Category Archives: Environmental Enforcement

European Union Finally Adopts Corporate Sustainability Due Diligence Directive

by Samantha Rowe, Patricia Volhard, Jin-Hyuk Jang, John Young, Ulysses Smith, Jesse Hope, Harry Just, and Andrew Lee

Photos of the authors

Top left to right: Samantha Rowe, Patricia Volhard, Jin-Hyuk Jang and John Young. Bottom left to right: Ulysses Smith, Jesse Hope, Harry Just and Andrew Lee. (Photos courtesy of Debevoise & Plimpton LLP)

On 24 May 2024, the European Council (the “Council”) formally adopted the Corporate Sustainability Due Diligence Directive (the “CSDDD” or the “Directive”). The regime introduces human rights, environmental and governance due diligence obligations for in scope companies’ and their subsidiaries’ operations, and in their “chain of activities”, which are companies’ supply and distribution chains.

Continue reading →

EPA Announces New Enforcement Policy Requiring Civil-Criminal Coordination

by Steven P. Solow and Chloe Graham

From left to right: Steven P. Solow, and Chloe Graham (Photos courtesy of Baker Botts LLP)

The Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance (OECA) announced a new Strategic Civil-Criminal Enforcement Policy (Policy) that is perhaps the most significant change in environmental enforcement since the passage of the basic environmental laws decades ago. At bottom, the new Policy addresses the long-standing concern that the decision to enforce a matter civilly or criminally ultimately depended on whose “desk” it landed on.

Continue reading →

Amid Storm of Controversy, SEC Adopts Final Climate Disclosure Rules

by Stephen A. Byeff, Ning Chiu, Joseph A. Hall, Margaret E. Tahyar, Ida Araya-Brumskine, Loyti Cheng, Michael Comstock, and David A. Zilberberg

photos of authors

Top from left to right: Stephen A. Byeff, Ning Chiu, Joseph A. Hall, Margaret E. Tahyar.
Bottom left to right: Ida Araya-Brumskine, Loyti Cheng, Michael Comstock, and David A. Zilberberg. (Photos courtesy of Davis Polk & Wardwell LLP).

Changes from the proposal include elimination of Scope 3 disclosures, scaled back attestation requirements, additional materiality qualifiers and narrower financial statement triggers. Given the lack of explicit congressional authorization for this new sweeping disclosure regime, its political sensitivity, complexity, cost and the substantial challenges already underway in federal courts, we anticipate rapid developments and possibly confusing stops and starts to unfold over the coming weeks.

Continue reading →

Supply Chain Due Diligence Obligations in Germany, France and the EU: An Overview

by Amélie Champsaur, Mirko von Bieberstein, Guillaume de Rancourt, Sebastian Kummler, Camille Kernevès, Andreas Wildner, and Marc Christopher Baldauf

Photos of authors

Top from left to right: Amélie Champsaur, Mirko von Bieberstein, Guillaume de Rancourt, Sebastian Kummler.
Bottom left to right: Camille Kernevès, Andreas Wildner, and Marc Christopher Baldauf. (Photos courtesy of Cleary Gottlieb Steen & Hamilton LLP).

Germany and France, the two largest economies in the EU, have adopted laws to hold companies accountable for violations concerning human rights and environmental protection along their supply chain. With the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, “LkSG”) and the French Duty of Vigilance Law (Loi de vigilance, “Vigilance Law”) both countries have already implemented a respective regulatory framework that would be refined by a future European Corporate Sustainability Due Diligence Directive (“CS3D”), which would mandate all other Member States to implement similar laws.

The following provides an overview of the key aspects of the LkSG and the Vigilance Law, draws comparisons between the LkSG and the Vigilance Law and gives an outlook on the envisaged CS3D for supply chain due diligence in the EU in the future, based on the latest proposal.

Continue reading →

SEC Issues Long-Awaited Climate-Related Disclosure Rule

by Eric T. Juergens, Benjamin R. Pedersen, Paul M. Rodel, Kristin A. Snyder, Caroline N. Swett, Ulysses Smith, Michael Keene, Mie Morikubo, Michael Pan, Amy Pereira, and Maayan G. Stein

photos of authors

Top left to right: Eric T. Juergens, Benjamin R. Pedersen, Paul M. Rodel, Kristin A. Snyder, Caroline N. Swett, and Ulysses Smith. Bottom left to right: Michael Keene, Mie Morikubo, Michael Pan, Amy Pereira, and Maayan G. Stein. (Photos courtesy of Debevoise & Plimpton LLP).

On March 6, 2024, the U.S. Securities and Exchange Commission (“SEC”) adopted a long-awaited final rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which will require registrants, including foreign private issuers (“FPIs”),[1] to disclose extensive climate-related information in their registration statements and periodic reports (the “Final Rule”). The Final Rule is intended to facilitate the disclosure of “complete and decision-useful information about the impacts of climate-related risks on registrants” and to improve “the consistency, comparability, and reliability of climate-related information for investors.” The Final Rule constitutes one of the most significant changes ever to SEC disclosure requirements, and is expected to face legal challenges. The Final Rule is available here and the accompanying fact sheet is available here.

Continue reading →

Companies Face Increased Criminal Enforcement Risk From Aging Infrastructure-Related Disasters

by Alexander C.K. Wyman, Aron Potash, and Mikaela Wynne Gilbert-Lurie

From left to right: Alexander C.K. Wyman, Aron Potash, and Mikaela Wynne Gilbert-Lurie. (Photos courtesy of Latham & Watkins LLP)

Utilities and energy companies can implement strategies to mitigate risks from more frequent environmental disasters and infrastructure failures.

In the early morning of June 11, 2023, a tanker truck carrying gasoline up I-95 in Philadelphia crashed and caught fire, and the overpass above buckled and collapsed. The section of the highway is critical to the roughly 160,000 vehicles that cross it daily. The immediate cause of the collapse is believed to be either the heat from the flames or the impact of the explosion weakening the steel beams supporting the overpass. Some, however, identified a more fundamental problem: “the fragility of the state’s aging infrastructure.”[1]

While the I-95 collapse presents a recent example of the significant risks associated with the US’s aging infrastructure, it is by no means unique. Many of the roads, bridges, dams, and electrical grids that keep the country running are decades old and often in need of repair. Infrastructure failures combined with environmental disasters can be catastrophic, and the consequences dire, for the public, the environment, and the utility or corporate entity potentially responsible for operating the failed infrastructure component. Moreover, a vicious cycle is often at work with respect to the environment and infrastructure failures in which, for example, extreme weather causes an infrastructure breakdown that in turn may result in environmental damage.

Continue reading →

Supreme Court Rejects Challenge to California Law Alleged to Burden Out-of-State Industry

by John F. Savarese, Kevin S. Schwartz, Noah B. Yavitz, Adam L. Goodman, and Jacob Miller

Photos of the authors

From left to right: John F. Savarese, Kevin S. Schwartz, Noah B. Yavitz, Adam L. Goodman, and Jacob Miller (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

Recently, a divided Supreme Court upheld the constitutionality of a California law banning the in-state sale of meat from pigs confined under specified “cruel” conditions. Petitioners — two industry organizations — had alleged the law violates the Commerce Clause by imposing substantial costs on out-of-state producers and impermissibly regulating the national pork market. This challenge marked an effort by the industry to expand the so-called “dormant” Commerce Clause, which polices states’ ability to enact regulations with interstate impact when Congress has chosen not to act in the field sought to be regulated by a state. That effort failed. In National Pork Producers Council v. Ross, all nine Justices rejected petitioners’ argument that there exists an “almost per se” rule forbidding enforcement of state laws that have the practical effect of imposing prescriptions on commerce outside the state.

Continue reading →

New York Department of Financial Services Issues Final Guidance on Managing the Financial Risks of Climate Change for Insurers

by Marion Leydier, William Torchiana, Roderick Gilman, Sarah Mishkin and Samuel Saunders

On November 15, 2021, the New York State Department of Financial Services (“DFS”) issued detailed final guidance (the “Final Guidance”) addressing how New York domestic insurers should analyze and manage the financial risks of climate change.[1] The Final Guidance builds on the DFS’s proposed climate guidance released in March 2021.[2]

The Final Guidance reflects relatively limited changes from the proposed guidance.  The changes include additional guidance on the time horizon insurers should consider when integrating climate risks into business decisions; how insurers should manage uncertainty related to climate change; and how the guidance applies to insurers that are part of groups. The DFS notes that it expects insurers to implement its guidance relating to board governance and to have specific plans in place to implement the guidance relating to organizational structure by August 15, 2022. The DFS plans to issue further guidance on the timing for implementation of more complex areas that will take insurers longer to implement, such as those relating to risk appetite, analysis of the impact of climate risks on existing risk factors, reflection of climate risks in the Own Risk and Solvency Assessment (“ORSA”), scenario analysis and public disclosure, but the DFS notes that it encourages insurers to begin working on these now.

The Final Guidance comes as U.S. financial regulators and policy makers, including the U.S. Department of Treasury, the U.S. Securities and Exchange Commission (“SEC”) and the Federal Reserve Bank, are focused on the potential systemic risk that climate change poses to the financial sector.[3]

Insurance and other prudential regulators outside of the U.S. are also addressing climate-related risks, and the DFS notes that the Final Guidance is modeled on publications and guidance from international regulators and networks, including the Bank of England Prudential Regulation Authority, the International Association of Insurance Supervisors (“IAIS”), the European Insurance and Occupational Pensions Authority (“EIOPA”), the European Central Bank and the Network for Greening the Financial System.[4]

An overview of recent actions by regulators and lawmakers in the U.S., EU and UK related to climate change and other environmental, social and governance topics is provided in the Firm’s ESG update newsletter, available here.

Continue reading →

What’s Old Is New Again: DOJ’s New Corporate Criminal Enforcement Policies Equip Prosecutors with More Tools and Information

by Alicyn Cooley and Matthew Levine 

The approach of the Biden Justice Department to corporate and financial crime continues to emerge—or re-emerge. Corporations with federal criminal exposure must now, again (PDF: 463 KB), provide information on all individuals responsible for misconduct in order to receive cooperation credit from the Department of Justice. And corporations which resolve that exposure pursuant to Deferred Prosecution Agreements (DPAs) or Nonprosecution Agreements (NPAs) with DOJ will also now face the increased likelihood of independent monitorships—the use of which waned considerably in recent years, even before the Trump administration explicitly discouraged imposing them in 2018 (PDF: 4.9 MB).

In keynote remarks delivered yesterday at the American Bar Association’s National Institute on White Collar Crime, Deputy Attorney General Lisa Monaco announced these and other new DOJ policies and initiatives, all of which are reminiscent of the Obama Administration’s approach to corporate criminal enforcement. In particular, companies and practitioners should take note of DOJ’s stated commitments to: (1) equipping prosecutors with more information and tools—including monitors—to root out corporate crime and ensure corporations comply with the law and the requirements of their agreements with DOJ; (2) proactively using data accumulated about past corporate resolutions, including taking into account corporations’ full criminal and regulatory histories; and (3) standardizing approaches to corporate enforcement across DOJ and the U.S. Attorneys’ Offices.

Continue reading →

Recent Developments in Environmental Justice Enforcement and Permitting

by Peggy Otum, Shannon Morrissey, and Caroline McHugh

The Biden Administration’s “whole of government” approach to advancing environmental justice (EJ) continues apace, with agencies and courts pursuing focused enforcement and environmental review strategies that could affect regulated entities in a number of ways. At a high level, a novel partnership between the US Environmental Protection Agency (EPA) Region 9, the federal EJ leader, and the California EPA (CalEPA) could inform the way that the agencies investigate and enforce violations affecting communities overburdened by pollution. And other federal agencies—not previously known for their attention to EJ—are now taking steps to more thoroughly account for impacts to disadvantaged communities in their environmental reviews and permitting decisions. In light of these recent developments, companies should continue to anticipate increased enforcement of violations affecting overburdened communities and prepare for heightened scrutiny of EJ impacts in environmental permitting reviews.

Continue reading →