109 Iowa L. Rev. 1429 (2024)
Abstract
As social norms around climate change shift rapidly, and the U.S. Supreme Court requires federal regulation to retreat, regulations at the state and local levels fracture into increasingly aggressive, and often diametrically opposed, enforcement. Meanwhile, business representations regarding environmental, social, and corporate governance (“ESG”) initiatives are being policed by traditional charges of fraud that are civil, and, increasingly, criminal. These tensions create massive uncertainties for business. On a global issue like climate change, U.S. businesses, and the people who run them, need political and regulatory stability.
Most scholarship has focused on whether the proposed U.S. disclosure standards will survive Supreme Court review. This Article describes why they will not work, and why additional ESG liability is coming if we do not adopt protective international standards.
The Article makes three important contributions. First, it demonstrates how out-of-step with the rest of the world U.S. federal courts are, and how the country’s failure to adopt ESG standards in line with international developments hurts U.S. businesses. Second, it highlights for the first time the growing potential within the United States, due to its lack of such standards, for corporate criminal ESG liability based on fraud. Third, it flags potential similar individual civil and criminal liability for businesses’ agents and directors.
The Article concludes with the important, timely, and novel argument that U.S. businesses, their directors, and agents, especially counsel, should see it as in their best interests for the United States to adopt protective international ESG standards.