Executive Orders and Evolving Environmental Implications: What Companies Should Know

Recent executive actions during week one of the Trump presidency set the stage for a significant shift in US regulatory policies. These directives, coupled with changing federal and state-level priorities, hold substantial implications for companies navigating compliance and sustainability frameworks. Below, we outline the key executive orders, analyze their potential impact, and offer insights into what companies should focus on in this evolving landscape.

Key Energy Executive Orders (January 20-23, 2025)

1. Unleashing American Energy Act: Encourages energy exploration and production on federal lands and wanters, reducing environmental restrictions, and eases the permitting process for energy infrastructure projects
   
2. Putting America First in International Environmental Agreements: Announces the US withdrawal from the Paris Climate Agreement
   
3. Temporary Withdrawal of All Areas on the Outer Continental Shelf From OffShore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects: Suspends new offshore wind energy leasing on federal lands and waters, pending a review of the environmental and economic impacts of such projects
   
4. Declaring a National Energy Emergency: Declares a national energy emergency, citing inadequate domestic energy infrastructure and reliance on foreign energy sources as threats to national security
   
5. Unleashing Alaska’s Extraordinary Resource Potential: Repeals restrictions on oil drilling in the Arctic and along US coastlines, opening these areas for expanded fossil fuel exploration and extraction
   

What This Means for Companies

Domestic Energy and Fossil Fuels

The Trump administration’s focus on fossil fuel production and reduced support for renewable energy signals a shift in energy policy. Companies in traditional energy sectors may find new opportunities, but organizations committed to renewable energy projects should be prepared for reduced federal backing.

Regulation and ESG Reporting

Under a more business-friendly regulatory framework, the SEC is expected to scale back ESG-related disclosure requirements. This change aligns with Mark Uyeda’s interim leadership and the anticipated appointment of Paul Atkins as SEC Chai. Atkins has expressed skepticism regarding mandatory climate-related disclosures, favoring a principles-based approach. Atkins was previously SEC Commissioner from 2002 to 2008. Expect an era of de-regulation

Key Areas to Watch:

• Cryptocurrency Regulation: Anticipate a shift toward clearer, less restrictive frameworks to stimulate innovation.
• Capital Formation: Policies may ease compliance burdens for financial institutions, encouraging economic growth.
• ESG Disclosure Rules: Expect reassessments of climate-related disclosure requirements, reducing costs for public companies.

The Global Context: Sustainability and Reporting Standards

While the US focuses on deregulation, global standards for sustainability reporting are gaining traction. The International Sustainability Standards Board (ISSB) Standards, used in 20 jurisdictions covering over 55% of global GDP, present a growing challenge for companies operating internationally. European regulations, such as the Corporate Sustainability Reporting Directive (CSRD), will also affect multinational corporations.

What Companies Should Note:

• ISSB Standards: Companies seeking international investment must align with global reporting requirements.
• CSRD Compliance: An estimated 60,000 companies, including non-EU entities, will need to disclose sustainability impacts between 2025 and 2029.

State-Level Climate Regulations

As federal ESG requirements ease, state-level initiatives are stepping in to fill the gap. California’s mandatory climate disclosure laws, SB 253 and SB 261, serve as a blueprint for other states such as Washington, New York, and Illinois. Additionally, 24 states recently announced a continued commitment to working toward the US’ Paris Agreement goals.

California’s Key Laws:

• SB 253: Requires companies with more than $1 billion in revenue to disclose Scopes 1, 2, and 3 emissions starting in 2026.
• SB 261: Mandates biennial reporting on climate-related financial risks for companies with over $500 million in revenue, also beginning in 2026.

Emerging State Legislation:

• Washington: SB 6092 mirrors California’s emissions reporting standards, currently under consideration.
• New York: Proposals include mandatory climate risk reporting and emissions disclosures.
• Illinois: Legislation similar to California’s is under review, with an ambitious start date of 2025.

How Companies Can Prepare

1. Monitor Regulatory Changes: Stay informed on federal and state-level shifts in ESG and climate-related regulations.
2. Adopt Flexible Reporting Frameworks: Companies operating globally or in multiple states should integrate ISSB and CSRD standards into their sustainability strategies.
3. Engage with Policymakers: Advocacy and collaboration with industry groups can help shape favorable regulatory outcomes.
4. Enhance Transparency: Even if federal requirements decrease, investors and stakeholders will continue to demand robust ESG reporting.

Turn Uncertainty into Opportunity

The recent executive orders mark a pivot in US energy and regulatory policies, emphasizing domestic energy production and deregulation. While federal ESG mandates may recede, companies will still need to navigate a complex landscape of state and international standards. By proactively adapting to these shifts, companies can mitigate risks and position themselves for long-term success. Novata’s data management platform and Advisory team are here to help. Learn how our purpose-built solutions and experts can help turn regulatory requirements into a strategic opportunity to enhance risk management and business resilience.