Game-changer! International trade + ESG

In reality, however, most corporate management teams treat regulatory compliance as the sole objective of their ESG practices, failing to genuinely integrate ESG principles into long-term strategic planning and day-to-day operational policies. This leaves companies vulnerable to opportunistic behavior in their ESG implementation. For many enterprises, ESG practice appears narrowly focused on information disclosure and report preparation—under the mistaken belief that merely fulfilling these tasks effectively communicates their commitment to sustainable development. Consequently, numerous companies treat ESG disclosure solely as a public relations tool for enhancing corporate image. Some firms selectively disclose only favorable ESG information, even engaging in 'greenwashing'—exaggerating their environmental and social performance to create a false impression of robust ESG commitment, while actual action lags far behind. This overemphasis on disclosure at the expense of substantive practice—and on form over substance—seriously undermines the credibility and effectiveness of ESG information, preventing ESG from serving as a genuine 'passport' for enterprises entering international markets. Moreover, the domestic absence of professional third-party assurance providers capable of rigorously verifying corporate ESG data significantly compromises the traceability and reliability of disclosed information. This problem is increasingly acute against the backdrop of growing international emphasis on carbon tariffs. Carbon tariff policies impose exceptionally high demands on the accuracy and timeliness of key environmental metrics in ESG reports—such as total energy consumption, total greenhouse gas emissions, and emission intensity. Yet some companies, seeking to minimize carbon tariff costs, deliberately manipulate these critical performance indicators in their ESG disclosures—rendering ESG reports incapable of reflecting their true circumstances and further disrupting market order. Compliance Risk: Mismatch Between Corporate Capabilities and Regulatory Requirements Governments worldwide have introduced increasingly stringent ESG standards—standards that differ markedly across jurisdictions. This requires 'going global' enterprises to simultaneously master complex elements—including laws and regulations, cultural values, and business practices—across multiple regulatory environments. Take the European Union, for example: its Corporate Sustainability Due Diligence Directive (CSDDD) mandates that companies conduct due diligence on human rights and environmental issues across their global supply chains. Failure to meet these obligations may result in fines of up to 4% of the company’s global annual net turnover. Meanwhile, the U.S. Securities and Exchange Commission (SEC)’s newly adopted 'Enhanced and Standardized Climate-Related Disclosures Rule' requires companies to disclose how climate-related risks and opportunities affect their strategy and financial condition—as well as their greenhouse gas emissions data. Non-compliance with such disclosure requirements may expose companies to lawsuits filed by investors or other stakeholders, alleging violations of disclosure rules. At the same time, mainstream sustainability disclosure frameworks remain works in progress—continuously evolving and being refined. For instance, the International Sustainability Standards Board (ISSB)’s 'IFRS Sustainability Disclosure Standard S1—General Requirements for Disclosure of Sustainability-related Financial Information' and 'IFRS Sustainability Disclosure Standard S2—Climate-related Disclosures' are still undergoing ongoing revisions and interpretive updates.

After issuing new rules on listed-company information disclosure, the U.S. Securities and Exchange Commission was sued by 19 states.

Just over a week ago, in an article I published, I introduced a new rule issued by the U.S. Securities and Exchange Commission (SEC), requiring all U.S.-listed companies to comprehensively disclose climate-related information in their annual reports starting in 2025 (see 'SEC Requires U.S.-Listed Companies to Disclose Climate-Related Information Starting in 2025'). On the very same day this new rule was announced, the SEC was sued in federal court by ten U.S. states; one week later, the number of plaintiff states rose to nineteen. West Virginia led the charge: its Attorney General, Patrick Morrisey, announced on March 6 that a coalition of ten states would file suit against the SEC’s new regulation mandating climate-risk disclosures by listed companies. West Virginia and Georgia jointly filed the complaint with the U.S. Court of Appeals for the Eleventh Circuit. Subsequently, Alabama, Alaska, Indiana, Oklahoma, South Carolina, Wyoming, Virginia, and New Hampshire joined the lawsuit. One week later, on March 13, another group of nine states—led by Iowa—filed a separate but identical lawsuit targeting the same SEC rule. The additional plaintiffs included Arkansas, Idaho, Missouri, Montana, Nebraska, North Dakota, South Dakota, Utah, and the U.S. Chamber of Commerce for Free Enterprise. In fact, the climate rule barely passed within the SEC itself—by a narrow 3–2 vote. Two Republican-appointed SEC commissioners voted against it and publicly denounced the rule as an improper attempt to compel corporations to adopt a climate-related agenda. During the SEC’s rulemaking process, thousands of objections were submitted—including from many major U.S. public companies. Although the final version of the SEC’s rule removed certain provisions from earlier drafts—such as requirements for companies to report emissions from their supply chains and products—thereby somewhat lightening the reporting burden, it still provoked fierce backlash from numerous business groups and conservative Republican political figures. This reaction is unsurprising: traditional sectors—including agriculture, oil, coal, and metallurgy—are the industries most heavily impacted by the new rule, and they also constitute the Republican Party’s traditional electoral base. Among the 19 states now suing the SEC, West Virginia and Iowa—the two lead plaintiffs—are solidly Republican ('red') states. Of the remaining participants, only Virginia and New Hampshire lean Democratic ('blue'), while Georgia is considered a swing state—the rest are all Republican-controlled red states. At his press conference, Patrick Morrisey directly labeled the SEC’s rule a 'backroom maneuver designed to undermine the energy industry' and 'an unlawful power grab carried out without legitimate authority.' He even invoked the First Amendment to the U.S. Constitution—a provision Americans frequently cite—which guarantees freedom of speech. Morrisey argued that the rule sets a dangerous precedent by allowing 'federal agencies to compel companies to disclose information they do not wish to provide,' thereby violating the spirit of free speech (a claim that sounds rather far-fetched). Iowa Attorney General Brenna Bird stated: 'This rule will not only impose costly bureaucratic burdens on businesses, but will also disrupt our supply chains and harm family farms across Iowa.'

US SEC Will Not Pursue Charges Against Climate Group, Warns of Disclosure Obligations

18 hours ago

The US SEC decided not to charge the climate group Climate Action 100+ regarding its 2021 ExxonMobil shareholder meeting but warned large shareholders about regulatory disclosure obligations before the 2027 proxy season.

reuters

2026-10-07

US SEC Will Not Pursue Charges Against Climate Group, Warns of Disclosure Obligations

US SEC Will Not Pursue Charges Against Climate Group, Warns of Disclosure Obligations

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