In our world businesses are already forced to navigate a labyrinth of complex regulations—they are drowning in paperwork and incurring exorbitant costs just to stay afloat. Yet this scenario is about to get exponentially worse as the United States Securities and Exchange Commission (SEC) rolls out a misguided and burdensome new climate disclosure rule that could reshape the landscape of American enterprise. The SEC, an agency tasked with protecting investors and ensuring fair markets, has stepped into uncharted territory with this rule, demanding that public companies disclose extensive “climate-related” risks and greenhouse gas emissions data. The sweeping mandate has already sparked a fierce legal battle, and MSLF has entered the fray.
Case Background
In March 2024, the SEC introduced a new mandate requiring public companies to disclose extensive details regarding climate-related risks and emissions, claiming that such information is related to informed investor decision-making. The Job Creators Network Foundation and the National Association of Wholesaler-Distributors, both represented by Mountain States Legal Foundation, recognize this rule for what it is: an overreach of regulatory power. In our brief, we show how the SEC, in implementing this mandate, exceeded its lawful jurisdiction and invalidly tried to regulate our clients.
Job Creators Network Foundation partners with entrepreneurs to educate the public about governmental policies that impact American businesses. Meanwhile, the National Association of Wholesaler-Distributors advocates for policies that secure the interests of its members to do business freely and fairly. These organizations argue that the SEC’s rule would impose massive burdens on non-public entities, such as small and medium-sized businesses, to disclose voluminous data to their larger customers. For instance, a small company that makes parts for a large car manufacturer would be forced to report its own carbon emissions, even if it isn’t a public company regulated by the SEC.
The SEC’s onerous demands on small businesses would require significant time, financial resources, and specialized expertise for little to no benefit. If it goes into effect, the new regulation would be burdensome, unreasonable, and simply impractical. It threatens to disrupt the operations of smaller enterprises, jeopardize their relationships with larger corporate clients, and potentially undermine their overall success.
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Fortunately, the new rules were challenged right away. The Eighth Circuit Court Appeals is now handling combined challenges from 19 state attorneys general, the US Chamber of Commerce, and the Ohio Bureau of Workers’ Compensation, among others.
The lawsuits bring claims under the Administrative Procedure Act, the major questions doctrine, and even raise serious First Amendment concerns about compelled speech when it comes to the disclosures.
Mountain States’ amicus brief on behalf of our clients urges the court to strike down the rules. We sent a clear message that the SEC has acted arbitrarily and capriciously, arguing that it failed to adequately consider the full economic impact of the rule, particularly on small and medium-sized businesses. Ultimately, we hope to protect the ability of small and medium-sized businesses to compete and thrive, without being burdened by regulations designed for much larger companies.
What’s at Stake
For Our Clients and Small Businesses
For Job Creators Network Foundation and the National Association of Wholesaler-Distributors, the stakes are high. Small and medium-sized businesses would face significant new costs to collect, analyze, and report “climate-related” data. These businesses often operate on thin profit margins, and lack the resources to hire additional staff or outside consultants for this purpose. But they may lose contracts with larger companies if they cannot provide the required data, creating a two-tiered market where smaller businesses without the resources to track and report emissions are shut out of lucrative contracts. For instance, a small trucking company might lose business to a larger competitor that can offer detailed emissions data for its fleet.
For All Americans
For the broader American public, the rule’s implications would lead to economic harm and reduced job creation, particularly in sectors dominated by small and medium-sized businesses. Consumers would then face higher prices for goods and services, as businesses pass on compliance costs. Moreover, the rule represents the worst kind of government overreach, with an unelected agency – the SEC – making major policy decisions that would reshape the economy. This case raises important questions about the balance of power between government agencies and Congress in addressing complex issues like climate change.
