Following the issuance of the Securities and Exchange Commission’s (SEC) Climate Disclosure Rule in March, the rule was halted due to lawsuits attempting to block it being consolidated and adjudicated. Those opposing the rule argue that the SEC lacks the authority to mandate such disclosures, but the Commission’s history shows a trend of expanding investor protection, such as with conflict of interest disclosures and regulation of insider trading.
In today’s global economy, the SEC is not the sole regulator of American-based corporations. To operate in Europe, American companies must comply with upcoming rules set forth by the European Union and other international bodies and states are also implementing requirements for companies to disclose environmental risks. By halting the SEC rules, conservative forces risk sidelining the U.S. in shaping these disclosures.
Professionals worldwide are already working on regulating and ensuring the quality of sustainability reports, which involves defining terms, measures, and best practices. American companies could potentially miss out on opportunities for reciprocity with non-U.S. regulators if they do not comply with SEC rules. Despite attempts to impede U.S. regulation, many corporations are investing resources in measuring and reporting their climate risks, acknowledging the importance of addressing these risks.
Companies are facing increasing pressure to measure and report environmental risks, with stakeholders and investors prioritizing climate risk disclosure. Opposition to mandatory reporting often stems from a lack of understanding of the business benefits of reducing and reporting on environmental risks. Failure to recognize these risks could leave American companies vulnerable to changing regulatory landscapes and investor preferences.
Efforts by some American businesses and conservative groups to resist climate regulations, promote fossil fuels, or engage in corrupt practices such as Donald Trump’s offer to the oil industry pose risks to U.S. businesses. The potential delay or halt of SEC climate reporting requirements could hinder American businesses’ competitiveness in a global economy increasingly focused on sustainability and environmental responsibility.
Overall, the demand for climate risk disclosure is growing, and companies will need to adapt to navigate the complex and interconnected global landscape. Failure to regulate sustainability reporting could impede the U.S.’ ability to compete economically and safeguard the well-being of its citizens. It is crucial for businesses and policymakers to understand and address climate risks to ensure long-term success and sustainability.
