The new era of sustainability reporting: global shifts, practical lessons and strategic opportunities

Global sustainability reporting has hit a great reset

In 2025, ESG-related regulation is no longer a distant possibility, it’s a constantly shifting reality. While some jurisdictions have scaled back or delayed key initiatives, others are moving forward decisively. The result is a patchwork of evolving obligations that feel both urgent and unclear, posing a challenge for companies as they seek to understand and prioritize key sustainability-related efforts.

One of the most notable developments in the EU has been the adoption of the Omnibus Directive, which significantly revised the implementation timelines and scope of several cornerstone ESG regulations. The Corporate Sustainability Reporting Directive (CSRD), once poised to bring an estimated 50,000 companies under mandatory reporting obligations, has had its scope reduced by approximately 80%, limiting coverage to a smaller cohort of large and listed companies. Similarly, the Corporate Sustainability Due Diligence Directive (CSDDD) has been diluted in scope and delayed in application, with thresholds raised and civil liability provisions softened to secure political consensus. Newly proposed changes to the CSRD and CSDDD could result in even further reductions in scope.

Despite these changes, the EU continues to set the global benchmark for ESG regulation. While its applicability has been reduced to now exempt 90% of importers, the Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase in 2023 and will expand into full operational mode by 2026, signaling the EU’s commitment to embed climate considerations into trade and competition policy. The European Sustainability Reporting Standards (ESRS), while softened in their application, remain in force and will continue to shape disclosure practices far beyond Europe’s borders.

Investors remain committed to sustainable investment, despite slowing regulatory progress and geopolitical developments. Only 3% globally report that they are reducing their ESG objectives, and many remain committed to imposing specific expectations on portfolio companies. Norway’s Norges Bank Investment Management (NBIM), the world’s largest sovereign wealth fund, reaffirmed in its 2025 Climate Action Plan that it expects portfolio companies to publish climate transition plans, set science-based targets, and disclose in line with the TCFD and ISSB frameworks. Similar expectations are being echoed by BlackRock, Legal & General, and other institutional investors, many of whom are shifting focus from climate policy commitments to tangible emissions reductions and capital allocation alignment.

In North America, the regulatory trajectory is more fragmented. Canada’s Canadian Securities Administrators (CSA) surprised many by pausing its long-anticipated climate disclosure rules in April 2025, citing the need to align with evolving global standards. The move reflects a broader recalibration amid political pushback and implementation concerns, particularly for smaller issuers.

In the U.S., the Securities and Exchange Commission’s (SEC) Climate Disclosure Rule, finalized in March 2024, is facing significant legal challenges and is no longer being defended by the Commission in court. The future of federal climate-related disclosure in the U.S. is now highly uncertain. However, this federal stall is not halting progress across the board. California has emerged as a regulatory counterweight, with landmark laws such as SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Disclosure Act) still moving forward. These rules impose Scope 1–3 emissions disclosures and climate risk reporting requirements on large public and private companies operating in the state, reinforcing California’s leadership in subnational climate governance.

Globally, other jurisdictions continue to advance ESG reporting mandates. The International Sustainability Standards Board (ISSB) standards are gaining traction as the de facto global baseline, with 36 jurisdictions having adopted, used, or introduced the standards into their frameworks. Countries like the UK, Australia, Singapore, and Nigeria have announcing phased adoption plans through 2026 and beyond. Meanwhile, India, South Korea, and Brazil are exploring mandatory sustainability reporting frameworks that blend ISSB elements with local priorities.

When taken at face value, the global regulatory environment may appear uneven, but the long-term direction of travel is clear: disclosure expectations are rising, investor scrutiny is intensifying, and regulatory complexity is growing. While the pace and stringency of ESG mandates may ebb and flow, the strategic imperative for companies remains unchanged.

Staying Ahead of the Curve

Companies that view ESG regulation as a compliance exercise risk falling behind. Those that take a proactive stance—embedding materiality assessments, scenario analysis, climate governance, and credible transition plans into their core strategy—will be best positioned to withstand future regulatory shocks and stakeholder pressure. In particular, companies should:

• Track regulatory divergence across key markets and prepare for multi-jurisdictional compliance.
• Prioritize alignment with global baseline frameworks (ISSB, TCFD, GRI) to future-proof disclosures.
• Strengthen board oversight and cross-functional ESG governance structures.
• Engage early with investors and stakeholders to understand their evolving expectations.

In this volatile and evolving environment, agility and ambition will be the defining traits of ESG leaders. Even as regulation shifts, the message from markets, regulators, and society is consistent: sustainability performance is no longer optional, but integral to long-term value creation.

With the introduction or evolution of major ESG-related regulatory mandates and voluntary disclosure standards, we are entering a new era of sustainability reporting – 2024 marks a pivotal year for companies to position themselves for the changes ahead.

In the next two to three years, companies will be subject to a myriad of regulations. In the U.S., the SEC is expected to release its final Climate Disclosure Rules this April to be implemented in 2025. In the EU, the transitional period of the Carbon Border Adjustment Mechanism (CBAM) has gone into effect with the first reporting period ended on January 31st. Looking ahead, companies around the globe are also preparing for compliance with the Corporate Sustainability Reporting Directive (CSRD) beginning as early as 2026.

Even with the significant rise in regulation, there is a notice- able lack of specific guidance around how these requirements should be implemented. Despite the uncertainty that still looms around these tangible details, companies can still take a few key steps over the course of 2024 to get started and ensure they are adequately prepared to meet these new expectations:

1. Understand the Applicability of Requirements

Determine the scope and timing of relevant ESG regulatory requirements as they apply to the business and operations. For example, companies should identify which of their EU imports are covered by CBAM based on whether they fall under designated categories of goods. Similarly, the implementation timeline of CSRD requirements for companies is based on a phase-in schedule according to specific entity criteria. Companies should continue to monitor updates on evolving ESG regulations of the regions in which they operate.

2. Establish Governance and Accountability

The foundation of any strong, effective ESG-related program is clear assignment of oversight and responsibility for management of relevant topics or regulatory regimes. With key priorities and requirements in mind, companies should create a dedicated and cross-functional ESG governance structure within the organization to oversee and drive progress. This may involve establishing a board-level committee, appointing ESG officers, or integrating ESG responsibilities into existing roles or structures. Clearly defining responsibilities, as well as establishing accountability mechanisms, are critical to ensure that the organization complies with ESG-related regulations and achieves its sustainability objectives.

3. Conduct a Materiality Assessment and Climate Scenario Analysis

While the specific metrics of disclosure obligations may vary, two commonalities are that these regulations are focused on material sustainability-related risks and opportunities, and many are centered around climate change. Performing a thorough materiality assessment to identify and prioritize ESG issues that are most relevant and impactful for the company and its stakeholders is a critical step for informing reporting in line with CSRD or the International Sustainability Standards Board (ISSB).

Similarly, many climate-related regulations and voluntary reporting frameworks, including the SEC proposed climate disclosures and the Task Force on Climate-Related Financial Disclosures (TCFD), require companies to identify, discuss, and manage their material climate risks, opportunities, and impacts. A climate scenario analysis is a powerful tool for com- panies to understand how the global risks of climate change will impact their business, to limit financial losses, manage dis- ruptions to operations, and provide investors with insight into how they are preparing for a changing climate.

4. Enhance Data Collection and Reporting Processes

Mandated sustainability-related disclosures entail increased scrutiny of the accuracy and thoroughness of ESG data. Companies should implement robust systems to gather, analyze, measure, and report ESG-related information. As part of this, companies should establish proper processes or procedures to prepare for assurance of sustainability disclosures that will be required under various regulations in the future.

5. Engage with Stakeholders

Throughout this process, companies must continue to understand and monitor the expectations and concerns of key stakeholders, including investors, customers, employees, and communities. At the end of the day, a primary purpose of the increased standardization of ESG-related disclosures is to provide stakeholders with complete, accurate, and decision-useful information. Therefore, companies must engage with their stakeholders to ensure sustainability priorities and progress is being effectively communicated.

On Nov. 4, 2022, ISS ISS proposed policy updates for 2023. ISS is inviting comments through Wednesday, Nov. 16. Below is a summary of the updates planned for the U.S. market.

Board Gender Diversity

As announced last year, in 2023. 1 ISS will be extending its board gender diversity policy to all U.S. public companies and foreign private issuers (FPIs). 2 Currently, it only applies to Russell 3000 and S&P 1500 companies. Under the policy, ISS will recommend against the nominating committee chair (or other directors on a case-by-case basis) if there are no women on the board.

ISS is also adding a one-year grace period for companies that have no female directors but disclose at least one board member who identifies as non-binary.