On April 4, the Securities and Exchange Commission (SEC) chose to delay the implementation of its climate-related disclosure requirements applicable to operating companies until they can be reviewed by the Eighth Circuit U.S. Court of Appeals.
The climate rules have become a contentious issue, sparking legal disputes from both business and conservative factions, arguing that the SEC is abusing its power with the climate disclosure rules. On the other side of the coin, environmental organizations have filed their own lawsuits, contending that the regulations aren’t strict enough.
The SEC has stated its commitment to vigorously defending the legitimacy of its climate rule, asserting that it acted within its jurisdiction to mandate disclosures crucial for investors. According to the SEC, granting a stay enables the court of appeals to concentrate on assessing the merit of the case.
So, what does the stay mean for public US companies?
Companies should not see the stay as a chance to ease up on reporting preparation. Most SEC registrants are still bound by climate disclosure requirements under the Corporate Sustainability Reporting Directive (CSRD) and California climate legislation, both slated to take effect in 2025 for many.
In fact, CSRD goes beyond the SEC climate rule, necessitating assurance over all disclosures from the first year of reporting, rather than just greenhouse gas emissions. Should the SEC climate rule be delayed, many registrants will likely need to provide CSRD or California disclosures anyway before providing similar disclosures in their SEC filings.
To be clear, the stay neither reverses nor alters any of the stipulations in the climate rule, nor does it affect in any manner the SEC’s current 2010 interpretive release concerning climate-change disclosures.
In summary, businesses should persist in their preparations to comply with the requirements despite ongoing legal disputes. For assistance in getting ready for the Final Rules, CSRD, and any other ESG-related initiatives, ESG Playbook stands out as the leading reporting software to provide guidance and support.