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US Climate Policy in 2024: What to Expect and How Companies Can Prepare


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Climate change continues to be a growing concern – one that affects every region of the world, particularly those living in more vulnerable areas. Climate change hazards such as flooding, wildfires, tropical storms, failed crops and severe droughts are putting hundreds of millions of lives at risk. 

We cannot afford to remain stagnant. 

Fortunately, there is a global movement towards a sustainable future with ESG climate policy initiatives, which will have a significant impact on global industry. 

With the US rejoining the United Nations Paris Agreement, and committing efforts towards a Net-Zero goal, US climate policy will continue to expand and evolve in 2024. Additionally, climate-risk disclosure rules are becoming more mainstream and substantive, and this will continue. 

As we near the second quarter of 2024 however, there are many questions and concerns that companies have regarding the future of US climate policy.

In this article, we will unpack the most recent and relevant additions and amendments to climate policies, including the more prominent ones such as ISSB, the Clean Competition Act, and California Regulations SB 253 and SB 261. We will also talk about how these policies will impact US manufacturing and the future of US sustainability.

Let’s dig in.

What Is the Securities & Exchange Commission (SEC) and Why Are They Mandating Disclosure?

The Securities & Exchange Commission (SEC) is an independent agency in the US federal government that was created for the purpose of enforcing law against market manipulation. The SEC has been active since the Wall Street Crash of 1929, and in recent years, has overseen policy and legislation related to climate-risk activities in the marketplace, including manufacturing and industry.

The purpose of the SEC climate disclosure rules is to standardize ESG reporting. Because there are so many different ESG frameworks that businesses need to navigate, the SEC seeks to unify and standardize these requirements.

Because the SEC is a U.S. entity, it may or may not recognize international policy standards regarding ESG and climate-risk activities. That has recently been the case in the wake of the March 6, 2024 finalization of The Enhancement and Standardization of Climate-Related Disclosures for Investors

While initial SEC drafts suggested an alignment with the International Sustainability Standards Board (ISSB), this has not been the case as the SEC has explicitly stated that:

“While we acknowledge that there are similarities between the ISSB’s climate-related disclosure standards and the final [SEC] rules… those jurisdictions have not yet integrated with the ISSB standards into their climate-related disclosure rules. Accordingly, at this time we decline to recognize the use of the ISSB standards as an alternative reporting regime.”

To familiarize yourself with the ISSB regulations, head over here.

What Is The Enhancement and Standardization of Climate-Related Disclosures for Investors?

Initially proposed in March 2022, the primary purpose of the ruling is to formalize and harmonize climate disclosures for businesses, their stakeholders, investors, and customers.

The disclosure requirements will apply to all publicly traded companies operating in the US. This includes oil and gas, technology, and retail, and encompasses approximately 2,800 U.S. domestic businesses and around 540 foreign businesses with operations in the U.S.

The final rules will apply to all publicly-traded U.S. companies. Compliance dates with be dependent on the status of the businesses as either:

  • Large accelerated filer (LAF)
  • Accelerated filer (AF)
  • Non-accelerated filer (NAF)
  • Smaller reporting company (SRC)
  • Emerging growth company (EGC)

How Will the SEC Ruling Affect US Companies?

Ultimately, the SEC ruling will help companies standardize their ESG reporting, across the board, and help create transparency in climate-risk activities. 

In general, the new rules will require businesses to disclose:

  • Potential and actual impacts of all climate-related risks on business operations, including financial impacts over the short-, medium-, and long-term (including climate-related events)
  • Rules and responsibilities of corporate governance as it relates to the identification and management of climate-related risks within the organization
  • How climate-related risks will impact business operations, theoretically, actually, and historically
  • The outlines process of identifying, assessing, and managing climate-related risks
  • Scopes 1 and/or scope 2 GHG emission metrics
  • All climate-related targets, transition plans, or goals

During the drafting of the SEC’s many iterations of this regulation, the final ruling has removed the Scope 3 emissions requirement that was initially proposed. 

The first wave of disclosure reporting will be required by the financial year beginning 2025.

For everything you need to know about the SEC’s new disclosure rulings, read the comprehensive guide here

What Is the Clean Competition Act?

As we talked about in detail here, as part of the expanding US climate change policies, the Clean Competition Act is an amendment to the Internal Revenue Code of 1986. It now includes a carbon border adjustment on all energy intensive products. 

The Act will require companies to submit reports, starting no later than June 30, 2026, that itemize greenhouse gas emissions produced as a result of industry activity. These reports will be based on products imported or exported into and out of the US, and will include:

  • All information eligible under the Greenhouse Gas Reporting Program
  • A breakdown of what electricity was used through an electric grid or a dedicated generation source
  • Any greenhouse gas emissions associated with the production of electricity must be reported for any electricity not provided through the electric grid 
  • The total weight (in tons) of each eligible primary good produced at that facility for each facility 

Carbon border adjustments will be imposed on all energy intensive imports to incentivize the decarbonization of domestic manufacturing. These adjustments will apply to:

  • Fossil fuels and hydrogen
  • Refined petroleum products 
  • Petrochemicals, fertilizers, and adipic acid
  • Cement, iron, steel and aluminum
  • Glass, pulp and paper, and ethanol

A portion of the fees collected from the border adjustments on these products will be allocated to research and development of clean energy technologies, working towards a Net Zero effort.

How Does the Clean Competition Act Affect US Manufacturing Companies?

The Clean Competition Act is not the only piece of legislation that will affect US manufacturing companies. For some time now, ESG disclosure requirements and regulations – particularly in the manufacturing sectors – have become more commonplace, not just in the US but abroad as well. 

The US has historically been lagging behind in the initiation and enforcement of climate related disclosures and reporting policies. However, companies are now being required to pivot and inculcate ESG data collection and reporting systems similar to financial data collection and reporting. 

In fact, ESG reporting is now being required by not just legislation and policy, but by investors, stakeholders, and customers who are demanding transparency and accountability. The Clean Competition Act is just one example of legislation that reflects all of this.

Many manufacturing companies will be impacted by the Clean Competition Act, although the Act only applies to larger, multi-armed companies, not smaller or family-owned businesses.  

While many large manufacturing companies already have ESG data collection and reporting systems, keeping on top of the latest regulations and requirements might make it necessary to create an in-house ESG rules and regulations committee in order to ensure that all regulations are met. To learn more about this, read our recent blog post on the Clean Competition Act.

What Are California Regulations SB 253 and SB 261?

California Regulations SB 253 and SB 261 are two separate pieces of legislation that have been formally ratified following the SEC’s ruling on The Enhancement and Standardization of Climate-Related Disclosures for Investors in October 2023. 

Together, SB 253 and SB 261 apply to California-based companies or companies that conduct business inside the State of California. These bills are also known as the Climate Data Accountability Act (the CCDAA) and the Climate-Related Financial Risk Act (the CRFRA), respectively.

The CCDAA and CRFRA require California businesses to disclose their scopes 1, 2, and 3 greenhouse gas emissions along with other climate-related financial risk details. 

While intended to work together, SB 253 and SB 261 are two separate entities and as such, we will talk about each individually below. 

What Is the Climate Data Accountability Act (CCDAA; SB 253)?

The CCDAA is an act that beginning in 2026, will require companies with revenue over $1B to provide “limited assurance” on scope 1 and 2 greenhouse gas emissions. These requirements will increase in 2030 to “reasonable assurance.”

Companies will be required to provide limited assurance disclosure for scope 3 emissions beginning in 2030, and in 2027, will be subject to review by the California Air Resources Board (CARB).

Any businesses found in violation of the act can be fined by the State up to a maximum of $500,000. The one exception applies to scope 3 emissions, which amendments have been made to scale back on company liability and penalty for errors made under scope 3 reporting, within reason. 

What Is the Climate-Related Financial Risk Act (CRFRA; SB 261)?

The Climate-Related Financial Risk Act (CRFRA or SB 261) requires companies entities doing business within the State of California, with revenue over $500M, to prepare and submit climate-related financial risk reports. Reports should be consistent with the recommendations made under the Task Force on Climate-Related Financial Disclosure (TCFD) framework. The first reports will be required by January 1, 2026.  

In addition and in light of the ongoing transparency that US climate change policy is attempting to achieve, applicable companies are required to make these disclosure reports available publicly on their websites.

How Do the CCDAA (SB 253) and the CRFRA (SB 261) Affect US Industry?

For the most part, many large companies who fall under the requirements of the CCDAA and the CRFRA have already begun the process of collection and reporting of climate change data and climate-related financial data. As ESG regulations continue to evolve in 2024, however, companies will need to become more efficient in data collection. 

If companies have not already done so, establishing internal protocols in the form of a charter or governance team is strongly advised. Additionally, using some form of ESG data collection and reporting software can significantly streamline workflows, reduce redundancies and inefficiencies, increase accuracy, and save time and money overall. 

As the world continues to shift towards a Net Zero goal, countries that have inculcated strong climate policies in domestic manufacturing and climate-risk industries will become strong contenders for positive trade, negotiations, and expansion in the global economy. Naturally, this can trickle down into healthier and more competitive domestic markets. 

The continued expansion of US climate change policies can help numerous US industry sectors position themselves in both the global and domestic markets. 

The Future of US Climate Policy

Thus far, the future of US climate policy is anchored in transparency and disclosure. As investors, shareholders, and customers become more climate aware, and as global markets are moving towards a Net Zero goal, US climate policy is also responding. 

The current US Administration has rejoined the Paris Agreement, which helps position the US as a global leader, and has established the National Climate Task Force (NCTA) – composed of leaders from across agencies. The goals of the NCTA is as follows:

  • The reduction of greenhouse gas emissions to 50-52% below 2005 levels by 2030
  • Achieving 100% carbon pollution-free electricity generation by 2035
  • Net-zero emissions economy by 2050
  • Investing 40% of the benefits from federal investments in climate and clean energy into disadvantaged communities

The US is also focused on expanding the availability of clean energy jobs, along with partnership with Indigenous communities and leaders, working towards a sustainable future. 

While these goals appear hopeful, the future of US climate policy rests mostly in the hands of elected leaders, and commitment to strong core beliefs in reducing climate-risk activities needs to be bipartisan and consistent. 

How Can Companies Prepare For the Future of US Climate Policy?

While many US companies have already begun collecting ESG data and making reports available, preparing for the continual evolution of US climate policy requires a systematic approach that is universal. 

To respond to new US climate policies, companies need to identify where their ESG data lives – both qualitatively and quantitatively. From this, workflow systems can be set up to identify, collect, and report all ESG data. 

Creating a governance board, along with an ESG data collection and reporting charter can be extremely helpful, particularly for multi-armed companies, with facilities across the country (and even globally). This charter should outline all current ESG rules and regulations, all personnel involved in the collection and distribution of data, safeguards against errors and protocols in the event of discrepancies. 

Additionally, continual education on ESG data collection, current rules and regulations, and the importance of remaining vigilant about ESG data will help bolster company-wide buy-in. 

Take Action Today

As we move forward into 2024 with ongoing and evolving ESG rules and regulations, companies need to keep up with what is required of them in their ESG reporting and disclosures. 

If your company is already reporting under multiple different regulations, redundancies and errors can occur. Software like FigBytes can be that key tool that optimizes your ESG data collection and reporting workflows. 

If your company is likely to fall under any of the current or new reporting requirements, it’s time to take action. Speak to a FigBytes expert for all your ESG data collection, management, and reporting needs.

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