Governance & Sustainability Roundup – April 21, 2026

Welcome to our Governance & Sustainability Roundup — Our regular briefing that gives a quick overview on what has happened recently in the world of governance and sustainability that may be of interest to your company, your executive team, or your boards. This is a fast-evolving space, and we hope to share brief highlights with you on a regular basis. V&E is happy to discuss any of these updates in more detail, so please reach out with any questions.

Key Developments You Should Know

Department of Justice’s Lawsuit Dismissed that Sought to Stop Hawaii From Suing Fossil Fuel Companies Over Climate Change

For the second time in 2026, a federal judge has dismissed the Trump administration’s efforts seeking to prevent a state from suing fossil fuel companies over climate change. In May 2025, the Department of Justice (“DOJ”) filed separate suits against Hawaii and Michigan alleging that their actions were preempted by federal law and would, relatedly, burden energy production (therefore contravening President Donald J. Trump’s directive in Executive Order 14260, Protecting American Energy from State Overreach). Both states had filed lawsuits against various fossil fuel companies seeking to hold them accountable for climate harms. A U.S. District Judge dismissed the administration’s lawsuit against Hawaii with prejudice, finding that the DOJ’s theory of harm was abstract, speculative, and based on hypothetical actions third parties could take if the state’s efforts were unsuccessful. The ruling tracked a similar decision from a federal judge in January 2026, dismissing the administration’s attempt to preemptively block Michigan from suing major oil companies. Although perhaps not considered a clear “win” for climate change proponents, the dismissals of the DOJ’s efforts leaves the door open for state lawsuits to proceed against fossil fuel companies for alleged damages related to the impacts of climate change. Energy companies should follow efforts by Hawaii, Michigan, and other states that may take similar actions, particularly given the possibility of significant financial impacts should any such suits be successful.

GHG Protocol Releases Potential Changes to Scope 3 Reporting Standard

The reporting of Scope 3 greenhouse gas (“GHG”) emissions has been subject to intense scrutiny and much controversy. Scope 3 GHG emissions are indirect emissions from a company’s value chain, including upstream suppliers and downstream customers. They are often the largest portion of a company’s footprint, but the most difficult to accurately measure, calculate and report, largely because such emissions are outside of a company’s direct control. In early April 2026, the GHG Protocol released a progress update regarding potential revisions to its Scope 3 Standard. Perhaps the most significant proposed change, particularly for companies that report using the GHG Protocol Standards, is a new requirement for companies to report at least 95 percent of total required Scope 3 GHG emissions in order to comply with the Scope 3 Standard. The current standard does not quantify this requirement. The GHG Protocol’s rationale provides that this requirement will help capture all major activities attributable to a company’s business within their Scope 3 GHG inventory. Another notable change is the introduction of a “Category 16” that would cover other value chain activities not already set forth in the existing fifteen categories.Such activities would include facilitated emissions and emissions generated by third-parties from which the reporting company earns direct income. A complete draft Scope 3 Standard is expected to be forthcoming and will be “open” for public consultation. Organizations that report using the GHG Protocol’s various standards should familiarize themselves with the contents of the progress update and, when published, the draft Scope 3 Standard in order to begin incorporating new requirements and changes into their existing internal frameworks. This is particularly important given that certain mandatory reporting disclosure laws — such as the California Climate Laws — leverage the GHG Protocol within their requirements. Changes to the Scope 3 Standard could have implications for reporting entities when the time comes to report Scope 3 GHG emissions.  

EPA Designates Microplastics as a Priority Contaminant Group in Drinking Water

In early April, the U.S. Environmental Protection Agency (“EPA”) published its draft Sixth Contaminant Candidate List (“CCL 6”) for public comment. Notably, the draft CCL 6 includes four contaminant groups — per- and polyfluoroalkyl substances (PFAS), disinfection byproducts, pharmaceuticals, and microplastics — with the latter two on the list for the first time ever. The CCL identifies contaminants found in drinking water which are not currently regulated under the Safe Drinking Water Act; the EPA is required to update the CCL every five years. The publication of CCL 6 comes as part of the Trump administration’s focus to Make America Healthy Again (colloquially known as “MAHA”). Placing microplastics and pharmaceuticals on the CCL 6 will drive research, funding, and future regulatory decisions (i.e., national limits on allowable levels in public drinking water). As noted, the CCL 6 is open for public comment. EPA will also consult with an independent Science Advisory Board before finalizing the final CCL 6, expected in mid-November 2026. EPA’s action here is an initial step, but it should be noted that it is a long process from identification to regulation. Having said that, this is a notable development and one that companies, particularly in the plastics value chain, should keep an eye on. This new focus by the EPA could lead to regulatory scrutiny by the federal government in the medium-to-long term and raise awareness of the issue with other parties, such as state regulators or private plaintiffs in the near term.

DOJ Reaches Settlement in First DEI-Related Enforcement Under the False Claims Act

The DOJ announced the first settlement under the agency’s Civil Rights Fraud Initiative, involving a False Claims Act resolution against IBM (V&E has written extensively on the focus of DEI under the False Claims Act). The initiative, formed to identify and address allegations of illegal diversity, equity, and inclusion (“DEI”) practices among federal fund recipients, follows on the heels of the Trump administration’s efforts to eliminate what it considers to be unlawful discriminatory practices. The DOJ asserted that IBM ran afoul of anti-discrimination provisions in its federal contracts by taking into account DEI in making decisions about compensation and employment practices. In the DOJ’s public statement on the settlement, it noted that IBM allegedly engaged in systemic employment discrimination by incorporating race, sex, color, and national origin into compensation structures (including diversity-based bonus modifiers tied to demographic targets), hiring criteria, interview slate requirements, and promotion decisions designed to meet internally developed demographic goals. The government further alleged that IBM restricted access to training, mentorship, leadership development programs, and educational opportunities on the basis of race or sex, in potential violation of federal equal employment opportunity law. A number of the allegations are practices that were widely implemented by many companies in recent years (including federal contractors), which highlight the emerging risks of such practices given the DOJ’s focus on these topics. The settlement serves as a bellwether for future enforcement action under the False Claims Act. Companies that are parties to federal contracts should review with counsel their existing practices and procedures for compliance with federal anti-discrimination laws.

Oklahoma Supreme Court Rules Oklahoma Energy Discrimination Elimination Act of 2022 Unconstitutional

The Oklahoma Supreme Court struck down the Oklahoma Energy Discrimination Elimination Act of 2022 (the “EDEA”), which required state pension systems to divest from financial institutions that boycotted the fossil fuel industry and required the State Treasurer to maintain a list of such entities. In its decision, the Oklahoma Supreme Court noted that the EDEA’s objective of penalizing financial institutions that boycotted energy companies as part of the Oklahoma Public Employees Retirement System (“OPERS”) conflicted with the constitutional requirement that such investments be made with the exclusive purpose of providing benefits to participants and their beneficiaries. The Oklahoma Supreme Court concluded that the EDEA improperly constrained pension trustees from fulfilling their fiduciary duties to act solely in the interests of plan participants and beneficiaries. The Court noted that the EDEA would have required divestment from financial institutions representing nearly two‑thirds of OPERS’s portfolio, potentially resulting in significant losses. The ruling affirms in part a 2024 district court decision and permanently enjoins the State Treasurer from enforcing EDEA against the retirement system. V&E will continue to monitor for similar actions and challenges to anti-ESG legislation in Oklahoma and other states.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.