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Feature Feature
SHIFTING
ESG RULES
CHALLENGE
BUSINESS
LEGAL EXPERTS CAUTION FIRMS AGAINST REDUCING
SUSTAINABILITY INITIATIVES, URGING FOCUS ON RISK
MANAGEMENT, TRANSPARENCY, AND RESILIENCE,
REGARDLESS OF INTERNATIONAL POLICY SHIFTS OR
POLITICAL CHANGES, WRITES JESSICA MACH
SINCE THE US and European Union
began scaling back environmental, social,
and governance reporting requirements in
recent months, ESG experts say the ques-
tions they've been getting from Canadian
businesses largely boil down to one theme:
how should we proceed?
"You're seeing a bit of a shi across the globe
when it comes to ESG," says Conor Chell, a
Calgary-based partner at KPMG Law LLP
specializing in ESG law. Chell says this change
has le businesses nationwide unsure whether
they should pause sustainability efforts, revise
them, or abandon them altogether.
Sharon Singh, a partner at McMillan LLP
and co-head of the firm's Indigenous and
environment practices, is hearing similar
concerns from clients. With ESG backlash
deepening south of the border and potential
changes to the federal government at home,
many businesses are reviewing their current
ESG efforts and asking, "Are we worrying
about nothing?" Singh says.
She says this question has cropped up
regarding various ESG developments, like
changes to the Canadian Competition Act,
new climate change-related disclosure stan-
dards, and human rights due diligence legis-
lation. Businesses want to know whether
Canadian rules slated to come into effect will
be delayed or rolled back.
Specific developments beyond Canada's
borders are prompting these questions. In
February, Mark Uyeda, the US Securities
and Exchange Commission's acting
chairman, announced the agency would
pause defending its climate disclosure rule
in court. First proposed in 2022 under the
Biden administration, the SEC rule would
have required thousands of publicly traded
companies to report detailed information
about their climate-related risks and impacts.
Upon finalizing the rule in 2024, the SEC
was immediately hit with multiple lawsuits
by trade associations, interest groups, and
state attorneys general, who questioned the
agency's authority to require such disclo-
sures. e cases were consolidated before
the Eighth Circuit, a federal appellate court,
and the SEC stated that it planned to "vigor-
ously" defend the rule.
However, that stance shied when the
SEC's leadership changed hands with the
Trump administration. At the end of March,
the SEC told the Eighth Circuit it would no
longer defend the rule.
e EU is similarly poised to scale back
reporting requirements. On February 26, the
European Commission unveiled an omnibus
package, proposing to simplify numerous
corporate sustainability reporting and due
diligence requirements introduced under the
European Green Deal.
Since the European Green Deal's approval
in 2020, the EU has adopted a series of regu-
lations, such as the Corporate Sustainability
Reporting Directive – which mandated
companies to report greenhouse gas emissions
and other ESG disclosures – and the Corporate
Sustainability Due Diligence Directive –
which imposed additional reporting rules.
