Trump’s energy policies risk creating compliance headaches for US firms

Trump’s recent executive orders on climate and energy are causing increasing fragmentation in the US regulatory landscape, forcing firms to develop “flexible compliance strategies”, researchers have found.

Analysts from The Conference Board, published by the Harvard Law School Forum on Corporate Governance, looked at the impact of three recent executive orders signed by US President Donald Trump on corporate sustainability strategies.

The first order, which declared a national energy emergency, aims to accelerate domestic fossil fuel production by streamlining permitting and suspending environmental regulations and many renewable projects.

The researchers believe that this may lead to state-level pushbacks, particularly from California and New York, which will accelerate the implementation of their own climate regulations, and advise companies to closely monitor state-level developments.

“Diverging state and federal climate policies are creating a fragmented regulatory landscape in the US, challenging corporations to develop flexible compliance strategies that address both progressive state mandates and federal deregulatory initiatives,” author Matteo Tonello, Head of Benchmarking and Analytics at The Conference Board, notes.

Climate risk monitoring becomes more crucial than ever

At the same time, it will become even more crucial in a fossil fuel-driven economy to monitor and report on climate risks, so boards and senior management should ensure that they continue to assess these risks and integrate adaptation measures to protect assets and operations.

The second executive order, named ‘Unleashing American energy’, reduces federal support for renewable energy, eliminates environmental justice programmes and further streamlines permitting for fossil fuel infrastructure. This increases regulatory uncertainty (and litigation risks) – but the researchers believe that renewable energy will remain cost-competitive, so many corporations will continue to invest in clean power.

More pressure on private sector to provide climate finance

Finally, the ‘Putting America first in international environmental agreements’ executive order aims to prioritise domestic economic and energy interests over multilateral climate commitments, and include the US withdrawal from the Paris Agreement and the termination of US financing to the Green Climate Fund and other global initiatives.

Researchers expect limited impact from the Paris Agreement withdrawal on individual corporate sustainability strategies, but warn that the lack of federal contributions to climate finance may increase pressure on the private sector to step in.