Nancy Mancilla, VP of Environ’s Data & Reporting Group
At the request of our esteemed clients, we are compiling our insights on recent presidential executive actions in the United States that could impact transparency and disclosure practices. Given the rapidly evolving political landscape, we anticipate this to be the first of several statements we will issue. We would like to emphasize that our recommendations are based on the situation as of mid-February 2025, and we strongly encourage reporting organizations to seek tailored advice from legal counsel for more specific guidance.
Below are some of the key topics we are closely monitoring:
1. DEI and DEIA
Current Situation:
The American Alliance for Equal Rights (a nonprofit that files court challenges over the use of race and ethnicity as factors in employment, contracting and other areas) has announced its intention to challenge diversity programs in the private sector. The announcement follows the U.S. Department of Justice’s order to initiate criminal and civil investigations against companies over their diversity, equity, inclusion, and accessibility (DEI and DEIA) policies. This action is expected to eventually reach the Supreme Court, where a ruling could have major implications for how private entities implement diversity initiatives. In the near term, government contractors and companies receiving federal funds appear to face the greatest risk. We’re already starting to see target lists forming.
Recommendations:
Given the uncertainty surrounding DEI and DEIA-related legal challenges, organizations should proactively assess their programs in consultation with legal counsel to ensure they align with the evolving legal landscape. While the Department of Justice (DOJ) lacks enforcement authority over Title VII of the Civil Rights Act outside of federal contractors, private litigation risks remain significant. Ongoing cases from The American Alliance for Equal Rights underscore the potential for heightened scrutiny. As a precaution, companies should review their DEI programs, policies, and goals, working with legal counsel to evaluate their resilience in today’s litigious environment. Our team is fielding questions about terminology, and it seems that words, such as “belonging,” “engagement,” and “cultural transformation” are quickly replacing “diversity,” “equity,” and “inclusion.” Remember, DEI is a human rights issue. Therefore, we recommend referring to the UN Guiding Principles on Business and Human Rights for practices that can be defended. DEI also creates value to the bottom line over time for many companies so highlighting the ways these efforts make business sense can be a good strategy. For further recommendations, read this blog post by Baker Donelson, which outlines key steps for companies to take
2. Foreign Corrupt Practices Act (FCPA)
Current Situation:
With the issuance of an executive order to suspend the enforcement of the Foreign Corrupt Practices Act, the Trump administration paused a longstanding law that had governed corporate corruption and imposed severe penalties for bribery of foreign government officials. This suspension weakens protections for employees of U.S. corporations, leaving them more vulnerable to pressure from unscrupulous foreign officials to make illicit payments. It also deprives U.S. taxpayers of the potential recovery of billions of dollars in fines.
Recommendations:
Governance is a critical pillar for the success of environmental, social, and governance (ESG) initiatives. Corruption often leads to human rights violations, which are closely tied to DEI principles. Strong governance frameworks help mitigate both regulatory and reputational risks. Rather than merely referencing the FCPA in annual reports to ensure ethical behavior abroad, companies should consider revisiting and reinforcing all corporate policies related to antibribery and anti-corruption, emphasizing both expectations and consequences. For comprehensive guidance, refer to the OECD Guidelines for Multinational Enterprises and Due Diligence Guidance for Responsible Business Conduct.
3. Climate
Current Situation:
Under President Trump, the Securities and Exchange Commission (SEC) has started unraveling the climate disclosure rule created during President Biden’s term. Mandatory climate disclosure regulations still apply to many U.S. companies, as California, Colorado, New York and the European Union (EU) are considering ways to implement regulatory requirements aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework, now adopted by IFRS. While some banks have already begun withdrawing from the Net-Zero Banking Alliance, climate remains a critical risk for companies. Action is essential to assess the viability of relationships and ensure long-term sustainability.
Recommendations:
Though financial institutions may be trying to reorient their goals and ESG investors are strengthening their firewalls, companies that are mature in their ESG journey continue to place pressure on suppliers. For example, Nestlé and Mars have moved to fund incentives for farmers to cut dairy supply chain emissions. Due diligence for assessing climate-related risks and taking inventory of impacts for disclosure is not expected to go away any time soon. Therefore, we suggest following IFRS S2 alongside the TPT Disclosure Framework to develop a comprehensive roadmap for addressing climate risk. For those who are ready to boldly lead, we recommend signing onto the “We Are Still In” campaign to demonstrate support for climate action to meet the Paris Agreement. Despite a lack of political support in the U.S. at the federal level, a group of 24 state governors submitted a letter to the UN expressing continued support. Therefore, we should keep an eye on what these governors do through the U.S. Climate Alliance.
4. Double Materiality
Current Situation:
In line with many recent regulatory pivots, the EU released a “simplification omnibus” proposal to reduce Corporate Sustainability Reporting Directive (CSRD) requirements, exempting smaller companies and extending deadlines. However, materiality assessments will continue to be required. Earlier, Germany’s Sustainable Finance Advisory Board released a position paper on the expected omnibus, asserting that reporting under CSRD should proceed without delay, though enforcement should be postponed until legal uncertainties are addressed. The paper also expressed support for a principles-based approach that embraces the double materiality analysis. While practitioners continue to explore how to accurately assign financial values to material impacts, this practice will likely evolve further, especially if other EU nations adopt a similar stance.
Recommendations:
If this is the year that materiality (or double materiality) for your organization is due, it’s crucial to begin the process sooner rather than later. Educating finance and accounting teams will be essential, and we’ve also observed that legal teams are rapidly building expertise in this area. Given the steep learning curve, it’s possible the initial focus may be on facilitating the quantification of impacts. To accelerate this work, we’ve already developed processes and systems to help clients tackle this complex task, freeing up valuable time for fostering key internal collaborations.
Ensuring ESG Remains a Business Imperative
For years, we’ve heard that ESG should be embedded within organizations. For those genuinely committed to this goal, it’s time to accelerate the operationalization of efforts to ensure ESG is deeply integrated into the business case for cost savings, efficiency, and risk mitigation.
The evolving regulatory and legal landscape requires a balanced approach that weaves ESG considerations into core business operations and legal, finance, and risk management functions. Implementation should involve leaders across all departments. A robust governance structure to support disclosure is something we’ve all been working toward — it’s now time to activate it. By targeting key decision-makers with measurable business impact and return-on-investment (ROI)-driven evidence, companies can ensure that sustainability remains a strategic priority as the landscape continues to evolve.
With increasing political scrutiny around our work, it may be best to structure reports in a way that directly addresses concrete business challenges, such as cost reduction and operational efficiency. This can be followed by initiatives (aligned with material topics) that support resilience. When it comes to climate reporting, a recent Workiva study shows that 85% of companies plan to continue their efforts, even if regulations change. Sustainability isn’t going away, so we need to focus on moving forward — efficiently and effectively.
As regulatory landscapes shift, proactive adaptation is crucial for ensuring long-term sustainability and resilience. Remember, GRI (the Global Reporting Initiative) incorporates all international conventions for reducing risk across material issues. As a voluntary guide and the foundation for the European Sustainability Reporting Standards (ESRS), it’s worth revisiting the guidance provided by frameworks like CSRD, GRI, and IFRS in detail to ensure organizational structures are prepared for the unpredictable road ahead.
We’re here for you. We have the technical capabilities, learning, and even legal support that can be leveraged to help you navigate the current landscape. Contact us at info@environenergy.com