Climate and Energy Executive Orders: Implications for Corporate Sustainability

On January 20, 2025, the president signed three significant climate and energy-related executive orders—“Declaring a National Energy Emergency,” “Unleashing American Energy,” and “Putting America First in International Environmental Agreements”—and rescinded several executive orders from prior administrations, including those focused on reducing emissions and expanding clean energy infrastructure. This article analyzes the key provisions of each order and their potential impact on corporate sustainability practices.

Key Insights

• Intended to strengthen US energy security and boost economic competitiveness, these climate- and energy-related executive orders mark a pivotal shift in federal climate policy.
• Despite federal rollbacks, large and multinational corporations will remain subject to new ESG regulations such as California’s climate disclosure laws and the EU’s Corporate Sustainability Reporting Directive, maintaining momentum toward decarbonization.
• 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.
• While withdrawal from the Paris Agreement is unlikely to significantly impact corporate climate efforts, the absence of federal contributions to global climate finance could prompt firms to play a larger role in funding climate adaptation and mitigation initiatives.
• The recent growth in voluntary corporate climate disclosures, risk management, and renewable energy investments highlights the strong influence of market trends, investor expectations, and global standards in driving sustainability, beyond domestic policy shifts.

Executive Order: Declaring a National Energy Emergency

This executive order invokes emergency provisions to accelerate domestic fossil fuel production and infrastructure expansion, citing energy reliability, affordability, and national security as critical objectives. It suspends key environmental regulations and redirects federal resources to bolster fossil fuel supply chains. An accompanying memorandum also directs federal agencies to halt new offshore wind leases.

Key actions specified in the order:

• Streamlined permitting: Accelerated approvals for fossil fuel infrastructure, including pipelines and export terminals, with reduced environmental review requirements under the Clean Water Act and the National Environmental Policy Act (NEPA).
• Offshore wind slowdown: Suspension of new and renewed offshore wind leases and heightened emphasis on fossil fuel expansion—although some renewable energy generation projects may benefit from expedited approvals.
• Environmental law waivers: Temporary exemptions from federal environmental statutes to expedite fossil fuel production and infrastructure.
• Defense Production Act (DPA) in action: The order invokes the DPA, a federal law that grants authority to prioritize and direct industrial activities deemed essential for national security. This includes directing companies to focus on the domestic extraction, refining, and distribution of fossil fuels and critical minerals to address specific national priorities.

Potential implications for corporate sustainability efforts include:

• Fossil fuel gains: Fossil fuel companies may benefit from faster project timelines and expanded operations, but they risk encountering oversupply challenges as global energy markets increasingly transition toward decarbonization. Companies reliant on fossil fuels face heightened reputational risks amid growing stakeholder and shareholder demands for emissions reductions.
• State-level pushback: States with strong climate policies, such as California and New York, are expected to counter federal rollbacks with stricter climate regulations. For instance, California’s new climate disclosure laws—which will require large public and private companies to report on climate financial risks and scope 1, 2, and 3 emissions— emphasize the need for companies to closely monitor and align with varying state-level requirements.
• Climate risk management: Despite federal policy shifts, climate resilience remains a key priority for business leaders, driven by rising extreme weather risks. Notably, the share of Russell 3000 companies disclosing climate change as a material risk factor rose from 30% in 2021 to 63% in 2024 (Figure 1). Boards and senior management should ensure that they continue to conduct climate risk assessments and integrate adaptation measures to protect assets and operations.

Executive Order: Unleashing American Energy

This executive order prioritizes deregulation of domestic fossil fuel production, reverses prior climate-focused mandates, and emphasizes energy affordability, national security, and market-driven energy policies. It reduces federal support for renewable energy, eliminates environmental justice programs, and streamlines permitting for fossil fuel infrastructure.

Key actions specified in the order:

• Expanded drilling and production: Federal and offshore territories, including ecologically sensitive areas like the Arctic National Wildlife Refuge, are now open for oil and gas exploration. The production and export of liquefied natural gas will be expedited.
• Streamlined permitting: Environmental review requirements under NEPA are curtailed, expediting approvals for pipelines, refineries, and other energy infrastructure projects. Federal agencies are also tasked with reviewing and addressing regulations and policies that may burden domestic energy development.
• Elimination of EV support: Federal mandates and subsidies for electric vehicle (EV) adoption are repealed, with an emphasis on promoting consumer choice and a level playing field for gasoline-powered vehicles.
• Climate initiative rescissions: Disbursement of funds for renewable energy projects under the Inflation Reduction Act and Infrastructure Investment and Jobs Act are paused pending review. Programs like the American Climate Corps, aimed at renewable energy workforce development, are also terminated.

Potential implications for corporate sustainability efforts include:

• Regulatory uncertainty: While streamlined permitting reduces approval timelines, it increases litigation risks in states with stricter environmental oversight. Companies pursuing large infrastructure projects should prepare for potential legal challenges and reputational impacts.
• State-level divergence: As discussed above, states with strong climate agendas, like California and New York, will likely enforce stricter mandates on emissions disclosures and renewable energy standards. Flexible compliance strategies are essential for navigating conflicting federal and state policies.
• Resilience of renewable energy: Despite federal reorientation, renewable energy remains cost competitive, and many leading US corporations continue to invest in renewables to power their operations and support sustainability goals (Figure 3). For example, Microsoft’s commitment to achieve 100% renewable energy by 2025—through investing in wind, solar, geothermal, biomass, and hydropower—underscores how private-sector initiatives remain critical drivers of decarbonization.

Executive Order: Putting America First in International Environmental Agreements

This executive order prioritizes domestic economic and energy interests over multilateral climate commitments, directing the US withdrawal from international climate agreements and reducing federal involvement in global climate finance. This reflects a strategic shift in US climate diplomacy, focusing on perceived economic disadvantages of multilateral commitments while reframing global environmental agreements around energy security and trade interests.

Key actions specified in the order:

• Paris Agreement withdrawal: The US formally initiates withdrawal from the Paris Agreement, citing concerns over economic burdens on US industries and perceived inequities in global obligations.
• Climate finance termination: Federal contributions to initiatives like the Green Climate Fund and the US International Climate Finance Plan are revoked, ceasing financial support for developing nations’ climate mitigation and adaptation efforts.
• Domestic policy alignment: Federal agencies are instructed to prioritize economic efficiency, consumer choice, and fiscal restraint in international energy-related agreements, deprioritizing climate-centric goals.

Potential implications for corporate sustainability efforts include:

• Limited impact of Paris withdrawal: Withdrawal from the Paris Agreement carries geopolitical implications but has limited direct influence on corporate sustainability strategies, as the agreement outlines broad global climate goals without prescribing specific actions, standards, or sector-specific targets for businesses. Companies should set climate and environmental goals that are adaptable to policy shifts and aligned with their strategic vision, stakeholder expectations, and market trends, rather than relying on top-down directives from international agreements.
• Increased private sector role in climate finance: The withdrawal of federal contributions to global climate finance may increase pressure on corporations to step in through impact investing, partnerships, or other mechanisms to address climate adaptation and stakeholder expectations.
• Global regulatory pressure: Despite federal pullback from global emission goals, multinational corporations remain subject to international regulations, such as the European Union’s Corporate Sustainability Reporting Directive (CSRD). The increasing trend of US companies voluntarily disclosing GHG emissions—rising from 2021 to 2024 (Figure 2)— illustrates how global regulatory and stakeholder expectations continue to drive transparency and decarbonization efforts.

About This Article

This article summarizes three executive orders signed by the president on January 20, 2025, addressing climate and energy issues, and examines their potential implications for corporate ESG and sustainability efforts. It also incorporates data from the TCB Benchmarking platform, powered by ESGAUGE, which provides a comprehensive library of corporate disclosure data from US public companies, including environmental practices.

This article is based on corporate disclosure data from The Conference Board Benchmarking platform, powered by ESGAUGE