Understand U.S. Policies and Regulations

The past 10 years have seen many shifts where 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 are detailed below.

One other rule in the U.S. that you have likely heard about is the SEC’s proposed rule on Climate Risk Disclosure. Though the rule was released last year and reporting was intended to begin fiscal year 2025 – the rule has since been paused. Find more information about the SEC’s proposed rule below.

SEC Rule on Climate Risk Disclosure

In March 2024, the SEC released a new rule to help investors obtain comparable and specific climate risk information to increase their capacity to manage portfolio-wide climate risks, make decisions and protect the overall health of the financial system. Shortly thereafter though, the rule was paused after a series of lawsuits attempting to stop the rule.

The SEC rule was an important step in requiring publicly traded companies in the U.S. to disclose certain types of climate-related information which would not only increase overall transparency but also strengthen investors’ capacity to manage portfolio-wide climate risks, protecting the overall health of the financial system.

It is unclear what is next – but given the impact this would have on business in the U.S., we recommend keeping an eye out for updates from the SEC.

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.

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?

Federal Acquisition Regulation Amendment for Federal Contractors 

If you are a company receiving funds from the federal government, then You may also be impacted by the Federal Acquisition Regulation for Federal Contractors (FAR).

In November 2022, the Biden Administration proposed to amend the Federal Acquisition Regulation (FAR) to require Federal contractors to disclose their emissions and climate risk, as well as set science-based targets to reduce emissions. In April 2024, the final rule with this amendment was published. Under FAR, there are important reporting requirements for procurement professionals and vendors:

• Companies that get more than $50 million in annual contracts from the federal government are required to disclose scope 1, 2 and 3 emissions and climate risks as well as set science-based targets to reduce emissions.
• Midsize contractors receiving between $7.5 million but less than $50 million are required to disclose scope 1 and 2 emissions without mandatory target setting.
• Small businesses with over $7.5 million in annual contracts are required to disclose scope 1 and 2 emissions.
• Federal contracts below $7.5 million are exempt.

The new rule does not give a specific threshold that companies must achieve for reducing emissions but rather says that the goals must be in line with the goals of the Paris Agreement. It is important to keep an eye out for changes under the new administration.

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.