• Companies are grappling with conflicting environmental, social, and governance (ESG) regulations as the U.S., EU, and California implement differing climate disclosure mandates, according to a new report by Thompson Hine.

Biggest Short-Term ESG Challenge: Conflicting Requirements

• A lack of clarity due to conflicting ESG requirements has emerged as the most significant short-term challenge for public companies, with 41% of respondents in a recent survey identifying this issue.
• The survey results were released by Thompson Hine on Tuesday.

Survey Details

• Thompson Hine LLP collected responses in May from 152 U.S. in-house lawyers and executives at public and private companies in various industries, including manufacturing and financial services.
• Over a third of the respondents were from public companies.

Context: Recent Regulatory Changes

• The survey was conducted following recent mandates by the U.S. Securities and Exchange Commission (SEC) and California for greenhouse gas emissions reporting.
• The EU has also introduced its climate disclosure standards, set to begin this year and extend to large multinational companies by 2028.

Varying Reporting Requirements

• The reporting requirements vary significantly, with the SEC mandating more limited emissions disclosures compared to California and the EU.
• These rules are at different stages of implementation, with the SEC's requirements currently paused due to litigation.

Legal Guidance Sought

• Thompson Hine partner Heidi Friedman noted that clients are seeking assistance in navigating these complex requirements.

Different Interests and Compliance Deadlines

• California's regulations, enacted in late 2023, require companies to disclose emissions from their supply chains and other indirect sources.
• The SEC's March rules did not include such supply chain reporting, known as Scope 3, which is mandated by the EU's Corporate Sustainability Reporting Directive for businesses in Europe.
• The SEC paused its rules in April amid several lawsuits, and California Governor Gavin Newsom is advocating for a delay in reporting from 2026 to 2028.

Public Companies' Readiness

• The SEC's regulations have captured the attention of public companies, with 85% preparing to comply despite legal challenges, according to the survey.
• In comparison, 63% are preparing for the EU's Corporate Sustainability Reporting Directive, and only 35% are gearing up for California's requirements.

Supplier Data and Private Companies

• Nearly half of the public companies surveyed are collecting emissions data from their suppliers to meet potential Scope 3 requirements.
• However, private companies show less interest in preparing for these regulations.
• Only 13% are preparing for the EU or California climate disclosure requirements, and just 9% are readying for the SEC's regulations.

Implications for Private Companies

• There is an importance of preparation for private companies as it's going to catch up to the private companies in one way or another.