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A Sustainability Regulatory Roadmap for US Businesses

Sustainability roadmap

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New US Climate Regulations—Are You Ready?

By many accounts, 2023 is expected to be a transformative year in the evolution of climate-related disclosure and mitigation requirements in the United States. In this webinar, we cut through the jargon to provide clarity about what climate-related requirements may be coming for US companies by unpacking the two proposed federal rules that are currently pending and one EU regulation that affects some US companies.

Mapping out the significant dates that will shape sustainability regulations for US companies between now and 2028.

By Nicole Sullivan

The world of sustainability reporting is evolving rapidly. As leading sustainability frameworks consolidate and the European Union (EU) puts several of its initiatives onto fast track, United States (US) based organizations must keep a close eye on the global, federal and state-level picture. In this post, we lay out some key dates to mark in calendars through 2028, actions you can take to proactively prepare, and how CarbonBetter can help support your sustainability journey. It’s important to note that as regulations evolve and new regulations emerge, dates and applicability may change, so it’s important to keep a close watch on your organization’s potential applicability to current and emerging regulations.

Sustainability Regulations From 2021 to 2028
2021
February 2021: US rejoins the Paris Agreement

After a temporary withdrawal, the US officially rejoined the Paris Agreement, committing to reducing global temperature rise below 2 degrees Celsius. This signaled a return in focus on carbon emission reductions and reflected the Biden’s administration’s aim to combine environmental justice with climate policy.

2022
August 2022: The US Inflation Reduction Act (IRA)

The IRA allocates a significant portion of its $400 million budget to carbon emission reductions, environmental justice projects, renewable energy, electric vehicles (EVs), and technologies such as carbon capture and clean carbon. For companies and non-profits specializing in these areas, these funds can be accessed through tax incentives, grants, and loan guarantees.

November 2022: Announcement of the Proposed Federal Supplier Climate Risks and Resilience Rule

This proposed rule addresses climate-related risks within the federal supply chain, impacting businesses serving as suppliers to the US federal government. Companies involved in government contracts and procurement processes must be prepared to comply. You can read more about who is subject to the proposed rule as written and how to prepare here.

2023
January 2023: The Corporate Sustainability Reporting Directive (CSRD) comes into effect

Earlier this year, the EU’s CSRD broadened its scope to all large companies (EU and non-EU doing business in the EU) and listed small and medium-sized enterprises (SMEs). This means that around 10,000 companies, with one-third of those based in the US, will now be subject to the requirements of the CSRD. Compliance with the CSRD is crucial for companies operating within the EU or with EU ties.

March 2023: The Japan Financial Services Agency (FSA) introduced new guidelines defining the scope of Environmental, Social, and Governance (ESG) Public Funds

The finalized taxonomy includes activities linked to land use and gender equality to support a green transition. This is currently under a test phase.

March 2023: The Japan Financial Services Agency (FSA) introduced new guidelines defining the scope of Environmental, Social, and Governance (ESG) Public Funds

This was the first time Japan introduced mandatory guidelines to disclose and manage ESG public funds to avoid greenwashing.

May 2023: Brazil released initial considerations for its Sustainable Finance Taxonomy

The Laboratorio de Inovacao Financiera released an outline for an upcoming Sustainable Finance Taxonomy, covering land use, transition, and social aspects.

June–July 2023: The International Sustainability Standards Board (ISSB) published its “S1” and “S2” standards and takes over responsibilities of the Task-force on Climate-Related Financial Disclosures (TCFD)

In a dual announcement, the ISSB announced two major changes to operations. In June 2023, the ISSB made its “S1” and “S2” reporting standards publicly available, fully incorporating the TCFD’s recommendations. These standards will be key for businesses looking to align their climate disclosures with global best practices.

From July onwards, the ISSB will assume the role of monitoring and supporting companies’ progress on climate-related disclosures, marking a significant shift in the global regulatory landscape. Reporting companies will need to be prepared to follow the new ISSB standards from 2024 onwards.

July 2023: EU Passes Nature Restoration Law

As part of the European Green Deal, the EU passed a nature restoration law that will place recovery measures on 20% of the EU’s land and sea by 2030, rising to cover all degraded ecosystems by 2050. The proposed legislation also requires changes to farming methods in Europe.

September 2023: Task-force on Nature-related Financial Disclosures (TNFD) due to be formally launched

The TNFD is to be formally launched in September 2023. This shares the same four-pillar approach as the TCFD, and similar aims. Of the 3000 metrics currently in use for TNFD reporting, the TNFD’s goal is to streamline reporting, drive transparency, and enable global comparability.

Late 2023: Final Rule Issuance Anticipated for the U.S. Securities Exchange Commission (SEC) Proposed Climate Disclosure Rule

The SEC’s much-anticipated proposal will likely mandate American public companies and certain foreign private issuers to disclose climate-related information and metrics in their annual reports and registration metrics. Following a comment period since its release in March 2022, the Final Rule is expected to be published in the Fall of 2023 and make disclosures of Scope 3 emissions, climate-related risks, and human capital management mandatory.

Fierce Whiskers Case Study Cover
FW Sustainability Report

Learn more about how Fierce Whiskers has made sustainable choices every step of the way by downloading its full sustainability report.

2024
January 2024: ISSB Standards Effective for Annual Reporting Requirements

From January 1, 2024, the ISSB will enforce the application of International Financial Reporting Standards (IFRS) S1 and IFRS S2 for annual reporting periods. These standards closely align with the TCFD framework, signaling a globally standardized approach to climate-related disclosures. However, it’s important to note here that some obstacles to universal adoption remain. In the EU, the draft European Sustainability Reporting Standards (ESRS) also requires entities to report their impacts (double materiality) in contrast to the ISSB’s focus on enterprise value.

2024: Start of CSRD Disclosures

In 2024, the current CSRD proposal requires companies to make disclosures for their fiscal year of 2023 (assuming a fiscal year-end of December 31). Companies falling under this criteria must prepare to comply with the CSRD, which has expanded its reach to include US businesses that conduct business in the EU.

2028
2028: Introduction of new EU Taxonomy Regulation

The EU Taxonomy Regulation (EUT) is one of the most influential pieces of legislation adopted by the European Union. Designed to identify environmental and sustainable economic activities, this unified classification system applies to US businesses operating directly within the EU or having operations, investments, or trade ties with the EU market.

Eligible businesses must publish sustainability information covering their entire operations, including non-EU activities, and prepare reports following the CSRD standards, starting in 2028 for U.S. companies subject to the rule.

Preparing for the Future

As the regulatory landscape continues to evolve, businesses must take proactive steps to remain resilient in the face of change and continue operations.

StepAimHow CarbonBetter Can Help
Evaluate potential risks and identify opportunitiesUnderstand the potential risks and opportunities associated with the evolving sustainability regulations. You can use this insight to build a robust reporting strategy and identify competitive advantages1. Run an applicability assessment and gap analysis to determine which regulations apply

2. Guide organizations through the reporting process
Set goals and prioritize changesEstablish clear sustainability goals aligned with regulatory requirements. Working with experts to identify and implement necessary changes effectively will be critical1. Provide consultation to establish Smart, Measurable, Actionable and Time-Bound (SMART) Goals

2. Help in-house teams implement strategies to meet them
Review resource allocationInvest in the internal infrastructure required for efficient and effective sustainability reporting. Businesses with the necessary technology and expertise to meet the upcoming regulations will already be at a competitive advantage1. Provide consultation services to review and improve sustainability data

2. Offer guidance on resource management

3. Serve as fractional support to existing teams

4. Support in creating engaging sustainability stories

Contact us today for help with any of these steps.

How CarbonBetter Can Help

Navigating the complex world of evolving and emerging sustainability regulations requires expert guidance. At CarbonBetter, we offer applicability assessments and gap analyses to first determine which frameworks your business must comply with. Our experts can then help you tell your sustainability story, with reporting, and by ensuring compliance with the latest standards.

Conclusion

We are at a critical juncture point in regulation. In a world in which climate regulations are picking up pace and businesses are realizing the urgent need to build resilience, it’s more important than ever to be proactive. By partnering with CarbonBetter, you can confidently navigate the fast-changing regulatory landscape, mitigate non-compliance risks, and identify growth opportunities.

No matter where you are in your climate journey, we are here to help. Reach out today to get started.

How frequently do sustainability regulations typically change, and how can we stay updated?

Sustainability regulations, especially in the current global context, are evolving rapidly. The frequency of changes can vary based on global events, political shifts, and emerging environmental data. Subscribe to our newsletter to stay up-to-date with the latest changes and upcoming regulations relevant to your operations.

With so many upcoming regulations, how can we prioritize which ones to prepare for first?

Prioritizing regulations often depends on their applicability to your business, the region(s) you operate in, and the potential impact on your operations. CarbonBetter provides a regulatory impact assessment, helping businesses identify and prioritize regulations that are most pertinent to them, ensuring timely compliance and strategic planning. Contact us today to learn more.

If a proposed regulation doesn’t become law, how much should we pivot our sustainability strategy?

While not all proposed regulations become law, they often indicate the direction in which the regulatory landscape is moving. It’s wise to consider the intent behind these proposals when shaping your sustainability strategy. CarbonBetter offers strategic consultation to help businesses adapt their sustainability plans, ensuring they remain forward-looking and resilient, regardless of regulatory uncertainties. Contact us today to learn more.

How can we ensure our internal teams are well-equipped to handle the complexities of evolving regulations?

Continuous training and access to updated resources are crucial. CarbonBetter offers tailored training sessions and workshops for businesses, ensuring that internal teams are always equipped with the latest knowledge and skills to navigate the dynamic regulatory environment. Contact us today to learn more.

What’s the best way to integrate upcoming regulations into our long-term sustainability goals without constant overhauls?

The key is to develop a flexible sustainability strategy that can accommodate regulatory changes without requiring complete overhauls. By setting broad, overarching goals and using adaptable tactics to achieve them, businesses can integrate new regulations seamlessly. CarbonBetter assists in crafting such dynamic strategies, ensuring businesses remain compliant while staying true to their long-term sustainability vision. Contact us today to learn more.


About the Author

Nicole Sullivan leads CarbonBetter’s climate practice, helping organizations measure, reduce, offset, and report on environmental impacts, including carbon emissions, water, and waste.


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