The new federal administration is reversing positions on certain ESG (environmental, social and governance) initiatives, including DEI (diversity, equity and inclusion) and federal leadership of the transition to renewable energy. With the political, regulatory and economic climates in flux, it’s more crucial than ever for EHS professionals to be aware of changing dynamics and potential impacts on compliance.
This article clarifies the evolving EHS and ESG interface, offering insights on how EHS professionals can proactively manage risks and seize opportunities in the face of uncertainty. First, a quick reference guide (Table 1) shows the relationship between traditional EHS functions and an ever-growing list of management and disclosure topics that fall under the broad umbrella of ESG or corporate sustainability.
Table 1 shows which ESG issues are typically owned and managed by EHS and which are owned or supported by other teams. Importantly, ESG and sustainability are different concepts. ESG has a reporting focus—for example, meeting investors’ demands for greater amounts of risk-oriented data. Sustainability encompasses a company’s long-term operating focus: how a business ensures prosperity from an environmental, social and economic perspective. The two terms are often used interchangeably, which can be confusing.
Table 1. Who Owns ESG and Sustainability? (Third Partners)
High-priority ESG issues that pertain to a specific company based on its industry and activities are known as “materially significant” issues. These topics are the priorities to measure, manage and report to stakeholders. There are various reporting frameworks for doing so. Companies report on some topics through government channels, including OSHA and EPA. Broader reporting happens through voluntary disclosures—for example, answering surveys from buyers and publishing sustainability reports for investors, employees and customers.
Most issues under the umbrella of ESG or sustainability have some impact on the EHS function and vice versa. Issue-by-issue, we’ll analyze the seven areas undergoing the greatest level of change and those requiring the most coordination between EHS and managers in other areas of the business:
🏛 Federal Transition Concern | Areas to monitor for changing enforcement, ongoing political division, controversy
💰 Economic Concern | Impact on business profitability, top line growth, compliance with customer requirements
⚖ Regulatory Concern | ESG-related policies with impacts for business
✔ Resources and actions for EHS leaders.
1. Energy Management and Energy Efficiency
🏛 The Trump administration is promising to unleash an all-of-the-above energy bonanza while simultaneously eliminating, rebranding, or blocking implementation of Inflation Reduction Act (IRA) programs to help manufacturers decrease energy costs and carbon emissions through subsidized cleantech investments. The IRA remains popular for its positive impacts on profitability and job creation. Energy policies such as repealing the ban on LNG exports may have the effect of driving up domestic energy prices, which would impact COGS for manufacturers and product prices for consumers.
💰 The business case for energy management remains clear. EHS professionals play a leading role helping companies reduce energy and pollution-related risk. Efficiency measures that reduce energy consumption typically correspond with decreased emissions of regulated pollutants including NOx, SOx, VOC, and PM. This is especially important during times of energy price volatility. Federal grants that improve the financial ROI of renewable energy and energy efficiency measures, such as Rural Energy for America Program (REAP) grants have been paused indefinitely.
⚖ In select jurisdictions such as New York City, energy efficiency is now the law. Exceeding commercial building energy benchmarks results in steep financial penalties for owners under NYC Local Law 97, creating a strong mandate for energy management, deep efficiency, and reporting.
✔ Resources and actions for EHS leaders:
● Participate in the US Department of Energy’s Better Buildings, Better Plants initiative, a longstanding program to help manufacturers improve energy efficiency and reduce COGS related to energy and waste. Resources include free on-site energy audits, training, energy management software, and more.
● “You cannot manage what you do not measure.” Implement an energy management system, in line with the ISO 50001 standard.
2. Circularity and Waste Reduction
⚖ EHS professionals will navigate a maze of jurisdiction-specific requirements, led by California and the European Union. The U.S. FTC’s “Green Guides” which protect the public from unfair or deceptive green marketing claims will endure, alongside parallel regulations for companies placing products on the market in Canada and the EU. For EHS leaders, that means developing new processes and controls to substantial product claims including “free from,” “made with,” and “made without.” This can be difficult in cases involving contaminates such as PFAS. Some California producers must meet the Responsible Textile Recovery Act of 2024, while food producers in the state prepare to meet the Plastic Pollution Prevention and Packaging Producer Responsibility Act making single-use packaging & food service ware recyclable or compostable by 2032.
💰 Disparate state & international requirements on waste and non-hazardous materials management typically translate into additional compliance costs for companies. Regulatory risk mitigation becomes more challenging in the absence of a unified federal agenda. On the bright side, weak federal coordination may translate into increased white space for leading companies to achieve brand differentiation through smart, circularity-based product innovation. Process-driven EHS professionals play a starring role when innovation involves coordinating people, capital, and materials flows.
✔ Resources and actions for EHS leaders:
● EHS professionals may share accountability for measuring and reducing waste with colleagues in engineering, R&D, and other areas of operations where excellence in safety, efficiency, and other sustainability challenges has direct positive implications for the bottom-line.
● Lean manufacturing, Six Sigma and operations efficiency working groups can help pinpoint the “7 sources of waste.”
● EHS leaders need to get involved as early as possible in team efforts to develop compliance strategies and workplans. Few other roles have as much direct experience with collecting & analyzing manufacturing data, supporting operational change management, and facilitating cross-functional collaboration.
3. Decarbonization, GHG Emissions Reduction and Target-Setting
🏛 Greenhouse gas emissions are not regulated at a federal level for most companies. The U.S. is once again exiting the Paris Climate Agreement, which will inevitably accelerate global warming and create confusion among corporate leaders. Thousands of U.S. companies base their own corporate GHG reduction targets on the international scientific consensus. Energy utilities may benefit from Trump-era GHG deregulation but the follow-on impacts for energy users are unclear.
💰 On the operations side, analysts expect GHG policy rollbacks to result in higher prices for energy ratepayers by undermining programs that aimed to stabilize the long-term costs of energy by transitioning to cleaner, less expensive technologies including wind and solar. Companies should expect energy price volatility. At a product and sales level, more and more buyers require companies to measure and disclose the carbon footprint of products using methods including Life Cycle Assessment (LCA). Markets for low-carbon construction materials and environmentally-oriented goods in the EU require studies to substantiate claims and disclosures used by specifiers.
✔ Resources and actions for EHS leaders:
● Federal mandates were never a significant factor in companies’ decarbonization programs. Thousands of companies have a mandate from their investors, shareholders, customers, and employees to measure and take action to reduce GHG emissions over time. Using a commitment framework such as the Science-Based Targets Initiative or Amazon Climate Pledge provides built-in tools to help measure and report year-over-year reductions.
● “A hedge with benefits.” EHS professionals will partner with colleagues in finance and procurement to explore renewable energy options and report to customers and investors on positive impacts. To lock-in lower prices from lower polluting energy sources contracts for renewable energy offer a long-term discount over spot market prices.
● Organizations like the Clean Energy Buyers Association (CEBA) provide training and resources to help get started in a space that may be unfamiliar to many facilities and operations leaders.
● When it comes to measuring GHG emissions and showing progress on goals, EHS professionals have a growing number of carbon accounting software options. To minimize time and resources, it may be advisable to get third party advice on the best approach for your specific situation.
4. Physical Risks of Climate Change
💰 The floods following Hurricane Helene in the southeastern states in 2024 devastated hundreds of business in agriculture, energy, logistics, and manufacturing and cost over $30 billion. EHS managers play a direct role in helping their organizations prepare, prevent, and recover from increasingly frequent climate-fueled natural disasters including fires, floods, extreme heat and cold. As these incidents become increasingly frequent and severe, the disaster planning and recovery function within companies becomes more critical to ensuring business continuity.
⚖ By the end of 2025, California SB 261 requires some 10,000 companies doing business in the state to study and disclose the financial risks of climate-related risks to their operations and supply chain. Specifically related to rising temperatures, a new Heat Stress Rule proposed by OSHA in 2024 would require companies to implement new operating procedures to protect worker health and safety. While unlikely to be implemented by the new administration, the rule mirrors state laws in Washington, Oregon and Minnesota already in effect.
✔ Resources and actions for EHS leaders:
● “Hope for the best, prepare for the worst.” Business Continuity Plans, Disaster Recovery Plans, and Incident Response Plans must be updated to address more frequent and severe climate-related incidents.
● Customers and investors require emergency plans to be in place and increasingly ask for more comprehensive planning, including tabletop exercises, recovery time statistics, simulations, and reviews of insurance policy coverage information.
● GIS-powered tools can help businesses prepare their own operations, disclose risks to customers and regulators, and even create new business solutions to climate-related threats. For example, understanding location-specific water scarcity over time is essential for business continuity and to protect profit margins from increasing natural resource costs.
5. Supply Chain Environmental and Social/Labor Impact
⚖ New regulations in California, Canada, and the EU make social and environmental sustainability in supply chains the law. New rules target deforestation (EUDR) and human rights in operations and supply chains. Companies must comply if they engage in commercial activity in the jurisdiction, which includes placing products on the market, with or without a physical presence.
💰 The biggest financial risk to companies is a combination of reputational damage and trade restrictions from non-compliance. The California Supply Chain Transparency Act carries fines of $2,500 per violation. The Canadian Modern Slavery Act (MSA) can result in fines of up to $250,000. For companies that place products on the EU market and fail to comply with EUDR, fines are up to 4% of EU sales, plus seizure of goods and exclusion from the market.
✔ Resources and actions for EHS leaders:
● These regulations cover company operations, products, and supply chain. Complying often involves collaboration between EHS professionals and peers in procurement, logistics, regulatory, sales, and HR.
● Waiting for a compliance survey to hit your inbox is not a good idea. The EU CSRD and EUDR impact U.S. companies. The data required to comply is extensive and may require weeks and months of lead time to work with suppliers and other business units.
● Even if you do not do business directly in Europe, you may be required to provide new information on labor and environmental practices to international customers who are directly impacted.
6. Land, Water and Air Pollution Reduction
🏛 The Trump administration promised Americans the “cleanest air and water.” Early executive actions show multiple risks mounting. Waivers to the Clean Water Act to expedite highly polluting industrial projects may have far reaching consequences for drinking water quality, availability, and human health in affected communities.
💰 Certain companies or industries may benefit in the near term from lax enforcement and waivers. Making long-term R&D, CapEx and process decisions based on a temporarily lax four-year regulatory cycle would have negative long term compliance cost consequences for the majority companies.
⚖ Expect some environmental reporting requirements and pollution control measures to be eased as chemical industry and fossil fuel lobbyists take the helm at the US EPA. For most companies and industrial facilities with a strong EHS program, the fed is just one of multiple jurisdictions responsible for pollution control. State, municipal, and customer-driven requirements continue to drive EHS programs. For example, wastewater quality requirements imposed by a local municipality will not be affected by federal deregulation.
✔ Resources and actions for EHS leaders:
● For companies that earn a premium market position with customers through differentiation on environmental benefits, it will be business as usual in 2025.
● Leading companies will maintain current best management practices for pollution control and reporting in order to meet other stakeholder requirements, including state and local jurisdictions, NGO watchdogs, customers, and communities.
● Voluntary standards such as Zero Discharge of Hazardous Chemicals (ZDHC) offer prescriptive “beyond compliance” guidelines for producers and buyers in apparel and consumer goods sectors.
7. DEI (Diversity, Equity and Inclusion)
🏛 Federal agencies are purging DEI from leadership roles, contract requirements, and procurement programs. Companies that sell to the Federal government will experience changing business requirements. However, companies that sell to other buyers e.g. state and local governments, retailers, and other businesses will still find that a diverse and inclusive company translates into less risk and more opportunity.
💰 There is a proven financial relationship between employee turnover, employee satisfaction, safety, and profitability. Programs to prevent bias and discrimination are aimed at reducing costly lawsuits and toxic workplace conditions which drag down productivity, morale, and retention. Cultivating an inclusive culture where employees feel like they belong has a net positive financial ROI for companies. For example, there is a strong correlation between turnover and safety incidents.
⚖ A few large companies have been targeted in court by activists who scare companies into abandoning corporate DEI practices. Other large firms like Costco are holding out. The vast majority of companies do not practice “race based employment,” but instead define DEI programs in ways that focus on positive cultural benefits of inclusion, anti-discrimination, and anti-harassment. Anti-harassment programs and training are still required by law in certain states, including California, New York, and Illinois. It remains illegal under federal law to discriminate based on protected status (race, ethnicity, age, gender identity) when hiring.
✔ Resources and actions for EHS leaders:
● DEI is traditionally owned by corporate HR and legal functions; however, EHS leaders may benefit from the proven correlation between a healthy culture, employee retention, safety and quality.
● Companies do not need to call wellness-related programs “DEI” to reap the benefits. The best policies reinforce the benefits of a workplace that values mutual respect, allyship, and appreciation for different life experiences without alienating any group of employees.
● Employee resource groups (ERGs) must be open to all employees, not just a particular group.
● Engagement surveys to measure effectiveness of safety and security practices can also be used to measure employee views on equity and inclusiveness, before gaps result in costly incidents or turnover.
