Dylan Buck (He/Him), Environmental Law Review Staffer, Fordham University School of Law, Class of 2027

The spring of 2025 marked a definitive turning point for corporate environmental accountability in the United States. In March, the Securities and Exchange Commission (SEC) abruptly ended its legal defense of the landmark climate-disclosure rule, calling it “unnecessarily intrusive.” By June, the agency doubled down by withdrawing proposed rules for enhanced environmental, social, and governance (ESG) fund disclosures. 

Broadly defined, ESG is a framework of performance indicators used by investors, regulators, and corporations to evaluate a company’s impact and sustainability beyond traditional financial metrics. For these withdrawn rules, the term specifically targeted how investment funds marketed their sustainability strategies to ensure that “standardized, comparable data supported green” or “sustainable” claims.

This regulatory pivot effectively killed the push for a standardized, federal greenhouse gas reporting framework, leaving investors to navigate a murky “federal vacuum.” In its place, a decentralized mix of Federal Trade Commission (FTC) guidance, aggressive state statutes, and private litigation has emerged as the primary check on corporate sustainability claims. However, this fragmented system is structurally weaker than the uniform regime it replaced. While it can successfully penalize blatant lies, it remains poorly equipped to discipline the softer, aspirational “greenwashing” that continues to distort consumer and investor confidence.

Greenwashing is the practice of making an organization or its products appear more sustainable or environmentally beneficial than they actually are. It typically involves using vague or unsubstantiated claims to create a misleading environmentalist image and capitalize on the growing consumer demand for “green” choices. Legally, this often manifests as “paltering”—the use of technically true statements to create an overall false or deceptive impression of a company’s climate impact. Beyond misleading consumers, greenwashing causes tangible ecological harm by delaying urgent climate action and allowing high-emitting practices to persist under a veneer of sustainability. This “symbolic talk” masks a company’s actual carbon footprint, preventing the market from penalizing environmentally destructive behavior and internalizing the costs of climate damage.

Without a federal floor, California has stepped into the breach as a de facto national regulator. Laws like Senate Bill 253 and Senate Bill 261 now mandate that large entities disclose Scope 1, 2, and 3 emissions, as well as climate-related financial risks. These “scopes” categorize greenhouse gas reporting by source, with Scope 1 covering direct emissions from the company and Scope 3 encompassing all indirect emissions across a company’s entire value chain (including upstream suppliers and downstream customer use). Furthermore, the Voluntary Carbon Market Disclosures Act (AB 1305) requires businesses to provide discrete data to substantiate “carbon neutral” or “net zero” claims (assertions that an entity has achieved an overall balance between the greenhouse gases it emits and those it removes from the atmosphere.) “Discrete data” refers to the specific, itemized evidence required to substantiate environmental claims, such as project locations, the protocols used for emissions calculations, and independent third-party verification.

New York is mirroring this ambition with its own Corporate Climate Accountability Act and bills specifically targeting “paltering”—the use of technically true statements to create misleadingly positive environmental impressions. This state-led surge introduces a “multi-layered divergence” that forces multinationals to juggle inconsistent standards, often leading to confusion rather than clarity.

The limitations of this patchwork system are most visible in recent Attorney General enforcement actions. In late 2025, New York Attorney General Letitia James secured a $1.1 million settlement with JBS USA, the world’s largest beef producer. The investigation revealed that JBS claimed a commitment to “Net Zero by 2040” despite having no viable plan to address its massive Scope 3 emissions. While the settlement forced JBS to pivot from using terms like “pledge” to “goal,” the intervention was purely reactive. It functioned as a post-hoc cleanup of a narrative that JBS had already spent years cultivating through expensive ad campaigns in major outlets like The New York Times. Under a mandatory federal disclosure regime, such unsubstantiated claims would likely have been stifled at the filing stage rather than litigated after the damage to consumer trust was done.

Furthermore, the existing tools for private and administrative policing remain toothless. The FTC Green Guides provide essential definitions for terms like “eco-friendly,” yet they are merely administrative interpretations, not stand-alone laws. This leaves enforcement to a surge in private consumer class actions, which Sabin Center data shows are frequently dismissed in U.S. courts on standing and redressability grounds. Because U.S. litigation often focuses on economic injury rather than environmental restitution, these suits rarely result in direct remediation of ecosystem damage. This gap means that even successful consumer settlements may fail to address the underlying atmospheric or ecological harm caused by the misstated emissions.

The U.S. “single materiality” standard’s focus makes it nearly impossible to discipline “image-building” claims that lack an immediate, provable financial impact. The U.S. standard only requires disclosure of information that a “reasonable investor” would consider important (or “material”) when deciding whether to buy, sell, or hold a company’s stock. This is in stark contrast to the European Union’s “double materiality” standard, which also mandates reporting on “impact materiality”—the actual external effect of a company’s activities on the environment and society. This EU framework forces transparency regarding negative externalities, ensuring that corporate accountability is tied to binding goals for CO2 reduction and measurable ecological outcomes rather than just immediate financial risk.

This structural weakness in U.S. law, which fails to mandate disclosure regarding planetary impact, is driving a troubling trend: “greenhushing.” Nasdaq analysis of fiscal year 2025 reports found that 37% of public companies scaled back or dropped standalone ESG risk disclosures, a sharp rise from 20% the previous year. Rather than becoming more transparent about their contributions to environmental harm, companies are choosing silence to avoid the heightened litigation risk in the current decentralized, state-led landscape. 

This retreat suggests that without a uniform federal mandate, the present regime is encouraging obfuscation. As corporations trade “commitments” for vague “aspirations” to escape liability, the law is failing to achieve its core purpose: providing the transparency necessary for a truly green economy. A regime that only cleans up the “worst examples” after the fact allows systemic environmental degradation to continue unabated. To truly deter greenwashing, the law must evolve from a reactive tool for consumer protection into a proactive framework that ties corporate transparency to measurable, verifiable planetary outcomes.