Recent news coverage of corporate sustainability and environmental, social and governance (ESG) initiatives has highlighted several major global reforms such as the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive in Europe, the U.S. Securities Exchange Commission’s Climate Related Disclosure Standards, and the new sustainability reporting standards by the International Sustainability Standards Board. However, these initiatives only scratch the surface of the rapid pace and wide scale of global and local regulatory developments in the sustainability space.
To provide a comprehensive overview of the regulatory risks faced by businesses and the potential costs of compliance, a recent analysis tracked the total number of sustainability-related regulatory developments in key jurisdictions globally, including North America, the EU, Asia-Pacific, Africa, and the Middle East. The analysis covered new regulations, proposals, and amendments across various categories like corporate sustainability reporting, ESG topics, climate change, stakeholder engagement, responsible investment, and biodiversity. In the first two months of 2024, there were 522 new regulatory developments on corporate sustainability globally, adding to the 1,300 reported in 2023 and 800 in 2022.
For businesses operating in multiple jurisdictions, the cumulative effect of sustainability regulation is becoming increasingly complex as guidance and proposals from previous years evolve into laws that are constantly updated, refined, and implemented. Multinational corporations must navigate hundreds of sustainability and ESG-related regulatory updates in various stages of finalization in different countries and states where they operate. These regulations cover a wide range of sustainability compliance aspects, from mandatory reporting requirements to standards for responsible investment, employee wellbeing, gender equality, human rights in supply chains, and more.
Beyond environmental risks, sustainability regulations are also focusing on human rights, worker safety, and other ESG areas that impact companies’ operations and global supply chains. To ensure compliance with these specialized and detailed requirements, sustainability teams must engage multidisciplinary experts with domain and jurisdictional knowledge to address the diverse regulatory changes comprehensively. Every local jurisdiction’s actions to implement impactful reporting requirements or supply chain due diligence processes contribute to a constantly changing global regulatory landscape that companies must interpret, adapt, and comply with accordingly.
Investing in the resources and systems needed for compliance with evolving sustainability regulations will present significant financial and administrative challenges for most companies in the short term. However, making this investment early on will benefit businesses in the long run as regulators and customers are more likely to provide leniency to those demonstrating efforts to comply. As compliance processes mature over time, businesses that act proactively now will be better positioned to navigate the increasingly complex sustainability regulatory landscape and achieve long-term success in the evolving ESG environment.
