Environmental, Social, and Governance (ESG) regulation and compliance in 2026 is notably different than the landscape businesses faced before 2025. Deregulation on the federal level has resulted in states taking more active roles in environmental regulatory rulemaking and collectively filing litigation challenging Trump administration actions. Conversely, anti-ESG sentiment in some states has resulted in 23 states passing an assortment of state-level ESG restrictions.[1] Federal preemption pressure has intensified, particularly for state greenhouse gas emission (GHG) laws.[2]
Companies doing business internationally are faced with the reality that global ESG regulatory requirements require action, even if federal US regulations do not. The international and California ESG regulatory frameworks have transitioned to binding legal obligations. Those businesses required to file GHG disclosures under international or California law need to develop best practices for insuring compliance and avoiding enforcement actions. Moreover, while US federal enforcement has waned, private party greenwashing litigation continues to challenge sustainability claim marketing and labeling practices.
I. Corporate Climate Disclosure Trends
A. US Retreat at Federal Level, Active State Enforcement
1. SEC’s Climate Disclosure Rule
At the federal level, the Trump administration is actively dismantling the SEC’s Climate Disclosure Rule (Rule). In March 2025, the Administration withdrew its defense of the Rule and the Eighth Circuit held the consolidated challenges in abeyance on May 28, 2026.[3] In June 2026, the SEC proposed rescinding amendments to the Rule, including those requiring registrant reporting of climate-related information in the registration statements and annual reports.[4] According to the SEC, the Rule exceeds SEC’s statutory authority and lacks clear congressional authorization under the major questions doctrine; and even if authorized, is unnecessary and inconsistent with a registrant-specific, materiality-based framework.[5] However, notwithstanding the rescission of the Rule, companies are still obligated to disclose material climate information under existing principles-based obligations, including the 2010 Guidance and Regulation S-K Items 101 (business), 103 (legal proceedings), 105 (risk factors), and 303 (MD&A).[6] Companies also remain subject to state climate-related reporting obligations as discussed below.
2. California’s Climate Disclosure Laws
California is actively enforcing ESG laws through its Climate Corporate Data Accountability Act (SB 253) [7] and Climate-Related Financial Risk Act (SB 261).[8] SB 253 requires public disclosure of Scope 1[9], 2,[10] and 3[11] GHG emissions, measured under the GHG Protocol with third-party assurance, while SB 261 requires biennial climate-related financial risk reports under the Task Force on Climate-Related Financial Disclosures (TFCD), plus measures to reduce and adapt to those risks.[12] Under SB 253, U.S. organized entities doing business in California with total annual revenues exceeding $1 billion in the prior fiscal year must publicly disclose Scope 1 through 3 GHG emissions on an annual basis.[13] SB 261 requires US-organized entities doing business in California with total annual revenues exceeding $500 million in the prior fiscal year to biennially disclose climate-related financial risks.[14] While the Ninth Circuit granted a preliminary injunction halting enforcement of SB 261,[15] SB 253 remains in effect with an upcoming compliance deadline set for November 10, 2026 for Scope 1 and 2, and 2027 for Scope 3 GHG emissions reporting.[16]
Other states such as Colorado, Illinois, New Jersey, and New York are modeling corporate disclosure laws after California’s but are in varying stages of enforcement and compliance. In February 2026, the New York Senate passed the Climate Corporate Data Accountability Act (S. 9072A).[17] Modeled after California’s SB 253, the bill would require companies doing business in New York generating more than $1 billion in annual revenue to disclose Scope 1 through 3 GHG emissions with independent third-party assurance.[18] As currently drafted, the bill would require Scope 1 & 2 and Scope 3 GHG emissions reporting beginning in 2028 and 2029, respectively.[19] The legislation remains pending before the New York Assembly. If enacted, New York would become the second state behind California to impose broad climate-reporting obligations on both public and private companies. The bill includes a reciprocity provision letting entities satisfy New York’s requirements through California’s climate-related disclosures.
B. EU Narrowing of Corporate Sustainability Directives
Corporate Sustainability Directives in the European Union (“EU”) include: the Corporate Sustainability Reporting Directive (“CSRD”) and Corporate Sustainability Due Diligence Directive (“CSDDD”). For covered entities, CSRD requires submission of a sustainability report under the European Sustainability Reporting Standards on a double-materiality basis [20] covering strategy, transition plan, targets, governance, impacts, and value-chain due diligence.[21] CSDDD similarly imposes a due-diligence duty on covered entities to identify, prevent, mitigate, and end adverse human-rights and environmental impacts across the company’s own operations, subsidiaries, and chain of activities.[22]
In December 2025, the European Parliament formally amended CSRD and CSDDD, effectively narrowing both laws as to covered entities:
CSRD applies to EU companies with more than 1,000 staff and over €450 million net annual turnover (financial firms excluded) and non-EU parent entities generating over €450 million in net turnover in the EU in each of the last two financial years and have either: (i) an EU subsidiary with a net turnover exceeding €200 million in the last financial year, or (ii) an EU branch with a net turnover exceeding €200 million in the last financial year; and
CSDDD applies to EU companies with more than 5,000 staff and over €1.5 billion net annual turnover and non-EU companies with net annual turnover in the EU of over €1.5 billion in the last financial year.
The mandatory net-zero transition-plan obligation included in CSDDD was also removed. In March 2026, CSRD was subsequently amended such that it would apply to in-scope EU undertakings from 2028 (financial years starting 2027) and to non-EU undertakings with EU branches/subsidiaries from 2029. CSDDD was similarly amended where compliance is now required for in-scope companies by July 2029.
Companies should not treat the current rollbacks as the end of their environmental obligations and should stay abreast of the latest litigation, legislative, and administrative updates, particularly internationally and in states like California and New York which are actively enforcing, or gearing up to enforce, corporate climate disclosure obligations.
III. Greenwashing: Enforcement Rollback in US, Intensification in the European Union
In the US, greenwashing and carbon claim regulation is shifting from the federal to the state level. In contrast, the EU’s Empowering Consumers for the Green Transition Directive (“ECGT”), which took effect on September 27, 2026, amends the EU’s 2005 Unfair Commercial Practices Directive (“UCPD”) and the EU’s 2011 Consumer Rights Directive (“CRD”) to ban a wide range of generic and offset-based claims.[23] The EU’s Green Claims Directive – which would authorize fines up to four percent (4%) of a non-compliant trader’s annual turnover in EU member state(s) and a one-year exclusion from public procurement and public funding – remains stalled and may not pass Parliament.[24]
A. Substantiation-Based Liability
In the US and EU, the law on substantiation-based liability continues to develop. In the EU, the ECGT bans certain claim types outright, specifically targeting claims traders cannot substantiate. For example, offset-based neutrality claims (e.g., “climate neutral,” “CO2 neutral certified,” “carbon positive,” “climate net zero,” etc.) based on offsetting outside the product’s value chain; sustainability labels not based on a certification scheme or established by a public authority; unsubstantiated generic environmental claims (e.g., “eco-friendly,” “green”); and overly broad claims applying to an entire product or business when only one aspect qualifies. In the US, courts generally apply the FTC Green Guides and consumer fraud laws to determine whether unqualified claims mislead consumers.[25] The FTC Green Guides address deceptive environmental marketing and carbon-offset claims, including unqualified general environmental benefit claims that are difficult to substantiate, because they “likely convey that a product, package, or service has specific and far-reaching environmental benefits and may convey that the item or service has no negative environmental impact”.[26] While the FTC Green Guides are used by parties in litigation and as regulatory compliance guidance, they have not been updated since 2012[27] and remain non-binding with no formal rule established at the federal level. As articulated by the Ninth Circuit in McGinity, the governing test is the reasonable-consumer standard: whether the labeling has a “meaningful capacity to deceive.” [28] To avoid deceptive marketing and adhere to the FTC Green Guide requirements, advertisers must use clear, prominent, qualifying language limiting the claim to a specific, substantiated benefit.[29]
B. Enforcement Mechanisms
Enforcement mechanisms vary between the US and EU. In the US, enforcement is predominantly private- and litigant-driven – consumer class actions under state law, competitor Lanham Act suits, and advocacy-organization representative suits – supplemented by state attorneys general. In the EU, authority is coordinated through the Consumer Protection Cooperation (“CPC”) Network and Commission, with consumer organizations (e.g., Bureau Européen des Unions de Consommateurs or BEUC) filing complaints rather than litigants.
In 2026, US court decisions narrowed certain greenwashing theories:
Comparative “fewer emissions” ads survived scrutiny where the public already understands trade-offs. See City of New York v. Exxon Mobil Corp., No. 2025-01687, 2026 WL 3023932 (N.Y. App. Div. Oct. 8, 2026) (holding product claims could not deceive even an unsophisticated consumer given the City’s own premise of near-universal public awareness that fossil-fuel use drives climate change and challenged statements were comparative (i.e., “fewer emissions” than other gasolines) and not alleged to be false);
Corporate (non-product) greenwashing claims failed under a transaction-linked city statute. See Id. (dismissing corporate-greenwashing claim because statements were not made “in connection with the sale” of consumer goods or services as the City statute requires); and
“First-to-market” greenwashing was held non-cognizable under the Lanham Act. See Vericool World, LLC v. Igloo Prods. Corp., 175 F.4th 1045, 1052–1059 (9th Cir. 2026) (holding false-advertising claim based purely on which product was “first-to-market” is not cognizable under § 1125(a)(1)(B) limiting competitor “first/innovator” greenwashing theories.)
Product-labeling claims tied to the FTC Green Guides, by contrast, continue to clear the pleading stage. See Lieber v. Igloo Prods. Corp., 824 F. Supp. 3d 283, 294–299 (E.D.N.Y. 2026) (denying motion to dismiss for biodegradability and recycled-content deception claims on grounds that unqualified claims could plausibly mislead a reasonable consumer under the FTC Green Guides.) Plaintiffs with concrete, product-level label claims continue to fair best, while those with abstract corporate-image theories fair worst.
On the state level, greenwashing issues are addressed by either (a) the enactment of a green-claims-specific statute that adopts the FTC Green Guides as the compliance benchmark (California, New York, Minnesota, Maine, Rhode Island, Indiana), or (b) rely on a Unfair or Deceptive Acts or Practices (“UDAP”) statute and AG enforcement (most states, plus the AG greenwashing suits in Massachusetts, Connecticut, Vermont, and D.C.).
California’s Voluntary Carbon Market Disclosures Act (AB 1305), effective January 2024, requires entities making “net zero,” “carbon neutral,” or similar claims to post website disclosures documenting the basis for their claim(s) and any third-party verification(s).[30]AB 1305 has no minimum revenue threshold – even small companies operating in California must comply if they make covered claims or transact in offsets.[31] Similarly, California’s “Truth-in-Recycling” law (SB 343) prohibits offering for sale any product or packaging making a deceptive recyclability claim, and deems a chasing-arrows symbol or any “recyclable” indication deceptive, unless the item is “recyclable in [California]”[32] Under SB 343, recyclability turns on the “60/60” criteria: “material must be collected by programs covering at least 60% of California’s population and sorted by facilities serving at least 60% of programs statewide.”[33] On July 14, 2026, the U.S. District Court for the Southern District of California issued an order enjoining enforcement of SB 343 following a challenge brought by trade association plaintiffs.[34]
In New York, GBL § 349 declares deceptive acts and practices in business unlawful and authorizes the AG to sue to enjoin them and obtain restitution.[35] In February 2026, GBL § 349 was broadened to add “unfair” and “abusive” acts to the previously deceptive-only prohibition.[36] GBL § 350 separately bars false advertising where the AG may obtain injunctions, restitution, and civil penalties up to $5,000 per violation pursuant to the state’s deceptive acts and false advertising law.[37] New York also enforces a targeted labeling rule requiring compostable plastic bags to be labeled “COMPOSTABLE BAG — DO NOT PLACE IN RECYCLING BIN.”[38] In PepsiCo, the court dismissed the New York AG’s suit, holding that a prediction of a “hoped-for future” event does not constitute misrepresentation under GBL §§ 349, 350 and that a company “promising to reduce its use of plastics does not amount to deception.”[39]
In the EU, the Unfair Commercial Practices Directive (UCPD) governs business-to-consumer marketing and advertising.[40] The European Commission, under the UCPD, treats it as making “untrue or unverifiable” environmental or green claims, claims that create “the impression…that a good or a service has a positive or no impact on the environment or is less damaging to the environment than competing goods or services.”[41] The UCPD is enforced by national consumer-protection authorities and coordinated EU-wide by the European Commission through the CPC Network. The UCPD acts as the primary greenwashing enforcement vehicle in the consumer sphere and operates through four prohibitions:
a blacklist of banned practices in Annex I [42] that are always unfair; [43]
misleading actions[44] (Article 6) and misleading omissions (Article 7);
aggressive practices (Articles 8–9); and
a general prohibition on practices that contravene professional diligence and materially distort consumer behavior (Article 5).
The UCPD places the burden of substantiation on the trader.[45] Under Article 12, businesses “must have appropriate evidence to support their claims and be ready to provide it to competent enforcement authorities if the claim is challenged.” [46] Evidence must also be kept current for as long as the claim is in use.[47] In the EU, enforcement has typically come through Commission-coordinated airline [48] and bottled-water [49] actions, which favor negotiated commitments backed by residual national enforcement, alongside standalone national fines (Shein[50]) and court judgments (ENGIE, Eni Plenitude, Shell, and TotalEnergies[51]).
Greenwashing remains an active enforcement and litigation risk, particularly internationally and in states like California and New York. Greenwashing claims drawing scrutiny have moved beyond simple product labels towards technical, accounting-dependent, and forward-looking assertions. Vague “general environmental benefit” buzzwords like “sustainable” as well as carbon neutral, net zero, and carbon-offset claims have been the most recent targets, with plaintiffs in the US regularly invoking the FTC Green Guides and state consumer-protection statutes in support of their claims. Internationally, consumer organizations like the BEUC continue to actively enforce greenwashing claims under the UCPD.
III. Conclusion
While the environmental-ESG landscape has taken a step back at the federal level in the US and in the EU, it has not disappeared. Similar to the EU, states like California and New York, are actively moving from voluntary, marketing-forward commitments to active and robust compliance regimes. Companies best positioned are those that retain the underlying data and diligence infrastructure while, at the same time, recalibrating public messaging and legal framing to the new, deregulated environment.
[1] States with anti-ESG restrictions include: Alabama, Arkansas, Florida, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Utah, West Virginia, and Wyoming.
[2] See Exec. Order No. 14,260, 90 Fed. Reg. 15,513 (Apr. 14, 2025); Diamond Alternative Energy, LLC v. Env’t Prot. Agency, 606 U.S. 100, 145 S. Ct. 2121, 222 L. Ed. 2d 370 (2025) (reopening merits review on whether fuel producers have Article III standing to argue EPA exceeded its CAA § 209(b) authority in reinstating California’s GHG waiver); Cnty. Commissioners of Boulder Cnty. v. Suncor Energy USA, Inc., 2025 CO 21, ¶ 69, 586 P.3d 161, 174, cert. granted sub nom. Suncor Energy (U.S.A.) Inc. v. Cnty. Commissioners of Boulder Cnty., 146 S. Ct. 1605, 224 L. Ed. 2d 3 (2026) (concluding district court correctly held that federal law did not preempt Boulder’s climate-related tort claims and that those claims could therefore proceed under state law.)
[3] See State of Iowa, et al. v. Securities and Exchange Commission, Case No. 24-1522 (8th Cir. Mar. 12, 2024).
[4] 91 FR 33296 (June 3, 2026).
[5] Id. at 33298.
[6] 75 FR 6289 (February 8, 2010).
[7] See Cal. Health & Safety § 38532 et seq.
[8] See Cal. Health & Safety § 38533 et seq.
[9] Under SB 253, Scope 1 GHG emissions refers to “all direct GHG emissions that stem from sources that a reporting entity owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities.” See Cal. Health & Safety § 38532(b)(3).
[10] Under SB 253, Scope 2 GHG emissions refers to “indirect GHG emissions from consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity, regardless of location.” See Cal. Health & Safety § 38532(b)(4).
[11] Under SB 253, Scope 3 GHG emissions refers to “indirect upstream and downstream GHG emissions, other than Scope 2 GHG emissions, from sources that the reporting entity does not own or directly control and may include, but are not limited to, purchased goods and services, business travel, employee commutes, and processing and use of sold products.” See Cal. Health & Safety § 38532(b)(5).
[12] Supra notes 8 and 9.
[13]Supra note 8.
[14]Supra note 9.
[15]See United States of America Chamber of Commerce, et al. v. Sanchez, et al., No. 25-5327 (9th Cir. August 21, 2025).
[16]See California Corporate Greenhouse Gas Reporting and Climate Related Financial Risk Disclosure Programs, available at: https://ww2.arb.ca.gov/our-work/programs/california-corporate-greenhouse-gas-reporting-and-climate-related-financial-risk
[17]S. 9072A, 2025–2026 Leg., Reg. Sess. (N.Y. 2026).
[18]Id.
[19]Id.
[20]Under CSRD, “double materiality” includes both impact materiality (effects on people/environment) and financial materiality (effects on the undertaking).
[21]Directive (EU) 2022/2464.
[22]Directive (EU) 2024/1760.
[23]See Directive (EU) 2024/825 of the European Parliament and of the Council of 28 February 2024 amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and through better information, 2024 O.J. (L 825) 1.
[24]Proposal for a Directive of the European Parliament and of the Council on substantiation and communication of explicit environmental claims (Green Claims Directive), COM (2023) 166 final (Mar. 22, 2023), 2023/0085 (COD)
[25]16 C.F.R. §§ 260.1 et seq.
[26]See 16 C.F.R. §§ 260.1, 260.4.
[27]The FTC opened a decennial regulatory review of the Guides in December 2022, but no revised Guides have been issued. See Statement of Chair Lina M. Khan Regarding the Regulatory Review of the Guides For the Use of Environmental Marketing Claims Commission File No. P954501, 2022 WL 17751442.
[28]McGinity v. Procter & Gamble Co., 69 F.4th 1093, 1097 (9th Cir. 2023).
[29]See 16 C.F.R. § 260.4.
[30]See Cal. Health & Safety § 44475 et seq.
[31]Id.
[32]Cal.Pub.Res.Code § 42355.51.
[33]Cal.Pub.Res.Code § 42355.51(2).
[34]See California League of Food Producers et al. v. Bonta, Case No. 3:26-cv-01675 (S.D. Cal. Mar. 17, 2026).
[35]GBL §§ 349.
[36]Id.
[37]GBL § 350.
[38]ECL § 27-2707.
[39]People by James v. PepsiCo, Inc., 85 Misc. 3d 969, 222 N.Y.S.3d 907 (N.Y. Sup. Ct. 2024).
[40]Directive 2005/29/EC.
[41]Id.
[42]Annex I of the UCPD contains the blacklist of commercial practices automatically banned across all EU member states under Directive (EU) 2024/825.
[43]Banned practices include: displaying a sustainability label not based on a certification scheme or established by a public authority (i.e.,, effectively barring self-created or private labels); making an unsubstantiated generic environmental claim (i.e., terms such as “environmentally friendly,” “eco-friendly,” “green,” “climate friendly,” “carbon friendly,” or “biodegradable” where a trader cannot demonstrate recognized excellent environmental performance); making an overly broad claim about an entire product or business when it concerns only one aspect (e.g., “made with recycled material” when only the packaging is); claiming neutral, reduced, or positive environmental impact based on offsetting GHGs (e.g., “climate neutral,” “CO2 neutral,” “carbon positive” ).
[44]Misleading actions include: making a future environmental-performance claim (e.g., a net-zero pledge) without “clear, objective, publicly available and verifiable commitments and targets set out in a detailed and realistic implementation plan” or independent verification and advertising irrelevant benefits that do not result from any feature of the product.
[45]Supra Note 41.
[46]Id.
[47]Id.
[48]In November 2025, 21 European airlines committed, following CPC/Commission action, to modify misleading environmental claims, including removing statements that flight CO2 emissions can be offset or directly reduced through climate-project payments or alternative aviation fuels. CPC authorities may still act against airlines that fail to deliver. See EU press release available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_25_2608
[49]After a November 2023 BEUC complaint challenging “100% recyclable”/“100% recycled” claims (actual EU recycling rate ~55%, excluding caps), bottled water producers Coca-Cola, Nestlé, and Danone committed to more accurate labeling (e.g., “This bottle is 100% recycled. Excluding cap and label”), with CPC members able to enforce penalties if the bottled water producers fail to comply. See BEUC press release available at: https://www.beuc.eu/unbottling-greenwashing
[50]In July 2025, France’s General Directorate for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF) fined Shein roughly €22 million ($26 million): €16.7 million for order-confirmation issues and €5.8 million for issues with returns and environmental quality information. Shein called the penalty disproportionate and vowed to contest both sanctions. See newspaper article available at: https://www.wsj.com/business/retail/french-regulators-fine-shein-for-misleading-discounts-fabef615
[51]In June 2026, the BEUC filed a greenwashing complaint with the European Commission and national consumer authorities against ENGIE, Eni Plenitude, Shell, and TotalEnergies over marginal-renewables marketing, net-zero claims amid fossil-fuel expansion, and misleading GHG comparisons seeking fines and consumer compensation. BEUC asked authorities to fine the above companies if misleading claims continue, to require consumer compensation for higher prices charged on the basis of misleading claims, and to bar them from presenting climate-project investments as offsetting emissions. See BEUC press release available at: https://www.beuc.eu/press-releases/consumer-groups-file-greenwashing-complaint-against-engie-eni-plenitude-shell-and
