ESG Disclosure Bills Introduced to States
American companies are facing unprecedented pressure to take action on issues like race and gender, inequality, pollution, and human rights. In 2022, state governments introduced a plethora of new legislation aimed to hold corporations accountable. RILA has identified four district categories of legislation related to government mandated disclosures in 2022: Corporate Board Diversity, Human Capital Management, Environmental Disclosures, and Supply Chain Transparency.
Corporate board diversity requirements promote an increase in diversity on corporate boards. Legislation that falls under the human capital management category often requires employers to submit internal compensation statistics across a variety of categories, including gender identity, race, ethnicity, and seniority. Bills in this category may also require companies to provide a salary range on all job postings. When Colorado became the first state to require that job postings include a salary range at the beginning of 2021, some companies simply stopped advertising jobs in the state.
Legislation in the environmental disclosure category would require companies to publicly disclose their greenhouse gas emissions and/or prepare a climate-related financial risk report that is reviewed by a state agency and then made available on the company’s own website. Finally, the supply chain disclosure bills that we have reviewed are often written to address specific human rights concerns with the global supply chain such as human trafficking, the use of forced labor in China, or the use of child labor in mining operations in the Congo.
The tables below provide legislative examples of the different types of ESG disclosure bills introduced in 2022. These types of proposals will only become more and more common, especially if progressive states continue to feel like their priorities are not adequately addressed at a federal level. For American companies, this means that there could be a patchwork of cumbersome disclosure requirements laid out in a select number of states. It is important that companies are aware of the various types of disclosure legislation happening now, so that they can be properly prepared for the future.
An overview of introduced, and previously enacted, ESG disclosure bills can be downloaded below.
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