companies doing business in the state to disclose information about their greenhouse gas emissions, climate risks, and use of carbon offsets. This paper summarizes each of these three rules and the status of the litigation.