Sustainability updates amidst federal uncertainty

Despite the prevailing uncertainty at the federal level, sustainability and environmental reporting requirements are expected to maintain forward momentum as individual states and international agencies continue to address climate and environmental concerns.. Various developments at different levels of government and within the business sector show a continued trend toward environmental, social, and governance (ESG) initiatives. Our advisors at Abdo are here with a comprehensive overview of the current landscape to keep your organization in the know.

Federal Actions Affecting Climate

Recent actions at the federal level indicate some setbacks for climate initiatives. Significant budget cuts and workforce reductions are anticipated for the Environmental Protection Agency (EPA), similar to the cuts being seen to other federal agencies in recent weeks.

Future government contractor requirements are expected to drop climate reporting obligations that had begun to appear in some contracts, and the Securities and Exchange Commission (SEC) has discontinued its plans to introduce climate reporting regulations for public companies.

The United States has also exited the Paris Climate Agreement, reflecting a step back from international climate commitments.

State-Level Initiatives and International Impact

While federal actions may be backtracking on climate initiatives, state-level regulations and international groups are continuing to require sustainability and environmental reporting.

• California’s Climate Rule: California’s stringent climate rule will directly impact 10,000 US companies and many more organizations indirectly. Five other states have implemented similar mandates, making climate reporting across Scopes 1, 2, and 3 inevitable. Organizations with sales over $1 billion in affected states must report verified greenhouse gas (GHG) emissions, while organizations in California and New York with over $500 million in sales must also disclose climate-related risks.
• EU’s CSRD Rules: The European Union’s Corporate Sustainability Reporting Directive (CSRD) rules are already affecting many US organizations and will impact thousands more, particularly due to the inclusion of Scope 3 requirements in the current omnibus amendment.
• Global Adoption of ISSB-Aligned Reporting: Thirty other countries, including the UK, Japan, Canada, Singapore, and South Korea, are adopting International Sustainability Standards Board (ISSB)-aligned reporting regulations. This means GHG emission reporting, including Scope 3, will be required for many multinational corporations operating in these regions.

On-the-Ground Developments

Corporate actions and market pressures are also significantly influencing the ESG landscape. Major corporations are increasingly requiring robust sustainability data from their customers, driving a steady rise in reporting through frameworks such as CDP and EcoVadis. Last year saw a record number of companies conducting these reports.

There has also been a record surge in companies setting climate reduction targets. By 2025, the Science Based Targets initiative (SBTi) reached a major milestone, with over 10,000 companies now committed to science-based climate goals. Recent surveys also confirm that 92% of CFOs plan to increase sustainability spending in 2025, underscoring the value seen in climate investment.

As the costs of climate inaction become undeniable, companies are doubling down on climate programs, ambitions, and targets to build resilience.

Business Reactions and Market Pressure

In the US, commercial market pressure continues to be a significant driver for climate measurement, reporting, and improvement. Large organizations recognize the commercial value of robust sustainability programs, often in response to consumer and investor expectations. These organizations remain committed to their climate efforts, albeit less vocally.

The future of climate disclosures

Climate disclosures in the US are no longer a question of “if” but “when.” With six states already advancing climate reporting laws, US companies will soon have no choice but to disclose emissions and climate risks. The regulatory landscape is changing rapidly, and inaction is not an option. Here are some key states driving this change:

• California (Passed): Companies with $1 billion+ in revenue must report assured Scope 1, 2, and 3 emissions, while those with $500 million+ must disclose climate risks starting in 2026.
• New York (Pending): Expected to require companies with $1 billion+ in revenue to report all scopes and mandate climate risk reporting for companies with $500 million+ in revenue beginning in 2027.
• Illinois (Pending): Will require Scope 1, 2, and 3 reporting by 2027 for companies with $1 billion+ in revenue.
• Washington (Pending): A proposal from 2023 that mandates Scope 1, 2, and 3 reporting for companies with $1 billion+ in revenue by 2027.
• New Jersey (Pending): Introduced in 2025, with phased-in requirements for companies with $1 billion+ in revenue starting four years post-passage.
• Colorado (Pending): Proposed in 2025, requiring Scope 1, 2, and 3 reporting for companies with $1 billion+ in revenue, phased in from 2027 to 2031.

A path forward amidst uncertainty

Even amidst federal uncertainties, the drive for climate and sustainability initiatives is gaining momentum through state-level regulations, international commitments, and corporate actions. Companies are increasingly recognizing the commercial value and necessity of robust ESG programs. As climate disclosures become inevitable, businesses must prepare to adapt to the rapidly evolving regulatory landscape.

Proactive measures are essential for building resilience and ensuring long-term success. Abdo’s sustainability advisors can help guide you on the path forward – developing a plan for climate disclosure reporting and projection. Reach out to our team today to get the conversation started.