Gravel2Gavel Construction & Real Estate Law Blog
As the Securities and Exchange Commission (SEC) steps back from defending its March 2024 Climate Disclosure Rule, companies face growing uncertainty in navigating an increasingly fragmented and uncertain landscape of state and international mandates—with no uniform standards in sight. This development signals a broader shift under the Trump administration, which has prioritized deregulation, withdrawn support for federal disclosure mandates, and signaled opposition toward state-level requirements. The resulting regulatory divide leaves companies with a patchwork of emerging rules and limited guidance on how to harmonize compliance across jurisdictions.
The SEC Retreats from Its Climate Disclosure Rule
The SEC’s Climate Disclosure Rule, adopted in March 2024, requires public companies to report Scope 1 and 2 greenhouse gas (GHG) emissions and disclose material climate-related risks. Legal challenges quickly followed. Among the first challengers was Liberty Energy, a fracking services company formerly led by current Energy Secretary Chris Wright, which argued that the Rule exceeded SEC’s statutory authority, compelled speech and imposed significant compliance burdens on U.S. businesses. Liberty Energy v. SEC, No. 24-60109 (5th Cir.).
Just nine days after Liberty Energy’s petition was filed, the Fifth Circuit granted an emergency stay—even before the Rule was published. Shortly thereafter, on April 4, 2024, the SEC administratively stayed the Rule pending the legal challenges, which were consolidated in the Eighth Circuit under State of Iowa, et al. v. SEC, No. 24-01522 (8th Cir.).
Following the change in Administration, the SEC announced on March 27, 2025, that it would no longer defend the Rule. The decision, approved by a 2–1 vote, was opposed by Commissioner Caroline Crenshaw, the Commission’s sole Democrat, who called the move an “unlawful dismantling” that could create regulatory chaos and reduce transparency around climate-related risks. Acting Chairman Mark T. Uyeda (R) and Commissioner Hester Peirce (R) voted to end legal defense of the Rule, which they had previously criticized as overly burdensome.
On April 24, 2025, the Eighth Circuit placed the case in abeyance while SEC considers whether to formally reconsider the Rule. The Rule technically remains in effect, but the SEC’s decision not to enforce or defend marks a de facto end to its implementation.
Conflicting State, International and Federal Initiatives
As federal efforts to mandate climate-related disclosures stall, California and the European Union (EU) are advancing their own regulatory regimes—creating growing complexity for companies operating across jurisdictions.
State-Level Rules
In 2023, California enacted two comprehensive climate disclosure laws designed to reach well outside the borders of California. The Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) impose greenhouse gas emissions and climate-related financial risk reporting requirements that could apply to thousands of public and private companies formed under U.S. law and “doing business in California.” While the laws do not define that term, California tax law has broadly defined it to include any entity “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.” Cal. Rev. & Tax. Code § 23101(a).
SB 253 applies to entities with over $1 billion in annual revenue and requires annual reporting of Scope 1, 2 and—starting in 2027—Scope 3 emissions, with third-party assurance mandated. SB 261, which applies to companies with over $500 million in annual revenue (excluding insurers), requires biennial reporting on material climate-related financial risks and the measures being taken to mitigate them. Initial reporting under both laws begins in 2026. Similar climate disclosure bills have been proposed in New York (S. 3456 and A. 4282) and Colorado (HB25-1119).
California’s SB 253 and SB 261 are already facing legal challenges on preemption and various constitutional grounds. As a result, it remains uncertain whether the state’s climate disclosure laws will ultimately withstand judicial scrutiny.
EU Actions
Meanwhile, the EU continues to expand its regulatory climate disclosure regime. Its Corporate Sustainability Reporting Directive (CSRD), adopted in 2022, and Corporate Sustainability Due Diligence Directive (CS3D), adopted in 2024, establish broad reporting and due diligence obligations for large companies operating in the EU, including non-EU entities.
The CSRD requires disclosure of climate-related risks and Scope 1, 2 and 3 GHG emissions, along with third-party auditor assurance. The CS3D imposes human rights and environmental due diligence obligations across a company’s operations, subsidiaries and value chains, targeting issues such as harmful air and water emissions, damage to ecosystems, and biodiversity loss.
But in February 2025, the EU proposed narrowing and delaying both directives through the Omnibus Simplification Package. While final passage is expected by the end of 2025, the proposal signifies a climate and ESG disclosure regime that has bent, but not broken, in response to business criticism.
Federal Opposition
At the same time, federal lawmakers have taken almost diametrically opposed actions on climate disclosures. The Trump administration has made clear its intent to broadly oppose all climate disclosure initiatives. On April 8, 2025, President Trump issued Executive Order 14260, Protecting American Energy From State Overreach, directing federal agencies to review and halt enforcement of climate and energy policies deemed to “burden” domestic energy production. Although the Order does not explicitly name California’s disclosure laws, it has been widely interpreted as signaling federal challenges to SB 253 and SB 261, including potential legal action by the Attorney General.
The Prevent Regulatory Overreach from Turning Essential Companies into Targets (PROTECT USA) Act of 2025 (S. 985), now under consideration in Congress, would prohibit companies in “essential” industries from complying with foreign ESG or climate disclosure mandates, such as those imposed by the EU. If enacted, the law could place multinational companies in a compliance dilemma: adhere to EU rules and risk violating U.S. law, or comply with the U.S. Act and face enforcement abroad.
Regulatory Uncertainty in a Multi-Jurisdictional Disclosure Framework
The climate disclosure policies and regulatory frameworks emerging from states, the federal government, and the EU reflect fundamentally different approaches. Federal retreat, combined with state and international advancement, leaves U.S. companies with significant uncertainty about how to comply with overlapping and potentially inconsistent disclosure obligations.
Whether companies can satisfy the requirements of one jurisdiction without violating another remains an open question. As compliance deadlines approach, businesses should monitor legal developments closely and prepare for a scenario in which global disclosure obligations diverge even further.
Pillsbury is actively tracking these developments and stands ready to assist clients in evaluating and responding to this evolving regulatory environment.