The SEC pulls back its climate reporting rules. California pushes its rules forward. The EU moves to simplify a pair of corporate sustainability directives. New rules in Japan, slated to take effect next year, will significantly raise the bar in Asia. The road ahead for corporate ESG principles is anything but clear, but Esther Toth of Workiva says delaying climate plans may be short-sighted.
Over the past year, the momentum behind corporate sustainability has shifted in pace and tone. Where once there was closer alignment across public and private sectors on the need to tackle systemic climate risks, support a just energy transition and advance human rights, today’s environment is more fragmented, politicized and marked by competing priorities. Teams that have been focusing on managing sustainability risks and opportunities now find themselves navigating supply chain disruptions, budget constraints and a recalibrated policy landscape.
The evolving patchwork of regulations related to the disclosure of sustainability- and climate-related risks and opportunities has put some pressure on businesses. Yet, while the path has become more complex, progress has not stalled altogether. A recent Workiva survey found that 85% of companies are pressing ahead with climate disclosures regardless of political headwinds, signaling that for many, sustainability is no longer optional but strategic.
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Read moreDetailsRegulatory momentum and regional divergence
In the past three years, waves of regulations and non-financial reporting standards have reshaped what companies need to disclose on risks, actions and performance related to relevant ESG topics. While the direction and the speed with which the waves are moving is uneven, the momentum is undeniable.
In the US, the SEC has ceased defending its climate disclosure rules, which would have required companies to report Scope 1 and 2 greenhouse gas (GHG) emissions and material climate-related financial risks. This move signaled a slowdown at the federal level. However, California has enacted and continues to implement its climate disclosure laws (including SB 253 and SB 261) that require companies with significant revenues in California to disclose GHG emissions data and climate-related financial risks. Given California’s size (its $4 trillion economy is the world’s fourth-largest) its rules would apply to thousands of companies, adding to the patchwork and complexity.
In Europe, the European Commission proposed an omnibus simplification package to streamline its Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) requirements in February. The European Commission has reiterated that these simplification efforts do not alter the EU’s overarching decarbonization targets or broader commitment to the net-zero transition. To that effect, the Commission has now also proposed to add the target of 90% net GHG emissions reduction by 2040 to the existing, legally binding goal of at least 55% reduction by 2030 in EU climate law.
While formal adoption of the simplification package is still to come, the European Sustainability Reporting Standards (ESRS) are also undergoing a review to improve clarity and understandability for reporting companies, strengthening interoperability with international standards and introducing new reporting reliefs.
Globally, over 30 jurisdictions are advancing their adoption of the ISSB sustainability disclosure standards, particularly countries in Asia-Pacific and Latin America.
- China is accelerating its transition to clean energy, and renewables contributed to a record 44% of its electricity generation in May 2024. In December, China launched its corporate sustainability disclosure standards (CSDS), establishing a foundational reporting framework that incorporates both financial and impact materiality, aligning with China’s commitment to integrating environmental sustainability into its economic growth model.
- Australia’s climate-related financial disclosures mandate has already come into force for the first group of companies (the largest listed firms, equivalent to ASX 200), which need to report in line with the Australian Sustainability Reporting Standards (ASRS) beginning this year.
- In Japan, the Sustainability Standards Board of Japan (SSBJ) finalized sustainability disclosure standards in March, based on the ISSB global standards. These are slated for adoption for the largest Tokyo Stock Exchange-listed companies for financial years beginning in 2026. This will significantly raise the bar on climate and sustainability transparency for firms operating in Asia’s second-largest capital market.
These developments underscore a global but uneven movement toward the integration of sustainability management and reporting into regulatory frameworks. The effort, or perceived burden, of producing standardized, externally assured non-financial disclosures is often portrayed as either a catalyst for competitiveness or a threat to it, depending on which end of the debate one stands. However, at least in Europe, there is a growing cohort of investors and companies who consider oversimplification risky and ultimately reducing the very transparency that financial markets need to assess and price risks and revenue generation prospects correctly over the short, medium and long term.
The imperative for action
So how should companies respond to the mixed policy signals and unhelpful politicization of highly technical and scientific domains? The temptation to delay action is understandable but likely shortsighted. Rather than retreat, forward-looking organizations can ensure not just effective on-time compliance but also build the governance, process and data foundations and be prepared for any type of change.
Here is how to act:
Elevate governance
Form a cross-functional sustainability leadership group with defined roles, executive sponsorship and board oversight. Ensure the mandate goes beyond compliance to aligning sustainability with core business risk, opportunity and performance.
Assess materiality
Engage stakeholders to regularly evaluate which sustainability- and climate-related risks and opportunities are most material to your business model, operations and value chain. A dynamic, industry-specific view of materiality helps prioritize resources and ensures relevance in disclosures.
Be audit-ready
Sustainability data is not different from financial and operational data as it is also based on the company’s economic activities. Identify key metrics, map their data sources and assess existing controls and gaps. Align sustainability data quality with financial reporting standards. Establish clear processes for internal review and external assurance to meet expectations.
The opportunity in a shifting landscape
Companies face a critical choice today: recommit with a renewed approach or quietly scale back sustainability ambitions and internal processes. This recalibration should not be taken lightly even when facing changing political headwinds. Ultimately, a smart approach to sustainability is about long-term risk management, maintaining a license to operate and growing a loyal customer base for products and services over time. The shifting tides in sustainability policy or public discourse will inevitably reveal which companies have genuinely worked on embedding sustainability considerations into their business model and which have merely treated it as a tick-box exercise.
This new clarity gives forward-looking businesses an opportunity: to take a data-driven approach that focuses on identifying material sustainability risks and opportunities, measuring performance accurately and embedding these insights into financial planning, capital allocation and enterprise risk management. Companies that approach this work with pragmatism and discipline will set themselves apart in a more volatile but also more transparent and increasingly discerning corporate sustainability and stakeholder landscape.
Esther Toth, senior industry principal of sustainability at Workiva, has more than 15 years of experience in corporate sustainability. In her current role, Toth leverages deep expertise to drive regional growth and advance the capabilities of Workiva, a cloud platform for integrated reporting. 
