20 Global Sustainability Regulation Updates in 2026
EU Corporate Sustainability Reporting Directive (CSRD) in force
Starting in 2025, thousands of large EU companies must publish annual sustainability reports under the CSRD, using the new European Sustainability Reporting Standards (ESRS) . By 2026 this mandate extends to nearly all big firms (including those with 1,000+ employees), requiring audited disclosures on ESG performance with a “double materiality” approach (covering both financial and environmental/social impacts). This shifts sustainability from voluntary CSR reports to a rigorous compliance exercise, meaning leaders must ensure robust data collection and governance for ESG reporting.
Global ESG disclosure standards (ISSB’s baseline)
A global reporting baseline is taking hold as the International Sustainability Standards Board’s IFRS S1 and S2 (on general sustainability and climate) became effective in 2024. Backed by regulators (endorsed by IOSCO in 2023), over 30 jurisdictions – including the UK, Canada, Japan, and others – are moving to adopt or align with these standards . Companies worldwide are expected to report climate and ESG risks in line with TCFD-aligned ISSB requirements, including Scope 3 emissions and industry-specific metrics , which elevates comparability and investor confidence in sustainability information.
U.S. SEC climate disclosure rules on the horizon
The United States is poised to mandate climaterisk reporting for public companies. In March 2024 the SEC approved sweeping climate disclosure rules, with phased implementation: large U.S. registrants must include climate-related risks and governance in annual reports as soon as FY2025, and disclose greenhouse gas emissions (Scopes 1 and 2, and Scope 3 if material) by 2026–2027 . Although legal challenges have introduced uncertainty, corporate sustainability officers should be preparing for SEC compliance – for example by building systems to measure emissions – as these rules signal an emerging global norm for climate transparency.
EU Corporate Sustainability Due Diligence Directive (CSDDD)
In 2024 the EU finalized a landmark directive requiring companies to proactively manage sustainability risks in their operations and supply chains. The CSDDD obliges large companies (initially those with over 5,000 employees and €1.5 billion in turnover) to identify, prevent, and mitigate human rights abuses and environmental harm across their value chains . Member States must transpose the rules by mid-2026, and although full compliance timelines have been extended (companies likely have until 2029 to meet all requirements) , firms should act now to implement due diligence processes – from supplier risk mapping to grievance mechanisms – or face fines and civil liability for violations.
Crackdown on greenwashing and vague claims
Regulators are imposing strict rules on environmental marketing to combat misleading “green” claims. The EU’s new Empowering Consumers for Green Transition (EmpCo) directive will ban generic claims like “eco-friendly” or “carbon neutral” by late 2026 unless backed by recognized proof . Similarly, the UK’s consumer protection law now enables the CMA to fine companies up to 10% of global turnover for unsubstantiated or deceptive sustainability claims . By 2026, corporate leaders must ensure any ESG claims (product labels, ads, reports) are verifiable and transparently substantiated, or risk major reputational and legal consequences.
EU regulation of ESG ratings and data
A new EU ESG Ratings Regulation (Regulation (EU) 2024/3005) has been adopted, aiming to bring oversight and transparency to the once-unregulated ESG ratings industry. From July 2026, any firm providing ESG ratings in the EU must be authorized and will face strict governance and quality-control requirements . This means companies will likely see more consistent and credible ESG scores – and also need to supply raters with high-quality data. In practice, sustainability teams should brace for greater scrutiny from ratings agencies under the new regime, as well as less “ratings shopping” as the EU clamps down on inconsistent methodologies.
Social sustainability – Pay Transparency Directive
The “S” in ESG is becoming mandatory too. The EU Pay Transparency Directive took effect in 2023, and Member States must implement it by June 2026, requiring companies to disclose gender pay gaps and ensure equal pay for equal work . Under the rules, firms with significant pay disparities (unexplained gaps over 5%) will be compelled to take corrective action. By 2026, large employers in Europe need robust HR data systems to report on pay equity and address any bias – a move signaling that workplace diversity and fairness metrics are now part of the core sustainability agenda alongside climate and environment.
EU deforestation-free supply chains law
Companies trading in key commodities face new due diligence duties to curb deforestation. Under the EU Deforestation Regulation (effective end of 2026), businesses importing or selling products like cattle (leather/beef), palm oil, soy, coffee, cocoa, rubber, or wood must ensure these were not produced on recently deforested land . Firms will have to collect precise geolocation coordinates for commodity sourcing and submit due diligence statements proving “deforestation-free” supply chains. This law compels organizations to enhance traceability and collaborate with suppliers on sustainable land-use practices, or else be barred from the EU market.
Forced labor import bans – ethical sourcing required
Governments are barring goods made with forced or child labor, raising the bar for supply chain oversight. The U.S. Uyghur Forced Labor Prevention Act already blocks imports linked to forced labor in Xinjiang, and the EU has now adopted its own Forced Labour Regulation (entered into force in 2025) which will outright ban products made with forced labor from being sold in the EU from 2027 . In anticipation of these rules, by 2026 companies must rigorously vet supply chains for labor abuses – conducting social audits, enhancing supplier codes of conduct, and redirecting sourcing where needed – as any taint of forced labor can lead to seized shipments and brand damage.
Mandatory climate transition plans
Companies are now expected not just to pledge “net-zero” but to show concrete plans. The EU’s CSDDD includes a requirement for in-scope firms (generally those with >1,000 employees) to adopt a science-based Climate Transition Plan aligning their business model with the 1.5 °C goal . These plans must set interim greenhouse gas targets (e.g. for 2030 and 2040), outline decarbonization actions and investments, and integrate board oversight of climate progress. Likewise, the UK is moving toward mandating transition plan disclosures – from 2026, companies listing on London markets must summarize their climate transition strategies in prospectuses . This trend means by 2026 a credible, detailed transition plan is becoming a de facto requirement, with investors and regulators expecting evidence of how organizations will reach net-zero commitments.
Carbon border pricing kicks in (CBAM)
The EU’s Carbon Border Adjustment Mechanism enters its operational phase on January 1, 2026, putting a carbon price on imports of emissions-intensive products . Importers of steel, cement, aluminum, fertilizer, electricity, and hydrogen will need to purchase carbon certificates corresponding to the product’s embedded CO₂ emissions, equalizing the cost with EU carbon prices. For corporates, this means supply chain emissions now directly affect cost – companies buying or importing targeted materials must start factoring in carbon costs, favor lower-carbon suppliers, or invest in cleaner processes to remain competitive as carbon leakage to low-regulation regions will no longer be cost-free.
EU Green Taxonomy expanded scope
The EU Green Taxonomy – a classification system defining “sustainable” economic activities – is adding new environmental objectives for corporate reporting. As of 2025, all CSRD-reporting companies must disclose what portion of their revenue, capex, and opex is Taxonomy-eligible, and from 2026 they must also report Taxonomy alignment not just for climate objectives but for the four other goals: sustainable water use, circular economy, pollution prevention, and biodiversity protection . In practice, by 2026 businesses need to assess their operations against detailed EU criteria for all six environmental objectives. This pushes companies to gather more granular environmental performance data (e.g. water efficiency, waste recycling rates) and potentially adapt projects to meet “substantial contribution” thresholds so they can be counted as sustainable in investor portfolios.
Green finance and investment pressure
expectations on corporate performance. The EU’s Sustainable Finance Disclosure Regulation (SFDR) already requires investors to report on ESG impacts, and a new wave of sustainable finance standards is emerging. Notably, the European Green Bond Standard became applicable at the end of 2024 as a voluntary “gold standard” label for bonds – issuers must align 100% of proceeds with the EU Taxonomy and meet strict transparency and external verification requirements to market bonds as EuGB-certified. By 2026, green bonds and loans are a mainstream funding tool, and companies seeking capital find that demonstrating credible sustainability projects (and hitting ESG targets in sustainability-linked loans) directly impacts access to finance. Corporate sustainability leaders must therefore ensure that ESG initiatives are not only compliance-driven but also structured to meet investor criteria for green financing.
Science-based climate targets become the norm
Setting verified, science-based emissions targets has moved from a niche practice to a standard expectation. In early 2026, the Science Based Targets initiative (SBTi) announced over 10,000 companies globally now have validated science-based climate goals – up nearly 40% from the prior year . These companies represent more than 40% of global market capitalization and span 90+ countries and all sectors , indicating a broad adoption of 1.5 °C-aligned targets. The implication is that by 2026, large firms are expected to have concrete emissions reduction targets in line with climate science (with short- and mid-term milestones) and to regularly report progress. Firms without SBTi-aligned targets face mounting pressure and may be viewed as laggards by investors, clients, and regulators focusing on credible climate action.
Collaborative emissions monitoring initiatives (EMPCo)
Industry coalitions are forming to improve carbon data quality and comparability. For example, late 2025 saw the launch of the Emissions Monitoring & Performance Coalition (EMPCo), bringing together major industrial, energy, and financial companies to create a consistent global carbon accounting framework . This coalition (similar to the “Carbon Measures” initiative) aims to tackle issues like inconsistent emissions measurement, double counting, and gaps in product-level carbon data . For corporate sustainability teams, participation in such collaborations means shaping emerging standards and gaining better tools for tracking emissions across supply chains. By 2026, the influence of EMPCo and similar alliances will push companies to upgrade their greenhouse gas monitoring and share more standardized emissions data – ultimately enabling more credible benchmarking of climate performance across organizations and sectors.
Biodiversity and nature risk reporting rising
Attention is shifting beyond climate to naturerelated impacts. The landmark UN Global Biodiversity Framework agreed in late 2022 (COP15) explicitly calls for large companies and financial institutions to assess and transparently disclose their dependencies and impacts on biodiversity by 2030 . In response, 2023 saw the launch of the Taskforce on Nature-related Financial Disclosures (TNFD) framework, which by 2026 companies are piloting to report nature-related risks (e.g. how operations affect forests, water, and ecosystems). This means sustainability leaders must begin treating biodiversity loss as a business risk akin to climate change – mapping their footprint on natural capital, setting targets to reduce impacts (such as deforestation or habitat conversion), and preparing for likely future regulations that will mandate nature-related disclosures and action plans
Circular economy regulations and product stewardship
New rules are pushing circular practices, aiming to reduce waste and encourage reuse. The EU’s Ecodesign for Sustainable Products Regulation (ESPR) starts to bite in 2026 with sector-specific requirements – for instance, from July 2026 large companies can no longer routinely destroy unsold consumer goods like textiles and footwear (a practice common in fast fashion), and they must publicly report the number and fate of unsold products . The ESPR is also introducing Digital Product Passports (initially for textiles by 2027) containing information on a product’s materials, repairability, and recyclability to improve transparency. These developments force companies to design products for longevity and recyclability, plan for take-back or recycling programs, and generally take responsibility for their products’ end-of-life. By 2026, forward-looking firms are already redesigning product lines and packaging to meet these emerging circular economy criteria and to pre-empt stricter waste regulations.
Tougher packaging and plastics requirements
Waste reduction rules are being standardized across Europe, affecting any business that uses packaging. A new EU Packaging and Packaging Waste Regulation will apply from August 2026, imposing sustainability criteria on all packaging placed on the EU market . Companies will need to ensure packaging is minimised, reusable or recyclable by design, and contains prescribed levels of recycled content (with certain single-use packaging to be phased out). Hazardous substances like PFAS are being restricted in packaging, and harmonized Extended Producer Responsibility schemes mean producers must finance the collection and recycling of packaging waste in each member state. For corporations, this means product packaging is no longer an afterthought – by 2026 packaging choices must align with circular economy goals, or firms risk non-compliance fees and losing access to sustainability-minded customers (and potentially, markets where non-compliant packaging is banned).
Climate litigation and accountability
Companies are facing real legal consequences for falling short on climate action. Notably, in 2021 a Dutch court ordered Royal Dutch Shell to cut its overall CO₂ emissions 45% by 2030, extending responsibility to Scope 3 emissions from the use of its products . Additionally, investors and NGOs are now willing to take corporate leaders to court – in 2023, environmental lawyers filed an unprecedented lawsuit against Shell’s own board of directors for mismanaging climate risks and failing to adopt a Paris-aligned strategy . By 2026, this wave of climate litigation is expanding globally (with cases targeting energy, agriculture, finance, and other sectors), making it clear that vague long-term pledges are no longer safe: regulators and judges are increasingly prepared to enforce emissions reductions or penalize greenwashing. Corporate sustainability heads must therefore treat climate targets as binding commitments, ensure boardlevel oversight of climate risk, and build legal resilience by aligning business plans with published climate goals.
ESG backlash in some markets
Even as sustainability norms strengthen, companies must navigate politicization of ESG in certain regions. In the U.S., for example, a number of state-level officials have attacked collaborative climate initiatives – in late 2025, 23 state attorneys general sent letters to SBTi and CDP accusing them of antitrust and “woke” practices , and some states have restricted business with financial firms deemed to boycott fossil fuels. This anti-ESG movement, likely to continue into 2026, creates a more complex environment for global companies. Corporate sustainability leaders should be aware of the contrasting expectations – while Europe mandates more ESG disclosure, parts of the U.S. question it – and focus on transparent, science-based sustainability strategies that demonstrate tangible value. In practice, firms may need to tailor communication and engage stakeholders to depoliticize sustainability actions, emphasizing risk management and innovation, to maintain broad support for their 2030 and 2050 goals.
Conclusion
Sustainability is rapidly shifting from voluntary action to strict global regulation, making ESG a core business priority rather than a branding exercise. Companies that build strong data systems, transparent reporting, and science-based transition plans will stay compliant and gain investor trust. Increasing scrutiny on green claims, supply chains, and social equity means sustainability must be embedded across all operations. Organizations that align compliance with innovation and long-term environmental and social value will be best positioned to succeed in this new era of accountable sustainability.
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