Twists and Turns in the ESG Saga

If you’ve been riding the rollercoaster of Environmental, Social, and Governance (ESG) regulations lately, you’ve probably suffered general neck pain. It’s been a dizzying series of rule proposals by the Securities and Exchange Commission (SEC), 24,000 public comments, repeated delays, threatened lawsuits, a final rule, and for-real lawsuits. Based on the latest developments in Spring 2024, we offer takeaways for CFOs and their teams.

Get into Gear

Need a primer on this ruling? The SEC’s fact sheet outlines filing categories and reporting timelines for the estimated 2,800 public companies affected. Still, no sooner had the pared-back rule been adopted in March (“Scope 3” got canned), than challengers stepped up. Ten states, the U.S. Chamber of Commerce, the Sierra Club, and oilfield service companies filed suits contending that the rule went too far…or not far enough. Facing pushback anew, the SEC issued a stay with vows to “vigorously defend” the rule in court.

While these players duke it out, CFOs would be wise to get ready. If you’re not already affected by other ESG regs governing public and private companies (see EU, ISSB, California’s SB-253 and SB-261, COP28), we recommend that you:

• Remain vigilant. Legal action and political challenges won’t nix all ESG obligations.
• Learn your compliance requirements. You may have several jurisdictions in which to report. Understand if, and where, overlaps occur. Other states have ESG regs in the works, too: IL, CO, VT, ME, and NY.
• Assess your internal controls, data sources, tools and technologies, available expertise, internal audit, and disclosure controls and procedures (DCPs).
• Convene a cross-functional sustainability reporting team (legal, auditors, compliance, etc.) to start, or refine, your disclosure plan.

It’s a lot to think about but hey, at least it’s not a snooze fest.

“Pleasing stakeholders and serving the common interest, including the planet’s, is how to create value today.”
– Andrew Winston, Net Positive: How Courageous Companies Thrive by Giving More Than They Take