Why corporate sustainability matters amid federal deregulation and policy volatility

Corporate sustainability in the United States is becoming increasingly complex as federal climate deregulation collides with accelerating state level disclosure requirements. This fragmented policy environment creates uncertainty for companies operating across jurisdictions, complicating long term planning and elevating regulatory, operational, and strategic risk.

Even as federal oversight recedes, sustainability remains a core business imperative. Investor expectations, supply chain data demands, escalating physical climate risks, and tightening global reporting standards continue to drive the need for credible climate measurement and disclosure, positioning sustainability as a critical element of risk management, resilience, and competitive advantage. Understanding the policy and regulatory landscape is key to success in this uncertain environment.

A conflicting policy landscape 

2026 began as a tumultuous year for corporate sustainability in the United States, marked by a federal rollback of the “endangerment finding” that had previously established six greenhouse gases as a danger to human health. This reversal represents a significant departure from decades of environmental regulation and climate policy. The administration’s assertion that fossil fuels no longer pose a threat stands in direct contrast to long-standing scientific consensus, which continues to identify greenhouse gases as a clear and ongoing risk to public health, economic stability, and infrastructure resilience. This disconnect between policy direction and scientific evidence heightens strategic risk for companies by creating regulatory whiplash and a lack of international consensus, complicating long-term planning.

At the state level, California is advancing the sustainability landscape by leading the charge on mandatory climate disclosures. However, the U.S. Chamber of Commerce has challenged California’s SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-Related Financial Risk Act) leading to a delay in SB 261’s implementation, despite the state’s efforts to enact these climate change regulations. In the meantime, other states are following in California’s footsteps and accelerating climate disclosure legislation.  The New York Senate passed S9072A, requiring annual Scope 1 and 2 greenhouse gas (GHG) disclosures for large companies beginning in 2028, and Scope 3 in 2029 . Since clearing the Senate, S9072A has been sent to the New York State Assembly, where it will be reviewed, debated, amended, and passed before it can proceed. If passed by the Assembly, the Governor must sign or veto the bill, marking a potential big win for corporate sustainability requirements. Illinois, Colorado, and New Jersey have also taken actions to propose their own climate reporting legislation. Collectively, these developments underscore a growing state-driven momentum toward climate transparency, even as individual policies face legal and procedural hurdles.

Against this broader backdrop of state-level action, California offers a clear case study of how climate disclosure requirements are moving forward amid legal and regulatory complexity.

California climate regulations deep dive

California, which has historically led the nation in climate policy, illustrates how state-level action is diverging from the federal retreat. California’s climate disclosure landscape in early 2026 is defined by a split regulatory trajectory between SB 253 and SB 261. 

Despite remaining under review by the Ninth Circuit, SB 253, the state’s emissions reporting law, remains fully in effect. CARB has settled on an initial reporting deadline of Aug. 10, 2026, for Scope 1 and 2 emissions, with Scope 3 disclosures and limited assurance requirements beginning in 2027.

SB 261, the climate related financial risk disclosure requirement, currently faces a temporary injunction issued by the Ninth Circuit, pausing enforcement pending appeal.  This stay means the statutory Jan. 1, 2026, reporting deadline is no longer enforceable, and the timing for reinstatement remains uncertain as litigation continues. Despite the pause, CARB has emphasized that companies should remain prepared to report, as the injunction could be lifted with little advance notice.

It is also important to note that during the review of the California climate disclosure laws, the judges did not express direct opposition to climate disclosures, focusing instead only on the legal architecture and statutory design. Oral arguments on SB 253 focused primarily on whether its Scope 3 emissions reporting requirements are overly burdensome and potentially unconstitutional as compelled speech.  Judges also explored whether these disclosures qualify as commercial speech and discussed the possibility of severing Scope 3 while keeping the rest of the law (Scope 1 & 2) intact. Oral arguments on SB 261 focused on whether its narrative climate-risk disclosures amount to compelled political speech due to their breadth and lack of clear guidance, raising stronger First Amendment concerns than SB 253. Judges also questioned how SB 261’s requirements differ from existing federal securities disclosures and whether they fit within a commercial-speech framework. These arguments make it clear that judges were not questioning the validity of climate change and climate disclosures but instead evaluating if compelling disclosures violates organizations’ constitutional rights.

California’s climate rules embody the complex and divergent sustainability landscape: while SB 253 remains in effect but is now undergoing legal review even as its emissions reporting deadlines continue to advance, SB 261 is simultaneously stalled under a temporary injunction, creating a split framework that adds uncertainty and operational complexity for companies navigating both active and delayed requirements.

While California’s climate regulations highlight the operational complexity created by state level action, they represent only one dimension of the forces shaping corporate sustainability decisions. Even as legal outcomes evolve, companies face a parallel set of non regulatory pressures that continue to drive the demand for climate transparency. Understanding these forces is essential to assessing why sustainability efforts remain strategically relevant beyond compliance alone.

Why corporate sustainability still matters

Investor sentiment

Despite the conflicting signals from federal and state regulations, corporate sustainability remains a critical element for running a business. Investors increasingly rely on standardized climate disclosures to evaluate financial risk. A 2023 study by researchers at The University of Texas at Austin found that 79% of surveyed investors consider climate risk disclosure to be at least as important as financial disclosure, while almost one-third consider it more important. This is an increase from a similar Harvard study in 2019, finding that 51% of respondents shared a strong general belief that climate disclosure is important.  Investors are increasingly recognizing that climate disclosures provide clearer insight into a company’s long-term resilience, governance quality, and exposure to material climate-related risks and opportunities, underscoring the importance of corporations evaluating and publishing climate disclosures.

Market and competitive pressures

Even without federal mandates, large enterprises continue to require emissions data from suppliers. According to Sweep, 86% of businesses now require suppliers to demonstrate sustainability credentials. Not only are data requirements growing for suppliers, but expectations regarding the quality of the data are also increasing. Large enterprises are often expecting third-party verification and activity-level emissions data because supplier emissions directly influence their own Scope 3 footprints, regulatory exposure, and ability to meet internal climate commitments.  As a result, to meet expectations as a supplier for large enterprises, corporate climate transparency is quickly becoming a market access requirement instead of an optional reporting choice.

Long-term risk management

Physical climate risks, including extreme weather, wildfire exposure, heat impacts, etc., continue to impose material operational and financial costs  on companies. In 2025, the U.S. experienced 23 billion-dollar weather and climate disasters, costing a total of $115 billion in damages. This is the third-highest year on record, followed only by 2023 and 2024. S&P Global estimates that the total cost of climate physical risk for the world’s largest companies that make up the S&P Global 1200 is projected to reach $1.2 trillion annually by 2050. Beyond historical losses, companies are increasingly quantifying the future financial exposure associated with physical climate risk. According to recent CDP analysis, organizations globally are already identifying significant potential financial impacts from extreme weather events, supply chain disruption, and operational downtime, with projected losses reaching into the hundreds of billions of dollars if risks are not addressed. These findings underscore that climate risk is no longer theoretical or long term – it is a material financial consideration that companies are actively assessing today. These climate risks have proved historically that they will continue to translate into tangible financial, operational, and strategic impacts for companies, regardless of shifts in federal regulatory posture.

Global alignment

The global sustainability regulatory environment is tightening , even as U.S. federal oversight recedes. The EU Corporate Sustainability Reporting Directive (CSRD) will require emissions disclosures and climate risk reporting from many U.S. multinationals in the coming years. In addition, the International Financial Reporting Standards Sustainability Disclosure Standard 2 (IFRS S2) Climate-related Disclosures standards are influencing reporting frameworks across global markets. Together, these frameworks signal a global shift toward stronger, more unified climate disclosure standards, reducing fragmentation and pushing companies toward consistent, comparable reporting across jurisdictions. Companies that prepare early for governance, controls, and assurance-ready climate data will be better positioned to navigate this increasingly harmonized global reporting ecosystem.

Navigating uncertainty requires proactive strategy and strategic recommendations  

Despite federal deregulation, climate-related risks and the market’s demand for transparency are accelerating. Companies that act now will be better positioned to manage regulatory uncertainty, meet stakeholder expectations, and maintain competitive advantage. To navigate this volatility, companies should act now by:

• Maintaining readiness for CA SB 253 compliance by measuring Scope 1 & 2 GHG emissions for the Aug. 10, 2026, deadline and preparing for Scope 3 and limited assurance requirements starting in 2027. 
• Preparing draft SB 261 aligned disclosures despite the injunction, as enforcement could resume rapidly after appeal. 
• Strengthening governance and controls around climate related data in anticipation of future assurance needs.
• Engaging cross functional teams (finance, risk, operations, sustainability) to embed climate risk into enterprise risk management.

Turn complexity into forward movement

CohnReznick supports companies navigating this complex and evolving sustainability landscape by combining regulatory insight, technical expertise, and practical implementation support. Our team helps organizations assess readiness for state, federal, and global climate disclosure requirements, translating regulatory obligations into actionable roadmaps while balancing competing investor and customer requirements. We also support businesses with GHG inventory development, assurance readiness, limited assurance, and climate risk reporting to meet your disclosure needs.

In an era of policy volatility, CohnReznick helps clients move from reactive compliance to proactive risk management, enabling long-term resilience, transparency, and competitive advantage.