The recent news coverage of corporate sustainability and ESG initiatives has highlighted key global regulatory reforms that are reshaping the way businesses operate. These reforms include instruments such as the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive in Europe, the U.S. SEC’s Climate Related Disclosure Standards, and the global sustainability reporting standards introduced by the International Sustainability Standards Board. However, the sheer volume and rapid pace of regulatory developments on sustainability are far-reaching, with significant implications for businesses.
To provide a clearer perspective on the risks and costs associated with these regulatory changes, an analysis was conducted to track sustainability-related regulatory developments across key jurisdictions globally. For the first two months of 2024 alone, there were 522 new regulatory developments focused on corporate sustainability globally. This includes a mix of global regulations like the CSRD and CSDDD, as well as more targeted guidance from organizations such as the Sustainable Stock Exchanges Initiative. The increasing volume of regulatory activity signals a complex landscape for businesses to navigate.
With sustainability regulation evolving globally, businesses are facing a cumulative effect of guidance and proposals becoming laws that require ongoing updates and compliance. Multinational companies are contending with hundreds of sustainability and ESG-related regulatory updates in multiple jurisdictions simultaneously. These developments cover a wide range of aspects of sustainability compliance, from mandatory reporting requirements to responsible investment standards to employee wellbeing and ESG topics such as gender equality and human rights in supply chains.
The regulatory landscape also includes a focus on human rights, worker safety, and a variety of ESG topics beyond environmental concerns. Sustainability teams must engage multidisciplinary experts with specialized knowledge to ensure compliance with the diverse regulatory requirements. Each new regulation introduced by a local jurisdiction contributes to a global network of changing mandates that businesses must navigate and adapt to. While compliance processes will mature over time, companies face significant financial and administrative challenges in the initial stages of implementing these regulatory changes.
Investing in the necessary resources and systems now to achieve compliance with sustainability regulations will ultimately benefit companies in the long run. Regulators and customers are likely to show some leniency to businesses that demonstrate efforts to comply with evolving sustainability requirements. However, the window for making these investments is limited, and businesses that delay may face greater challenges in meeting regulatory expectations in the future. Embracing sustainability regulations as a global imperative and being proactive in compliance efforts will be crucial for businesses to thrive in the changing regulatory landscape.
