The global regulatory landscape for corporate sustainability is evolving rapidly as jurisdictions and organizations address escalating environmental challenges and associated risks. In 2025 and beyond, companies will face a complex tapestry of sustainability reporting regulations enacted over the past year and ongoing legislative initiatives.
This blog provides a comprehensive overview of these developments, empowering businesses with the insights to maintain sustainability compliance and gain a competitive edge.
Enacted in January 2023, the Corporate Sustainability Reporting Directive (CSRD) mandates companies, including financial institutions, to disclose comprehensive ESG data to enhance transparency and accountability across their direct operations and supply chains. Organizations must report on four general sustainability areas: 1) governance, 2) strategy, 3) impacts, risks, and opportunity management, and 4) metrics and targets. Additionally, they must address individual ESG topics, such as climate change, biodiversity and ecosystems, own workforce, and business conduct, based on a double materiality assessment. The European Sustainability Reporting Standards (ESRS) provides an implementation framework for these disclosures.
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Enacted in June 2023, the EU Deforestation Regulation (EUDR) aims to minimize deforestation and forest degradation associated with goods entering the EU, addressing climate change and biodiversity loss. It requires companies dealing in high-risk commodities (e.g., palm oil, cattle, coffee, cocoa, timber, rubber) or derived products (e.g., beef, furniture, chocolate) to conduct due diligence, ensuring these products are not sourced from land deforested or degraded after December 31, 2020.
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The Carbon Border Adjustment Mechanism (CBAM) is a policy tool to prevent carbon leakage and support global climate action. CBAM places a carbon price on imported goods from high-emission industries, aligning their costs with the EU’s carbon pricing system. It targets sectors such as steel, cement, aluminum, fertilizers, electricity, and hydrogen, incentivizing cleaner production practices globally. The regulation entered into force on May 20, 2023, and began its transitional phase on October 1, 2023, during which reporting requirements are phased in without financial obligations.
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The Corporate Sustainability Due Diligence Directive (CSDDD) aims to integrate sustainability and human rights considerations into corporate governance. Enacted in July 2024, it mandates companies to identify, prevent, and mitigate negative environmental and human rights impacts across direct operations and value chains. It also requires disclosing a mandatory climate transition plan aligned with the Paris Agreement’s 1.5°C goal.
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Approved by the EU Council on May 27, 2024, the Eco-design for Sustainable Products Regulation (ESPR) is a key component of the EU’s circular economy strategy, designed to promote sustainability throughout a product’s lifecycle. It establishes new disclosure requirements for durability, repairability, energy efficiency, and recyclability across various product categories. A central feature of ESPR is the introduction of the Digital Product Passport (DPP), a digital tool that provides detailed data on a product’s composition, environmental impact, and recyclability.
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California’s SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act) are the first state climate transparency laws in the US to enhance corporate accountability and risk management through climate-related disclosures.
SB 253 mandates public and private companies operating in California with annual revenues over $1 billion to disclose their Scope 1, 2, and 3 greenhouse gas emissions in line with the GHG Protocol. SB 261 requires public and private companies operating in California with over $500 million in annual revenues to report on climate-related financial risks and the measures they have adopted to mitigate or adapt to those risks, in line with TCFD.
With SB 253 and SB 261 signed into law in 2023, and subsequent amendments under SB 219 in September 2024, the state is streamlining the implementation of these crucial policies.
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As federal efforts like the SEC’s climate risk disclosure rules face legal and regulatory hurdles, US states are filling the gap. Following California’s SB 253 and SB 261, states such as New York, Illinois, Washington, and Minnesota are advancing similar legislation. These bills target large companies, emphasizing emissions reporting and climate risk disclosures. While timelines and disclosure requirements vary, they collectively signal growing momentum for mandatory corporate climate reporting in the US amid federal uncertainty.
The EU is considering merging the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the Taxonomy into a single omnibus legislation. Announced by European Commission President Ursula von der Leyen during a press conference on November 8, 2024, this proposal aims to streamline regulatory requirements, reduce bureaucratic burdens, and eliminate redundancies without altering the core content of the laws.
However, the legislative process could allow amendments from the European Parliament and Council, potentially impacting the scope or timeline of these standards.
As of November 2024, jurisdictions representing 57% of global GDP have made significant progress in adopting ISSB Standards, with 16 jurisdictions finalizing the adoption and 14 actively progressing. Around 90% are implementing comprehensive disclosures, including industry-specific requirements and addressing all sustainability-related risks and opportunities beyond climate-related financial disclosures. All finalized frameworks include Scope 3 emissions, often with transitional relief measures to support compliance.
To succeed in this evolving regulatory landscape, companies must go beyond compliance, focusing on strategy and action to achieve their sustainability goals. By embedding sustainability into their operations and leveraging data-driven insights, businesses can turn regulatory challenges into opportunities for growth and leadership in a low-carbon economy.
Speak to our team to learn more about meeting these regulations and building a robust foundation for achieving your net-zero goals.
