Navigating ESG reporting requirements can feel like wading through a maze of ever-changing regulations. But whether you’re a small business owner or part of a large corporation, understanding these requirements is crucial for staying ahead of the curve.
From federal guidelines set by the SEC to state-specific mandates and global frameworks, there’s a lot at stake. In this guide, we’ll break down what ESG reporting means for US companies, how it impacts your operations, and the best strategies to stay compliant in 2025 and beyond.
Federal ESG Reporting Landscape
SEC’s Role in ESG Reporting
While there isn’t a single federal ESG law, the U.S. Securities and Exchange Commission (SEC) plays a significant role in shaping ESG reporting requirements. The SEC’s Climate Disclosure Rule, adopted in March 2024, required public companies to disclose material climate risks and their Scope 1 & 2 emissions.
This rule was designed to address the growing concerns around climate change and its financial impact on businesses. However, due to legal challenges, the SEC stayed the rule’s implementation in early 2025.
Aside from specific climate-related disclosures, materiality obligations also require companies to disclose risks that could impact their financial performance. These include climate vulnerability and human capital management.
Additionally, conflict minerals disclosure, mandated by the Dodd-Frank Act, requires companies to disclose the sourcing of certain minerals from conflict zones.
State-Specific ESG Reporting Requirements
While federal regulations set the groundwork, several U.S. states have enacted their own ESG reporting requirements. These state-level requirements fill the gaps in federal legislation, often with stricter provisions.
California’s SB 253 & SB 261
California is a leader in state-level ESG regulation. SB 253 mandates that public and private companies with revenues over $1 billion report their Scope 1, 2, and 3 emissions starting in 2026/2027. This is a critical shift toward more comprehensive emissions disclosure.
SB 261, on the other hand, requires companies with over $500 million in revenue to disclose climate-related financial risks every two years, beginning in 2026. These laws reflect California’s commitment to climate action and transparency.
New York’s Climate Leadership and Community Protection Act (CLCPA)
New York is another state with robust ESG reporting requirements. Under the Climate Leadership and Community Protection Act (CLCPA), major emitting companies in New York must report greenhouse gas emissions data. Additionally, the CLCPA integrates ESG metrics into state procurement processes, making it an essential regulation for companies operating within or contracting with the state.
Minnesota’s Climate Risk Surveys
Minnesota also has specific ESG reporting requirements for financial institutions. Institutions with assets over $1 billion must submit annual climate risk surveys. This ensures that the financial sector remains accountable for its environmental impact and can better understand the risks posed by climate change.
Global Impact on U.S. Companies
Many U.S.-based multinational corporations must comply with international ESG laws if they have significant operations abroad. For example, the EU Corporate Sustainability Reporting Directive (CSRD) impacts non-EU companies, including U.S. multinationals with substantial operations or revenue within the European Union.
The CSRD requires comprehensive reporting on Double Materiality, meaning businesses must disclose not only how ESG issues affect them financially but also how their operations impact society and the environment.
Voluntary ESG Reporting Frameworks
While federal regulations and state mandates are becoming more robust, most U.S. companies, particularly those in the S&P 500, rely on voluntary frameworks to meet investor demands. These frameworks help standardize ESG disclosures and make it easier for companies to report on their sustainability efforts.
ISSB (IFRS S1 & S2)
The International Sustainability Standards Board (ISSB) provides a global baseline for investor-grade sustainability reporting. The ISSB frameworks (including IFRS S1 & S2) focus on financial materiality, which makes them essential for companies aiming to attract long-term investors who value sustainability alongside financial performance.
Global Reporting Initiative (GRI)
The Global Reporting Standards (GRI) are one of the most widely used frameworks for broad ESG disclosures. These standards focus on social and environmental impacts, offering guidance for companies that want to demonstrate their corporate social responsibility and sustainability practices to the public.
Sustainability Accounting Standards Board (SASB)
The SASB Standards are industry-specific, helping companies disclose material ESG data that is financially relevant. For U.S. businesses, this framework is crucial for aligning ESG metrics with financial performance, making it easier for investors to assess risk.
How to Prepare an ESG Report: A Step-by-Step Guide
Step 1: Identify Key ESG Metrics
Start by identifying which ESG metrics matter most for your industry. Environmental metrics could include carbon emissions and energy consumption, while social metrics might focus on labor practices and employee health and safety. Governance metrics typically involve board diversity and executive compensation.
Step 2: Align with an ESG Framework
After identifying relevant metrics, align your reporting with voluntary frameworks like ISSB, GRI, or SASB. This ensures that your disclosures meet industry standards and satisfy investor and regulatory expectations.
Step 3: Collect Data and Analyze
Gather data on your chosen ESG metrics and analyze it. This includes Scope 1, 2, and 3 emissions for environmental reporting and human capital data for social aspects. Make sure your data is accurate to improve the credibility of your ESG reporting.
Step 4: Draft Your ESG Report
Once you have the data, begin drafting your report. Make sure to clearly highlight your goals, achievements, and areas for improvement. Transparency is key to building trust with your stakeholders.
Step 5: Publish and Share
After finalizing the report, publish it and share it with stakeholders, including investors, employees, and consumers. This demonstrates your commitment to transparency and sustainability.
Frequently Asked Questions (FAQs)
1. What is ESG reporting?
ESG reporting involves disclosing a company’s environmental, social, and governance practices. It helps stakeholders assess a company’s sustainability and ethical impact.
2. Are ESG reports mandatory for all U.S. companies?
While ESG reporting is mandatory for large public companies in the U.S. (especially those regulated by the SEC), smaller companies often use voluntary frameworks unless state laws require disclosures.
3. What are the main ESG reporting frameworks?
The main ESG reporting frameworks in the U.S. are ISSB, GRI, and SASB, each providing guidelines for companies to disclose their sustainability efforts in a standardized way.
Conclusion
Navigating ESG reporting requirements may seem complex, but it’s a vital step for US businesses to stay ahead.
By embracing transparency and aligning with the right frameworks, you’re not just complying—you’re building trust, attracting investment, and positioning your business for future success. Start today, and turn your ESG reporting into a powerful tool for growth.
