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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 , 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 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.