Data Story — Key Signals in Regulation Watch (EU/US/Global)

The 2025-2026 period marks an inflection point in sustainability regulation. The EU Corporate Sustainability Reporting Directive (CSRD) is expanding to 50,000 companies. The Carbon Border Adjustment Mechanism (CBAM) is entering its permanent phase. SEC climate disclosure rules, despite legal challenges, are reshaping US corporate reporting. For founders and business leaders, understanding these regulatory signals is essential—they're not just compliance requirements but market-shaping forces creating new buyer standards and competitive dynamics.

Why It Matters

Regulatory requirements are becoming the floor for market access. EU CSRD reporting will be required for non-EU companies with €150 million+ EU revenue by 2028, affecting 10,000 US companies. CBAM will add 20-35% to the cost of carbon-intensive imports into Europe, fundamentally changing procurement economics. California's climate disclosure laws, modeled on SEC proposals, affect any company doing business in the state regardless of headquarters location.

Beyond compliance, regulations create buyer requirements that cascade through supply chains. Major purchasers are already embedding regulatory standards into procurement—Scope 3 disclosure requirements mean that supplier emissions data is no longer optional but contractually required. Companies that cannot provide verified sustainability data face exclusion from major tenders and preferred supplier lists.

Key Concepts

The EU Regulatory Package

• CSRD (Corporate Sustainability Reporting Directive): Mandatory sustainability reporting under European Sustainability Reporting Standards (ESRS), covering environmental, social, and governance metrics with third-party assurance
• CBAM (Carbon Border Adjustment Mechanism): Carbon tariffs on imports of steel, aluminum, cement, fertilizers, electricity, and hydrogen, effective 2026
• EU Taxonomy: Classification system defining which activities qualify as "sustainable," affecting access to green finance and disclosure requirements
• CSDDD (Corporate Sustainability Due Diligence Directive): Mandatory human rights and environmental due diligence across supply chains

US Regulatory Landscape

• SEC Climate Disclosure Rule: Requires public companies to disclose climate-related risks, emissions, and transition plans in annual reports (partially stayed pending litigation)
• California Climate Laws: SB 253 and SB 261 require emissions disclosure and climate risk reporting for companies with California revenue above thresholds
• EPA Methane Rules: Stringent monitoring and reduction requirements for oil and gas operations

Emerging Global Standards

The International Sustainability Standards Board (ISSB) standards (IFRS S1 and S2) are becoming baseline disclosure requirements, adopted by 20+ jurisdictions including UK, Singapore, Hong Kong, and Australia. This creates converging global requirements even as regional approaches differ.

What's Working and What Isn't

What's Working

Early CSRD adopters gaining competitive advantage: Companies that invested in CSRD-aligned reporting infrastructure ahead of requirements are now winning contracts by meeting buyer requirements competitors cannot. Schneider Electric's comprehensive ESG data platform positions it as preferred supplier to companies needing Scope 3 data for their own disclosures.

CBAM forcing industrial decarbonization: With transition period reporting revealing emissions intensity of imports, EU buyers are shifting procurement to lower-carbon suppliers. Turkish steel producers have invested €2 billion in decarbonization since CBAM announcement, aiming to maintain EU market access. The mechanism is working as designed.

Regulatory convergence reducing complexity: ISSB adoption is creating a shared global baseline, reducing the previous patchwork of conflicting requirements. Companies building ISSB-compliant reporting can meet multiple jurisdictional requirements with limited adaptation.

Green finance alignment with taxonomy: EU Taxonomy alignment is becoming standard due diligence for green bonds and sustainability-linked loans. Banks report that taxonomy-aligned projects access 15-25 basis points better pricing, creating tangible financial incentives for regulatory compliance.

What Isn't Working

Implementation capacity constraints: Many companies, particularly SMEs, lack internal expertise to comply with complex reporting requirements. Big Four consulting firms report 300% increases in CSRD advisory demand, with capacity unable to meet timeline requirements.

Data availability for Scope 3: CSRD and SEC rules require supplier emissions data that many companies cannot provide. Without upstream supplier systems, downstream companies cannot complete required disclosures. The chain only works when all links can contribute.

Legal uncertainty in US: SEC rule litigation creates planning challenges. Companies must prepare for compliance without certainty rules will take effect as written. California laws face similar challenges but are proceeding faster.

SME supply chain exclusion risk: Large companies responding to disclosure requirements by demanding data from suppliers may simply switch to larger suppliers who can provide it, potentially excluding SMEs from global supply chains rather than supporting their compliance.

Examples

1. BASF CBAM Preparation, Germany: Chemical giant BASF restructured its EU-serving supply chains ahead of CBAM, investing €1.4 billion in lower-carbon production at German facilities and shifting carbon-intensive intermediate production to lower-emission partners. The company's CBAM exposure analysis identified €200 million annual tariff risk, justifying accelerated decarbonization investment that also supports customer Scope 3 requirements.

2. Unilever CSRD Readiness, Netherlands: Unilever completed CSRD-aligned reporting two years ahead of requirements, using the framework to identify gaps in supply chain visibility. The process revealed that 60% of Scope 3 emissions lacked adequate data, triggering supplier engagement programs that improved data coverage to 85% by 2025. Early preparation is now a sales tool in B2B contexts.

3. California Disclosure Response, Multiple Industries: Following SB 253 passage, major companies including Microsoft, Apple, and Salesforce accelerated emissions disclosure programs to meet California's 2026 deadline. The laws triggered internal investment in emissions tracking systems that will meet SEC and CSRD requirements simultaneously, demonstrating how state-level action drives federal-level preparation.

Action Checklist

• Map regulatory exposure—identify which regulations apply based on geography, company size, and sector, with timeline for each requirement
• Assess CSRD double materiality—conduct materiality assessment identifying both impact of company on sustainability factors and impact of sustainability factors on company
• Build CBAM import inventory—for companies importing covered products to EU, establish emissions intensity data for each product and supplier
• Invest in supplier data systems—develop platforms and processes for collecting verified emissions data from supply chain partners
• Align with ISSB baseline—build reporting infrastructure to ISSB standards as foundation for meeting multiple jurisdictional requirements
• Engage in policy processes—participate in regulatory consultations to ensure rules reflect operational realities and implementation capacity

FAQ

Q: When do CSRD requirements apply to non-EU companies? A: Non-EU companies with net EU revenue above €150 million and either EU subsidiary or branch generating €40 million+ must report starting fiscal year 2028 (published 2029). The threshold captures approximately 10,000 US companies.

Q: How should we prepare for CBAM costs? A: Calculate embedded carbon in imports of covered materials using supplier data or default values. Model cost impacts under different carbon price scenarios (€50-150/tonne range). Evaluate supplier switching, nearshoring, or decarbonization investments to reduce exposure. Build costs into forward pricing.

Q: Can we use carbon offsets to reduce CBAM liabilities? A: No. CBAM is based on embedded emissions in products, not net emissions after offsets. Only actual production emissions reductions decrease CBAM costs. This distinguishes CBAM from offset-allowing compliance mechanisms.

Q: How do California laws interact with SEC rules? A: California's SB 253 requires emissions disclosure from all companies with California revenue above $1 billion, regardless of where headquartered or whether publicly traded. Requirements are broader than SEC rules in some respects. Companies should plan for the more stringent requirement.

Sources

• European Commission, "Corporate Sustainability Reporting Directive Implementation Guidance," EC, 2025
• European Commission, "Carbon Border Adjustment Mechanism Transitional Period Report," EC, 2025
• US Securities and Exchange Commission, "Climate-Related Disclosure Rules: Final Rule," SEC, 2024
• California Air Resources Board, "SB 253 Implementation Timeline and Guidance," CARB, 2025
• International Sustainability Standards Board, "IFRS S1 and S2 Adoption Tracker," ISSB Foundation, 2025
• PwC, "CSRD Readiness Survey: European Corporate Preparedness," PwC, 2025