In my previous column, I spoke about how trade is leading the charge on President Trump's agenda, with a focus on reshoring manufacturing and potential tariffs on imported goods, strengthening border security, and achieving energy independence and about how these priorities will reshape business operations over the next 12 months. What we didn’t touch on was the administration's position to again withdraw the US from the Paris Agreement (Paris Agreement to the United Nations Framework Convention on Climate Change).
This agreement, also often referred to as the Paris Accords, is an international treaty on climate change adopted in 2015 that aims to limit global warming to well below 2°C compared to pre-industrial levels. It requires countries to set nationally determined contributions (NDCs) toward reducing greenhouse gas emissions. There are currently 195 parties (194 states/countries and the European Union as a single party) that have joined the agreement.
This poses an interesting, albeit complex, position for US businesses as it is only relevant to organizations or companies that are trading solely within the US. Although insular, some states will continue the enforcement of current state-level regulatory positions.
Consider California, where the state-level Climate Corporate Data Accountability Act-SB-253 and Greenhouse Gases: Climate-related Financial Risk-SB-261 environmental regulations will remain firmly in place regardless of federal policy changes. The Golden State isn't about to dismantle its ambitious emissions targets overnight. This creates a regulatory patchwork where geography, not just nationality, determines a company's environmental obligations. Businesses operating across multiple states will still need to meet the strictest market standards, effectively maintaining Paris-aligned practices.
Corporations operating and exporting internationally will find that reporting requirements haven't fundamentally changed. These companies remain subject to the environmental requirements of global trading partners and the expectations of increasingly climate-conscious consumers worldwide. European markets continue advancing stringent sustainability requirements for market access that American exporters cannot afford to ignore.
The reality is that reducing carbon emissions frequently translates to reducing costs. Energy efficiency initiatives that lower emissions simultaneously decrease energy expenditures. Supply chain optimizations that minimize transportation emissions also reduce fuel costs.
Looking at the numbers, more than 10,000 organizations worldwide have either set science-based targets or have committed to doing so under the Science Based Targets initiative (SBTi). These businesses were not forced to cut emissions but rather have chosen publicly to follow this guidance. This type of climate commitment from US-based firms won’t change regardless of what is happening at a federal level.
From a larger perspective, the withdrawal from the Paris Agreement is potentially a short-term action, and sustainability is a long-term journey. Who knows what the next administration will do? Investments made today are not made just for the next few years but rather to drive long-term value.
There are some reports that indicate leaving the agreement could potentially harm the US’s economic competitiveness. However, this is not to say that the withdrawal decision will allow for the US to increase its emissions or relax current emissions targets. At a minimum, this will create some regulatory uncertainty and fragmentation.
As other countries continue the race ahead with emissions-reduction investments and innovation, I don’t anticipate that companies, especially the larger ones in the US, will put a stop to current sustainability initiatives such as improving manufacturing processes or facility upgrades. This isn’t something that is simply switched off.
The practical implications of the US withdrawal from the Paris Accords on corporate sustainability efforts will likely be limited.
