Summary: The SEC's final climate disclosure rule is narrower than the original proposal because it removed mandatory Scope 3 emissions reporting and reduced some financial statement disclosure requirements. For supply chain and ESG professionals, that change lowers one U.S. reporting burden, but it does not remove the need for robust value chain data, since CSRD, CSDDD, and other international rules still push companies toward deeper climate and supplier transparency.
The SEC’s climate disclosure requirements have faced significant turbulence since 2024. For supply chain sustainability professionals, understanding their current status is essential. Indeed, in March 2024, the U.S. Securities and Exchange Commission adopted its final climate disclosure rule for public companies. Specifically, the rule requires disclosure of material Scope 1 and Scope 2 GHG emissions and climate-related risks.
However, in April 2024 the Eighth Circuit Court of Appeals issued a stay of the rule pending legal challenges. As of 2026, full implementation remains legally contested. For organizations with EU operations or EU-based customers, the EU’s Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and Germany’s LkSG create parallel disclosure and due diligence obligations. In many cases, these obligations are more rigorous. Moreover, they are advancing on a firm timeline regardless of US regulatory developments.
How Does the Final SEC Rule Differ from the Proposed Rule?
The SEC adopted its final climate disclosure rule in March 2024. This rule represents a significant departure from the original 2022 proposal. In particular, the SEC took a more measured approach after receiving over 16,000 public comment letters. The final rule notably omits the requirement for companies to disclose Scope 3 greenhouse gas (GHG) emissions from their value chain. Additionally, the SEC scaled back financial statement disclosure requirements and gave companies more time to implement disclosures and related assurance requirements.
A key change is the introduction of a materiality qualifier for Scope 1 and 2 GHG emissions disclosures, as well as other climate risk disclosures. As a result, companies must only report these emissions if investors consider them material. In practice, this threshold introduces significant judgment and inconsistency across issuers. Furthermore, the final rule removes the line-item disclosure requirement showing the impact of transition activities on a company’s financials.
These adjustments indicate the SEC’s intent to balance investor demand for climate information against compliance costs and legal complexity. However, the subsequent stay of the rule means US public companies face continued uncertainty about the final shape and timeline of domestic climate disclosure obligations. Consequently, voluntary alignment with international frameworks such as ISSB (IFRS S1 and S2) and TCFD becomes increasingly important as a baseline for investor communication.
Public Consensus on the SEC’s Climate Disclosure Rule Update
The investor community largely supported the SEC’s final climate disclosure rule, though the overall public response was mixed. The majority of comment letters backed enhanced climate disclosure requirements. This response indicates strong investor demand for consistent and comparable climate risk information. However, business groups and certain state attorneys general mounted significant legal challenges. Ultimately, these efforts led to the April 2024 stay of the rule by the Eighth Circuit.
The legal challenges reflect a broader political debate in the United States about the SEC’s role in mandating ESG disclosures. Notably, this debate has intensified since the change in presidential administration in 2025. Despite this domestic uncertainty, the global investor community continues to request TCFD-aligned and ISSB-aligned climate disclosures from portfolio companies. In particular, major institutional asset managers representing trillions in AUM drive these requests regardless of domestic regulatory requirements. For multinationals, EU CSRD obligations also create de facto climate disclosure requirements that extend to US-headquartered parent companies with significant EU operations or revenue.
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Next Steps After the SEC’s Updated Climate Disclosure Rule
Compliance and ESG teams in 2025–2026 should prepare for climate disclosure requirements from multiple directions simultaneously. The SEC rule’s legal stay creates domestic uncertainty. However, it does not eliminate climate reporting obligations for companies subject to CSRD, LkSG, or CSDDD. Specifically, CSRD mandates climate disclosures under ESRS E1 for large EU-nexus companies. Similarly, LkSG requires environmental risk assessments across supply chains. In addition, CSDDD mandates environmental due diligence including climate-related impacts. Therefore, companies should:
- Map their regulatory exposure across all applicable jurisdictions — SEC, CSRD, CSDDD, LkSG, and emerging ISSB-aligned national frameworks — to understand which climate disclosure and due diligence obligations apply and on what timeline.
- Build Scope 1 and 2 GHG measurement capability as a baseline, since these are required under both the SEC final rule (when/if implemented) and CSRD ESRS E1. Scope 3 measurement capability is required under CSRD and strongly recommended for CSDDD supply chain environmental impact assessments.
- Assess climate-related risks across operations and supply chains in line with TCFD’s four-pillar framework (governance, strategy, risk management, metrics and targets) — a methodology recognized across SEC, CSRD, and ISSB frameworks.
- Monitor legal and regulatory developments, including the outcome of pending court challenges to the SEC rule, potential rule revisions, and the ongoing CSRD and CSDDD transposition timeline across EU member states.
The SEC will likely provide further guidance as the legal situation evolves. Companies should therefore monitor SEC communications alongside updates from ECHA, the European Commission, and national CSDDD transposition authorities. This approach helps build a comprehensive picture of their disclosure obligations.
In the meantime, companies should pursue voluntary climate disclosure aligned with ISSB standards (IFRS S1 and S2). Above all, this applies particularly to those with material Scope 1 and Scope 2 emissions. This proactive approach helps companies stay ahead of regulatory requirements. It also demonstrates commitment to transparency. Most importantly, it satisfies the growing climate disclosure expectations of customers and financiers operating under EU ESG regulations.
Looking Ahead
Companies now navigate intersecting climate disclosure requirements from the SEC, CSRD, CSDDD, and LkSG. As a result, the era of purely voluntary climate reporting is clearly drawing to a close for large global enterprises. In fact, the question for compliance leaders in 2025–2026 is not whether mandatory climate disclosure is coming. Instead, leaders must determine which specific obligations apply, on what timeline, and how to build integrated reporting capability. Ultimately, this capability must satisfy multiple regulatory frameworks simultaneously while minimizing duplication of effort and maximizing the credibility of disclosed climate data.
Certainty Software is here to support you in meeting climate disclosure and supply chain compliance requirements across the SEC, CSRD, CSDDD, and LkSG frameworks. Our scalable, multilingual audit and inspection tracking platform, together with corrective action management capabilities, assesses all your suppliers — regardless of tier — against your climate and sustainability standards. As a result, it provides the documented evidence of supply chain due diligence that regulators and investors require. With a variety of configurable reporting options, stakeholders gain a clear, audit-ready view of your progress in meeting climate disclosure and due diligence obligations.
Book a demo today with our team to learn more about Certainty Software.
Frequently Asked Questions (FAQs)
What is the current status of the SEC climate disclosure rule in 2026?
As of 2026, the SEC’s final climate disclosure rule (adopted March 2024) remains stayed by the Eighth Circuit Court of Appeals following legal challenges from business groups and state attorneys general. The Trump administration, which took office in January 2025, has signaled limited enthusiasm for enforcing or defending the rule in its current form. Companies with US-only operations face continued domestic regulatory uncertainty, while those with EU operations or customers must still comply with CSRD and CSDDD climate-related requirements on the EU’s firm transposition timeline.
Do US companies still need to disclose climate information?
US public companies listed on major exchanges do not currently need to comply with the stayed SEC climate disclosure rule. However, many face de facto disclosure obligations through other channels. For example, large institutional investors routinely request TCFD-aligned climate disclosures. Additionally, many S&P 500 companies publish annual sustainability reports voluntarily. Furthermore, US multinationals with significant EU revenue or EU-based subsidiaries will be subject to CSRD climate disclosure requirements. Companies that get ahead of these requirements now will be better positioned for any eventual domestic regulatory action.
How do Scope 1, 2, and 3 emissions differ?
Scope 1 emissions are direct GHG emissions from sources a company owns or controls (e.g., fuel combustion in owned facilities or vehicles). Scope 2 emissions are indirect emissions from purchased energy (electricity, heat, steam). Scope 3 emissions cover all other indirect emissions in a company’s value chain. These include upstream supplier activities and downstream customer use of products. Under CSRD’s ESRS E1, companies must disclose all three scopes. The SEC final rule (when implemented) would require material Scope 1 and 2 disclosures but omits mandatory Scope 3 reporting.
How does CSRD differ from the SEC climate disclosure rule?
The EU CSRD is broader, more prescriptive, and more certain in its implementation timeline than the SEC climate disclosure rule. Specifically, CSRD covers all three Scopes of GHG emissions. It requires double materiality assessment, which evaluates both financial materiality and environmental/social impact materiality. Moreover, it mandates third-party assurance of sustainability statements. CSRD applies to all large EU companies and non-EU companies with significant EU revenue, covering over 50,000 companies in total. The SEC rule, by contrast, focuses on financially material climate risks and Scope 1 and 2 emissions for US-listed public companies. In addition, its implementation is currently stayed pending legal resolution.
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