Understand U.S. Policies and Regulations
Environmental Defense Fund
Navigating climate regulation can be a complex process for companies, with several rules impacting companies in the U.S. at both the national and international levels. Companies should research and understand which existing regulations impact their business, as well as important upcoming changes to climate disclosure frameworks, so that they can be prepared to report important climate data while meeting net zero targets.
At both the global and national level, there are several U.S. climate policies that impact companies based in the U.S. At the international level, the United States, under the Biden Administration, has rejoined the Paris Agreement, which aims to limit global warming to well below 2°C above pre-industrial levels. Under this accord, the U.S. has a new goal of achieving a net-zero economy-wide emissions target by 2050. Many other countries have implemented their own climate regulations, which may impact U.S. companies that operate in those regions. For example, Canada has implemented a national carbon pricing scheme, and several provinces and territories have their own regulations as well. Learn more about international policies impacting businesses in the Understand EU Policy and Regulation and Understand UK Policy and Regulation action steps.
At the national level, federal laws such as the Clean Air Act regulate emissions from industrial sources and set standards for greenhouse gas pollutants. Many states have also implemented their own regulations which may apply to businesses within their borders. California, for example has implemented its own cap-and-trade program, requiring companies to obtain emissions allowances to cover their greenhouse gas emissions.
While it is important for companies to understand the existing regulatory landscape, there are important changes happening to existing rules such as the Securities and Exchange Commission’s (SEC) Proposed Rule on Climate Risk Disclosure. Head to the following section to learn about upcoming regulatory changes and explore how you can start acting now to be prepared for upcoming regulation changes.
Unpack the New SEC Proposed Rule on Climate Risk Disclosure
In 2022, the Securities and Exchange Commission’s (SEC) proposed a new rule to enhance and standardize climate-related disclosures. This rule, expected to be finalized in 2023, would 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.
The proposal calls for climate risk disclosure from publicly traded companies including emissions from their operations, environmental risks they are facing, and response measures they are taking. This is similar to what many companies already provide under existing frameworks, such as the Task Force on Climate-Related Financial Disclosures (TCFD) but would improve upon the current state of play which has been defined by inconsistent and vague reporting.
This rule would have a phase-in period to provide companies with time to adjust to new requirements and collect and verify the climate information needed.
- Large accelerated filers to begin including required disclosures in reports filed in 2024, with Scope 3 reporting in 2025.
- Accelerated and non-accelerated filers to begin including required disclosures in reports filed in 2025, with Scope 3 reporting in 2026.
- Smaller reporting companies in 2026.
Though the new rule has yet to come into force, companies should start preparing now. Here is how you can get a head start and lead in your sector by starting the process of assessing emissions throughout your supply chain. Transparency not only attracts investors, but it helps to increase competitiveness and spark innovation.
Steps to preparing for new regulation:
- Develop a climate reporting strategy
- Choose metrics
- Collect data
- Address risk
You can also indicate your company’s support for climate risk disclosure by urging the SEC to move expeditiously to finalize and implement this proposed rule.
Federal Acquisition Regulation Amendment for Federal Contractors
If you are a company receiving funds from the federal government, then a new proposed amendment from the Biden administration may further impact your climate disclosure requirements.
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. This would mean that:
- Companies that get more than $50 million in annual contracts from the federal government would be 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 would be required to disclose Scope 1 and 2 emissions without mandatory target setting.
- Small businesses with over $7.5 million in annual contracts would be required to disclose Scope 1 and 2 emissions.
- Federal contracts below $7.5 million would be 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.
This amendment has yet to come into force, but if you are a company receiving money from the federal government you can start conducting research now to help you prepare to meet future regulatory requirements.