ESG in the US: What Comes Next?

This blog was originally posted on 18th March, 2025. Further regulatory developments may have occurred after publication. To keep up-to-date with the latest compliance news, sign up to our newsletter.

AUTHORED BY HANNAH JANKNECHT, REGULATORY COMPLIANCE SPECIALIST, COMPLIANCE & RISKS

As 2025 unfolds, the US ESG regulatory landscape is proving to be anything but static.

This blog offers a summary and future perspective on sustainability regulatory changes in the United States.

Deregulation at the US Federal Level

1. Increase in Executive Orders and the new 1-to-10 Rule

Since his inauguration on 20 January 2025, President Trump has signed nearly 80 Executive Orders and revoked a number of Orders related to climate change as well as diversity, equity and inclusion (DEI) issued by former President Biden. Amongst the revoked climate change-related orders are those related to the Climate Change Support Office and an order establishing the US policy to advance consistent, clear, intelligible, comparable, and accurate disclosures of climate-related financial risks.

The revoked Executive Orders related to DEI furthermore direct all executive departments and agencies ‘to terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements’. At the same time, it also encourages the private sector to end “illegal DEI discrimination and preferences”.

Though executive orders generate much attention, their limits should not be overlooked. EOs must be issued within the President’s constitutional or statutory authority, and they usually address the work of the executive branch and instruct agencies in their implementation and application of legislation. A number of EOs, including EO 14173 and 14151 on Diversity, Equity and Inclusion are furthermore being challenged in court at the moment.

Another Executive Orders, signed by the President on 31 January 2025, stands out in that it introduces a 10-to-1 Deregulatory Initiative, based on which agencies shall be required to identify at least 10 existing rules, regulations or guidance documents to be repealed for each new final rule that is approved. This includes agencies such as the Environmental Protection Agency, the Securities and Exchange Commission and the Consumer Product Safety Commission. The Order has been widely criticized, and it is expected that there will be legal challenges to the potential repeal of rules, regulations, or guidance documents.

2. Departure From International Agreements

President Trump signed an order informing the public of the US’s withdrawal from the Paris Climate Agreement on 20 January 2025. The withdrawal was communicated to the secretary-general on 30 January and will take effect on 27 January 2026. During his first term, the President already facilitated the USA’s withdrawal from the agreement, while his successor, President Biden, brought the country back to the agreement on 19 February 2021. In addition, the US also intends to pull out of the World Health Organization and the OECD pact on the taxation of large multinationals.

In the weeks following the withdrawal, Trump furthermore rejected and denounced the Sustainable Development Goals and the UN’s Agenda 2030 in a speech before the UN’s General Assembly, and announced the US’s withdrawal from the board of the loss and damage fund, which was set up in 2022 to provide support for losses and damages from natural disasters linked to climate change.

3. SEC Climate Disclosure Rules

The Enhancement and Standardization of Climate-Related Disclosures for Investors, published by the Securities and Exchange Commission (SEC) on 28 March 2024, aims to provide consistent and comparable information to investors on a company’s risks and opportunities in relation to climate change. Shortly after its adoption, the rule was challenged in court and, as a result, the SEC voluntarily decided to stay the application of the rule. While the previous SEC chair Gensler aimed to defend the rule in court, the newly appointed acting chairperson Uyeda released a statement on 11 February 2025, stating that the rule is “deeply flawed” and could potentially inflict significant harm on the capital markets. Uyeda furthermore requested that the Court not schedule the case for argument in order to provide time for the SEC to deliberate and determine the appropriate next steps. Shortly after the release of this statement, Commissioner Caroline A. Crenshaw issued a statement of her own, emphasizing that Mr. Uyeda’s statement did not have input from the full SEC, and disputing the notion that the SEC acted outside of its mandate when adopting the climate disclosure rules.

4. EPA Rules

In an Executive Order addressing independent regulatory agencies issued on 18 February 2025, the intention to expand Executive Branch powers over independent regulatory agencies was announced, noting that these agencies have previously been permitted to promulgate significant regulations without review by the president. As a result, agencies would be required to initiate a process to review the regulations within their jurisdiction. It is however important to note that the legality and constitutionality of this Order will likely continue to be questioned in court.

In a short video released on the EPA’s website on 12 March 2025, EPA administrator Zeldin announced the EPA’s intention to review and roll back more than 30 regulations. This includes a reconsideration of the GHG Reporting Program, Clean Power Plan 2.0, the Mercury and Air Toxics Standards and several National Emission Standards for Hazardous Air Pollutants for American energy and manufacturing sectors. Amongst the most controversial announcements is the intention to reconsider the EPA’s ‘Endangerment Finding’ from 2009, which states that greenhouse gases pose a threat to public health and forms the basis for the EPA’s GHG emissions-related decisions of the last 15 years.

5. Suspension of Foreign Corrupt Practices Act

Enforcement actions under the Foreign Corrupt Practices Act, the US’s main anti-bribery legislation adopted in 1977, were paused on 10 February 2025 in order to review guidelines and policies governing investigations and enforcement actions. President Trump justified this decision by stating that the instrument has been systematically stretched beyond proper bounds and, in his opinion, abused in a manner that harms the interests of the United States. The review period of 180 days can be extended by the Attorney General if deemed necessary. After concluding the review, the Attorney General shall determine whether additional actions, including remedial measures with respect to inappropriate past FCPA investigations and enforcement actions, are warranted.

6. Impact of European Sustainability Laws for US Companies

The European Union adopted several corporate sustainability laws in recent years that impact large US companies. The Corporate Sustainability Reporting Directive (CSRD) applies to non-EU groups that generate at least 150 million annual turnover in the EU and that have large branches or subsidiaries in the EU, while the Corporate Sustainability Due Diligence Directive (CSDDD) applies to non-EU companies with at least 450 million euro annual net turnover in the EU. The criteria for non-EU groups to be in scope of the CSRD are currently under review as part of the recent Omnibus Proposal, which proposes to increase the thresholds significantly. More information on the Omnibus Package can be found here.

In response particularly to the CSDDD, United States Senator Bill Hagerty introduced a Bill titled ‘Protect USA Act’ on 12 March 2025, proposing to prohibit entities integral to the national interests of the United States from participating in any foreign sustainability due diligence regulation, including the EU CSDDD. The term ‘entities integral to the national interest’ refers to companies doing business with the Federal Government, entities with strong activities in raw material extraction, manufacturing and processing companies, arms manufacturers and companies mining critical minerals. In the accompanying press release, Hagerty explains the proposal by stating that ‘“American companies should be governed by U.S. laws, not unaccountable lawmakers in foreign capitals. The European Union’s ideologically motivated regulatory overreach is an affront to U.S. sovereignty. I will use every tool at my disposal to block it.” The bill will however now have to move through both chambers to be passed.

The introduction of the Bill comes amidst a letter sent by a number of Republican Members of Congress to Treasury Secretary Scott Bessent and Director of the National Economic Council Keven Hassett, calling the Treasury to treat the CSDDD as a “non-tariff trade barrier”.

Increased US State Regulatory Activity in the Face of Decreased Federal Activity

As the federal trend towards deregulation unfolds, some US states are expected to increase their own activities, likely leading to an increased divergence between federal and state specific sustainability and product safety standards. While some states will follow the deregulatory trend, others are projected to enact further legislation to protect their inhabitants and the environment. With regard to product-specific regulation, an increase in regulatory activities concerning PFAS, plastic packaging and extended producer responsibility is expected.

A number of Bills in these areas have already been proposed in the first few months of 2025, including several textiles EPR bills and proposed PFAS restrictions in New Mexico, Maryland and Oregon, to name just a few. Several Bills have also been published in the area of corporate sustainability since January 2025, such as the proposed climate disclosure bills in Colorado, New York, Illinois and New Jersey, and proposals for increased fashion accountability in New York, Massachusetts and California.

In addition, it is hoped that state activities will be able to at least make up for some of the now abandoned emission reduction targets at the state level. According to research conducted by America Is All In, a coalition of leaders in support of climate action in the United States, state level contributions could still enable the US to achieve its 2035 Nationally Determined Contribution.

Looking Ahead at ESG in the US

While developments at the federal level are moving fast, the increase in state-level activities is likely to make it even more difficult for manufacturers to stay on top of the regulatory trends in the United States. Given these multifaceted influences, continuous regulatory tracking and horizon scanning are not merely advisable, but absolutely essential. Companies must proactively monitor both existing and emerging regulations to ensure compliance, mitigate risks, and stay ahead of the curve in this ever-evolving field.

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