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OUR PERSPECTIVES

Environmental Regulations for Companies to Watch in 2023



With a split Congress, the Biden Administration is considering which regulatory tools are available to continue to enact their agenda. There are several big regulations in motion that will impact almost every sector in some way. These regulations cut across organizational structure and will require auditing, environmental assessments, and a deep understanding of supplier materials to withstand increased government, consumer, and investor scrutiny. Understanding what’s coming down the pipeline and how to prepare is essential for companies operating across the US.


SEC Climate Disclosure Rule: Earlier this year, the Securities and Exchange Commission (SEC) released a 510-page proposed rule that would require publicly traded companies to disclose climate-related risks for the first time. If finalized, this could fundamentally change the way that investors view sustainability commitments and climate risks.


Under the proposed rule, publicly traded companies would have to provide more climate-related information in their financial statements. These include physical risks that detail how extreme weather will impact a company’s operations, as well as transition risks that explain how a company will decarbonize its operations to prepare for intensifying climate change. This reporting would need to include climate-related threats that companies are anticipating and how they plan to address these risks.


What comes next? The SEC originally pledged to release a final rule in October but due to internal disagreements, technological stumbles, and external political backlash, we don’t expect to see a final rule until 2023. There will be immediate litigation and intense House oversight once the rule is released (even if significantly watered down).


What’s the impact? It depends. If the SEC ends up including Scope 3 emissions in its required disclosure, this could be a much bigger lift for smaller publicly traded companies that are not already releasing sustainability data. Regardless of the severity of the final rule, investors are still requiring this information from companies, and many will continue to release this information with or without government mandates.


Waters of the United States (WOTUS): Earlier this year, the Supreme Court heard arguments on whether wetlands are considered “Waters of the United States” (WOTUS) and thereby regulated under the Clean Air Act. The case, called Sackett v. EPA, concerns permitting authorities over what exactly constitutes WOTUS under EPA regulation, and in what instances do individuals need to procure federal permits from the EPA in order to build on these waters.


Meanwhile, the Biden Administration is rewriting a WOTUS rule that has changed from administration to administration beginning under President Obama. The Supreme Court announcement that they’re planning to take up the case in 2023 has led to questions surrounding whether the judicial body could impact ongoing efforts from the Biden Administration to establish a new regulatory definition for WOTUS through a comprehensive rulemaking process.


What comes next? The Biden Administration will release a new WOTUS ruling soon, which will establish what is considered “navigable waters” under the Clean Water Act.


What’s the impact? Any company with a footprint that borders or contains streams or waterways could be impacted by the scope of WOTUS. If the Supreme Court ruling drastically differs from the Biden Administration’s WOTUS rule, there will be extended uncertainty as the Administration rewrites the rule to conform with new regulatory constraints.


PFAS Roadmap: Per- and polyfluoroalkyl substances (PFAS) are fluorinated chemicals used by industry and the military, and are known as “forever chemicals” since there is no known way to dispose of them after use. Some of the more common uses of PFAS include waterproof materials, fire suppressants, and nonstick coatings. Research has shown PFAS can cause severe detrimental health impacts when consumed through drinking water, which has led the Environmental Protection Agency (EPA) to begin regulating PFAS in public water supplies.


Under the Trump Administration and now the Biden Administration, the EPA has pledged to expand regulations to monitor and reduce PFAS contamination in waterways. Within the PFAS Strategic Roadmap released in 2021, the EPA commits to proposing a new regulation by fall 2022 and finalizing that proposed rule by fall 2023.


What comes next? EPA has been rolling out regulations that would require additional PFAS data collection. Congress is urging the EPA to act faster and bipartisan legislation could pass that would expedite and expand regulatory oversight.


What’s the impact? Retailers are already feeling the consumer pushback that more needs to be done to limit PFAS across their supply chains. Down the line, water consumers (so, virtually every company) could be regulated under these PFAS regulations. Companies who are not yet affected should be auditing how PFAS contamination interacts with their operations to consider potential cleanup and mitigation down the road.

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