Gravel2Gavel Construction & Real Estate Law blog — May 12, 2025
As SEC withdraws from defending the March 2024 Climate Disclosure Rule (SEC), companies face increasing uncertainty in navigating a fragmented and uncertain environment of state and international mandates, with no uniform standards in view. This development is indicative of a wider shift under the Trump Administration, which has prioritized regulatory deregulation, withdrew support for federal mandates and indicated opposition to 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. Liberty Energy, the fracking services firm formerly headed by Chris Wright, the current Energy Secretary, was among the first to challenge the Rule. They argued that it exceeded the SEC’s statutory power, compelled speech, and imposed significant compliance obligations on U.S. companies. Liberty Energy v. SEC No. 24-60109 (5th Cir. The Fifth Circuit granted a stay of emergency just nine days after Liberty Energy filed its petition, even before the Rule had been published. On April 4, 2024 the SEC administratively suspended the Rule until the legal challenges were resolved in the Eighth Circuit, under the State of Iowa et al. v. SEC, No. 24-01522 (8th Cir. After the change in Administration the SEC announced that it would not defend the Rule on March 27, 2025. Caroline Crenshaw (the Commission’s lone Democrat) opposed the decision, which was approved by a 2-1 margin. She called it an “unlawful deconstruction” that could lead to regulatory chaos and reduce transparency regarding 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. California enacted two comprehensive climate disclosure laws in 2023 that will reach far beyond the borders of California. Rev. & Tax. Code SS 23101 (a).
SB253 applies to entities that have annual revenues over $1 billion and requires annual reporting for Scope 1, 2, and–starting 2027-Scope 3 emission, with third party assurance mandated. SB 261, which is applicable to companies with annual revenues over $500 million (excluding insurers), mandates biennial reporting of material climate-related risks and mitigation measures. Both laws require initial reporting in 2026. Similar climate disclosure laws 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. The EU’s Corporate Sustainability Reporting Directive, adopted in 2022, as well as the Corporate Sustainability Due Diligence Directive, adopted in 2024 establishes broad reporting and due-diligence obligations for large companies in the EU. This includes non-EU entities. The CS3D imposes environmental and human rights due diligence obligations throughout a company’s operations and subsidiaries, as well as across value chains. It targets issues such a harmful air and water emission, damage to ecosystems and biodiversity loss. 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 stated its intention to oppose any climate disclosure initiative. The Executive Order, Protecting American Energy from State Overreach was issued by President Trump on April 8, 2025. It directed federal agencies to review climate and energy policies that were deemed to “burden’ domestic energy production. The Prevent Regulatory overreach from Turning Essential Companies Into Targets (PROTECT USA Act of 2025) (S. 985), now under consideration by Congress, would prevent companies in “essential industries” from complying with foreign ESG and climate disclosure mandates such as those imposed in 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.
