Understand U.S. Policies and Regulations

The past 10 years have seen many shifts when it comes to the United States’ engagement in climate diplomacy. Most recently, following his inauguration in January 2025, President Trump signed an executive order directing the United States to withdraw once again from the Paris Agreement, a global treaty between 195 countries to address climate change. Once the withdrawal takes effect one year from signing, the United States will be one of only four countries not engaged in the Paris Agreement.

Under this accord, the U.S. had a goal of achieving a net-zero economy-wide emissions target by 2050. Many U.S. companies aligned with the U.S. target and often went beyond it with even more ambitious 2030 and 2050 climate goals.

Now that the U.S. government has abandoned this commitment, that does not mean that ambition does not remain throughout the country. At the State level in particular, there has been a lot of action and advocacy for climate regulation. In particular, California continues to be a leader – and has recently introduced three State-level laws that are important to know for corporate climate reporting. More information about these laws and what it means for disclosure is detailed below.

State-Level Regulation in California

While there is currently no mandatory climate reporting at the federal level, there are State-level laws that impact many American companies. In October 2023, California introduced three new State-level climate regulations mandating large companies doing business in the State of California to disclose greenhouse gas emissions and climate-related financial risks.

Law AB-1305 is already in effect as of 2024 and requires any company operating in California that makes emissions reduction or other climate-related claims to substantiate those claims. It also specifically requires entities that market, sell, or purchase and make claims based on carbon offsets to publicly disclose relevant information about those offsets.

Law SB-261 focuses on climate risk and applies to companies with annual revenues of at least $500 million a year. The first report for SB-261 is due in January 2026.

Law SB-253 focuses on GHG emissions and applies to companies with annual revenues of at least one billion dollars a year. Disclosure includes:

1. A company’s direct emissions;
2. A company’s indirect emissions through suppliers and customers.

The California Air Resources Board (CARB) is working through public comments from companies to inform their rulemaking with the hope of having a regulation “by the end of the year.” 

Reporting for Scopes 1 and 2 is due in 2026, followed by Scope 3 in 2027.

Other states, including Washington, Illinois and New York are working to pass legislation that is similar to the laws in California.

• Washington SB 6092 would require companies with over $1 billion in revenue to report emissions.
• Illinois HB 4286 would require companies doing business in Illinois with over $1 billion in revenue to report Scope 1, 2, and 3 emissions.
• New York’s SB S897C and SB 5437: annual climate risk reporting.

Here are some key questions to guide your company as you prepare to meet requirements:

1. What do these requirements entail for my company’s operations?
2. How do these differ from other regulations?
3. Which departments need to be involved?
4. Has my company made any claim related to climate action or emissions reduction? If yes, on what basis?

Mandatory Disclosure Impacting American Companies, Outside of the U.S.

Even if the U.S. does not have mandatory reporting, many other countries have implemented their own climate regulations, which may impact U.S. companies that operate in those regions. For example, neighboring Canada has implemented a national carbon pricing scheme, and several provinces and territories have their own regulations as well. In Europe, the Green New Deal includes many regulations that impact American businesses, such as CSRD and the CSDDD. Learn more about policies in the Understand EU Policy and Regulation and Understand UK Policy and Regulation action steps.

It is expected that this will increase in the coming years, with many other jurisdictions in key markets around the world also planning to unveil mandatory climate disclosure.