With a more conservative administration coming into power next year, the fate of corporate sustainability may seem uncertain. But less may change in the sustainability arena than you might think. Companies are likely to stay the course in areas like climate disclosures, panelists said at a recent webinar hosted by Watershed, an enterprise sustainability platform.
Though “federal regulatory pressure will be different” under the new administration, NYU law professor and former SEC commissioner Rob Jackson said, “what hasn’t changed is the fundamental risk” that climate change poses to businesses.
The “bottom line,” he said, “is that as important as democracy and elections are, they don’t drive every business decision that a well-advised CEO and board of directors make.”
The climate rule will go into cold storage: Jackson predicts that the SEC will choose to ask courts to put the climate rule on pause “for a period of years.” But, he noted, “that doesn’t mean that companies are going to disclose less in their SEC filings in the United States next year.” The boards he’s spoken with recently have no plans to change their disclosures, “because they know their investors will still be engaged,” he said, “and because they built the infrastructure necessary to provide those disclosures.”
And businesses will still need to comply with climate disclosure rules in other jurisdictions. Companies doing business in or with California or the EU, Jackson said, “are going to continue to have to be on the cutting edge of disclosure practices.”
And other jurisdictions’ standards might become more meaningful in the absence of federal climate regulation, Jackson said. While he anticipates that “the president-elect is likely, once again, to withdraw us from international climate accords,” he believes “the EU will stay the course” where climate policy is concerned.
“The upside of that is that the EU is going to be able to pull American companies toward its practices,” he said.
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California’s climate bill has been challenged in court, but a judge denied the motion to move the case forward. The bill may be “the subject of further court attack and invalidation” in the future, but Jackson thinks the state will continue to “aggressively” defend it, and expects other states to “step up” with their own regulations as well.
The IRA will be hard to unravel: The Inflation Reduction Act (IRA) was one of the Biden administration’s most prominent pieces of legislation. And its piecemeal nature might make it hard for a new administration to dismantle. “The IRA is not a monolith,” Rich Powell, CEO of the Clean Energy Buyers Association and the Clean Energy Buyers Institute, said. “The IRA is a lot of different incentives that were cobbled together, many of which had very strong, bipartisan antecedents of some kind.”
And as Jackson pointed out, the IRA has already disbursed “billions and billions of dollars” toward projects, many of them in red states. Though that funding might be subject to efforts to claw it back, “most of those projects and those funds are fully dispersed and are likely to continue to push forward,” he said.
Keep your eye on the grid: One area boards and executives should pay attention to in coming years, Powell said, is electricity.
“Electricity in the remainder of this decade is going to be a bigger conversation than oil or fuel,” he said.
Companies and consumers have gotten used to stable prices for electricity, he said, because the US power grid has remained “stagnant” for around the past 20 years. Now, though, demand for power is, well, surging.
If supply can’t keep with demand, “you do risk higher prices,” Powell said. Boards and business leaders might be asked hard questions about adding power capacity as companies grow, he said.