State Governments Take the Lead on Climate Disclosure: SEC Pulls Back on Regulations

State lawmakers are stepping up to require big businesses to report their carbon emissions. This push comes as the federal government, under the Trump administration, pulls back on climate regulations. Laws are being proposed in New York, Colorado, New Jersey, and Illinois that would mandate companies making over $1 billion annually to share their greenhouse gas emissions every year. Failure to comply could lead to legal consequences from state attorneys general.

These proposed laws aim to provide transparency, allowing investors and consumers to make informed decisions based on a company’s environmental impact. The New Jersey bill states that residents have the right to know about the risks their state faces due to emissions.

The legislation is broad, affecting various sectors like technology and manufacturing. Large companies, including those like Amazon, which reported $638 billion in sales last year, may be required to comply, even though many already do report their emissions.

Companies would need to reveal both direct emissions, like those from the burning of fossil fuels, and indirect emissions, which come from sources like employee commuting and energy usage. California has set similar requirements, but its first phase won’t take effect until 2026.

These state-level laws reflect a growing movement in the United States for better climate disclosure. They also come as the SEC’s climate-related regulations, introduced under the Trump administration, face legal uncertainties. While these rules aimed to hold public companies accountable for environmental risks, their legality has been questioned.

These proposed rules would apply to all businesses meeting the revenue threshold, regardless of where they are based. This could create a confusing situation for companies, as varying state rules may lead to higher compliance costs and complexities in reporting.

If multiple states go ahead with these regulations, it may create a patchwork of requirements, forcing businesses to navigate different rules in different places. States will need to clarify terms like “doing business” to ensure all relevant companies are covered.

One major concern is Scope 3 emissions, which include greenhouse gases from suppliers and other indirect sources. Companies could end up requiring their smaller contractors to report emissions, further expanding the data reporting chain.

Legal challenges are expected if more states adopt these disclosure laws. California is already facing lawsuits from business groups who argue that the regulations violate their rights and overstep federal authority. The outcome of these lawsuits could shape the future of state-level climate regulations.

Overall, as states push for better transparency around corporate emissions, the discussion of climate change is becoming even more critical, affecting both companies and consumers alike.