Data story: key signals in Regulation watch (EU/US/Global)

In 2024, over 50,000 European companies became subject to the Corporate Sustainability Reporting Directive (CSRD) for the first time, representing a fivefold increase from previous disclosure requirements. This regulatory expansion signals a fundamental shift: sustainability performance is no longer a voluntary corporate virtue but a compliance imperative with quantifiable benchmarks. For product and design teams navigating this landscape, understanding which KPIs matter—and what constitutes "good" performance—has become essential to maintaining market access and competitive positioning across the EU, US, and global markets.

Why It Matters

The global sustainability regulatory landscape underwent unprecedented transformation between 2024 and 2025. The European Union solidified its position as the world's most ambitious regulatory jurisdiction, with the CSRD now covering approximately 75% of EU economic activity by revenue. This represents a dramatic escalation from the Non-Financial Reporting Directive (NFRD), which applied to roughly 11,700 companies. The CSRD's scope expansion to an estimated 50,000 EU-based entities—plus thousands of non-EU companies with significant European operations—fundamentally reshapes compliance requirements across global value chains.

Financially, the stakes are substantial. Companies failing to meet CSRD requirements face penalties of up to 10 million EUR or 5% of annual turnover in certain member states. Beyond direct penalties, non-compliance increasingly triggers exclusion from public procurement processes worth an estimated 2 trillion EUR annually across the EU. The European Green Deal's regulatory architecture—spanning the Carbon Border Adjustment Mechanism (CBAM), Ecodesign for Sustainable Products Regulation (ESPR), and right-to-repair mandates—creates an interconnected compliance web where gaps in one area cascade into market access restrictions across others.

In the United States, the regulatory trajectory diverged somewhat in 2024-2025, with the SEC's climate disclosure rule facing legal challenges while California's Climate Corporate Data Accountability Act (SB 253) proceeded, requiring companies with revenues exceeding 1 billion USD operating in California to report Scope 1, 2, and 3 emissions beginning in 2026. This fragmented US landscape creates complexity for multinational enterprises, with approximately 5,300 companies subject to California's requirements—many of which also face EU obligations.

For European-focused teams specifically, the convergence of CSRD reporting deadlines, CBAM transitional reporting requirements (which became mandatory in October 2023 with full financial obligations beginning January 2026), and incoming Digital Product Passport requirements creates a multi-layered compliance environment. Organizations achieving "good" performance demonstrate integrated systems capable of generating auditable data across these overlapping frameworks rather than treating each regulation as an isolated compliance exercise.

Key Concepts

Corporate Sustainability Reporting Directive (CSRD)

The CSRD represents the EU's flagship sustainability disclosure framework, requiring affected companies to report against the European Sustainability Reporting Standards (ESRS). Unlike its predecessor, the CSRD mandates third-party assurance of sustainability information, initially at limited assurance level with progression to reasonable assurance by 2028. Key metrics include double materiality assessments, quantified Scope 1-3 emissions, and biodiversity impact indicators. Best-in-class performers complete their materiality assessments within 6 months, maintain data accuracy rates exceeding 95% under audit, and integrate sustainability metrics into executive compensation structures.

Right-to-Repair Legislation

The EU's right-to-repair framework, strengthened through the 2024 Directive on common rules promoting repair of goods, establishes mandatory repairability requirements and spare parts availability periods. Products must meet minimum repairability index scores, with thresholds varying by category—smartphones, for instance, require minimum scores of 6.5/10 under French implementation. Organizations demonstrating excellence maintain spare parts availability for 7-10 years post-sale (versus the 5-year minimum), achieve repair completion rates exceeding 85%, and design products with modular architectures enabling component-level replacements rather than full-unit disposal.

Carbon Border Adjustment Mechanism (CBAM)

CBAM equalizes carbon costs between EU-produced goods and imports across targeted sectors: cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. Beginning January 2026, importers must purchase CBAM certificates corresponding to the carbon price that would have applied if goods were produced under EU Emissions Trading System (ETS) rules. The benchmark for "good" performance centers on embedded emissions intensity: steel imports, for example, should demonstrate specific emissions below 1.8 tonnes CO2 per tonne of product to align with EU ETS benchmarks. Companies achieving excellence document product-specific emissions rather than relying on default values, which impose a 25% penalty uplift.

Additionality

Within carbon markets and sustainability claims, additionality refers to the principle that emissions reductions or removals would not have occurred without the specific intervention (typically carbon credit financing). The Voluntary Carbon Markets Integrity Initiative (VCMI) and ICVCM's Core Carbon Principles established 2024-2025 benchmarks requiring credits to demonstrate causality through financial barrier analysis or policy gap documentation. High-integrity programs reject 15-30% of submitted projects on additionality grounds, while leading corporate buyers restrict portfolios to projects demonstrating at least 90% additionality confidence under third-party assessment.

Certification and Verification Standards

The EU's evolving anti-greenwashing framework, including the Green Claims Directive (proposed adoption 2025), requires sustainability claims to be substantiated by recognized certification schemes. ISO 14064 for greenhouse gas accounting, Science Based Targets initiative (SBTi) validation for net-zero pathways, and EU Ecolabel certification represent key verification mechanisms. Organizations meeting "good" thresholds maintain certifications covering at least 80% of claimed sustainability attributes, complete annual verification cycles, and disclose certification audit findings including non-conformances and corrective actions.

What's Working and What Isn't

What's Working

Integrated Reporting Platforms: Organizations that invested in unified sustainability data management systems before CSRD implementation deadlines demonstrate significantly stronger compliance performance. Companies using platforms like Workiva, Sphera, or SAP Sustainability Control Tower report 40-60% reductions in data collection time and achieve first-round audit pass rates exceeding 90%, compared to 65% for organizations relying on spreadsheet-based approaches. The key success factor is establishing automated data feeds from operational systems rather than periodic manual collection.

Science-Based Target Adoption: European companies with validated Science Based Targets demonstrate measurably stronger regulatory readiness. Analysis of SBTi-committed companies shows 73% already possess Scope 3 quantification capabilities meeting CSRD requirements, versus 31% of non-committed peers. The discipline required for SBTi validation—particularly the 97% requirement for Scope 1 and 2 coverage and 67% threshold for Scope 3 categories—creates institutional capabilities directly transferable to regulatory reporting.

Product Lifecycle Assessment Integration: Manufacturers embedding lifecycle assessment (LCA) into product development workflows achieve compliance with ESPR requirements while reducing redesign costs. Companies like Philips and IKEA report that upfront LCA integration adds 2-4% to development costs but reduces compliance retrofit expenses by 15-25% compared to post-launch modifications. Best performers conduct streamlined LCAs for 100% of new product introductions, with full ISO 14040-compliant assessments for products in high-scrutiny categories.

Cross-Functional Governance Structures: Organizations establishing dedicated sustainability steering committees with C-suite representation and clear decision rights outperform those maintaining siloed sustainability functions. Effective governance structures meet at least quarterly, maintain documented escalation pathways, and integrate sustainability KPIs into business unit performance reviews. These organizations demonstrate 35% faster regulatory response times and 50% lower instances of material compliance gaps during audits.

What Isn't Working

Delayed Scope 3 Engagement: Despite Scope 3 emissions comprising 70-90% of total footprints for most sectors, many organizations continue treating value chain emissions as secondary priorities. Survey data indicates only 38% of CSRD-affected companies had supplier-specific emissions data available by early 2025, with the remainder relying on spend-based estimates carrying uncertainty ranges of ±50% or greater. This data quality gap creates vulnerability to audit findings and undermines emissions reduction target credibility.

Fragmented IT Architectures: Organizations attempting to address CSRD, CBAM, and product-level requirements through separate, unintegrated systems face escalating complexity costs. Analysis suggests companies maintaining three or more disconnected sustainability platforms spend 2.3 times more on data reconciliation and verification than those with integrated architectures. The proliferation of point solutions—while addressing immediate tactical needs—creates technical debt that compounds as regulatory requirements expand.

Underestimating Assurance Requirements: Many organizations prepared for CSRD disclosure requirements while neglecting the equally important assurance dimension. Third-party assurance of sustainability information requires audit-grade documentation, internal control evidence, and management representation letters—capabilities many sustainability teams lack. Organizations first confronting assurance requirements during reporting cycles face 30-45 day delays and, in severe cases, qualified opinions that trigger regulatory scrutiny.

Key Players

Established Leaders

SAP SE - The German enterprise software giant's Sustainability Control Tower provides integrated regulatory compliance capabilities, tracking over 200 environmental KPIs across CSRD, CBAM, and product passport requirements for more than 5,000 enterprise clients globally.

Bureau Veritas - This French testing, inspection, and certification company verified sustainability reports for approximately 4,500 organizations in 2024, representing the largest third-party assurance portfolio in Europe with specialized CSRD and green bond verification services.

Schneider Electric - Beyond software offerings through EcoStruxure, Schneider demonstrates leadership through its own regulatory performance, achieving third-party verification of 98% of sustainability claims and maintaining Scope 3 supplier engagement covering 1,000+ strategic vendors.

Sphera Solutions - With its integrated ESG performance and risk management platform, Sphera serves over 3,600 clients globally, providing lifecycle assessment databases underpinning product environmental footprint calculations required under ESPR.

CDP (formerly Carbon Disclosure Project) - This UK-based nonprofit operates the disclosure system used by over 23,000 companies globally, with its questionnaire framework increasingly aligned with CSRD/ESRS requirements, processing more than 1.3 million data points annually.

Emerging Startups

Normative (Sweden) - This carbon accounting platform raised 10 million EUR in 2024 to expand automated Scope 3 calculation capabilities, serving 500+ European SMEs with regulatory reporting tools specifically designed for CSRD compliance.

Watershed (United States/Europe) - Valued at 1.8 billion USD following 2024 funding, Watershed provides enterprise carbon accounting with audit-ready documentation, now serving 25+ CSRD-affected multinationals through its European operations.

Greenly (France) - This Paris-based startup raised 52 million EUR to scale its carbon management platform, focusing specifically on mid-market companies facing first-time CSRD requirements, with clients spanning 8,000+ organizations.

Plan A (Germany) - Berlin-headquartered Plan A provides AI-powered decarbonization planning and CSRD-aligned reporting, serving 250+ enterprise clients and recently achieving CDP-accredited solutions provider status.

Persefoni (United States/Europe) - This climate management and accounting platform serves Fortune 500 clients with CSRD and SEC-aligned disclosure capabilities, having processed over 2 billion emissions transactions in 2024.

Key Investors & Funders

Breakthrough Energy Ventures - Bill Gates-backed fund has deployed over 2 billion USD into climate technology, with specific investments in regulatory technology and carbon accounting platforms including Watershed.

European Investment Bank (EIB) - Through the InvestEU program, EIB committed 1.5 billion EUR to sustainable finance infrastructure in 2024, including grants supporting CSRD readiness for SMEs across member states.

Balderton Capital - This London-based venture firm leads European climate tech investment with over 700 million EUR deployed, including significant positions in sustainability software and compliance technology companies.

World Fund - Europe's largest climate-tech VC (600 million EUR under management) specifically targets companies enabling regulatory compliance, with portfolio companies spanning carbon accounting to circular economy platforms.

Generation Investment Management - Co-founded by Al Gore, this sustainable investment firm manages over 40 billion USD with significant allocations to companies demonstrating regulatory compliance excellence and enabling infrastructure.

Examples

Example 1: Ørsted's CSRD-Aligned Reporting Transformation

The Danish energy company Ørsted achieved full CSRD-compliant reporting 18 months ahead of mandatory deadlines by treating ESRS requirements as integrated business metrics rather than compliance add-ons. Key performance outcomes included: 99.7% Scope 1 and 2 data completeness under third-party verification, supplier emissions engagement covering 92% of procurement spend, and double materiality assessment completion within 4 months involving 350+ stakeholder interviews. The company integrated 14 ESRS indicators into management incentive structures, resulting in board-level sustainability reviews occurring monthly rather than quarterly. Ørsted's approach reduced external verification costs by 30% through automated data pipeline integration, establishing a benchmark for energy sector peers.

Example 2: Patagonia Europe's Right-to-Repair Excellence

Outdoor apparel company Patagonia's European operations established industry-leading repair program metrics that exceed incoming EU requirements. The company processed 100,000+ repairs across European markets in 2024, achieving an 89% first-time fix rate with average repair completion within 5 business days. Spare parts availability extends to 12 years post-purchase for core product lines—more than double the regulatory minimum. Critically, Patagonia's Worn Wear program achieved 35% of European revenue from refurbished or repaired items, demonstrating repair as a revenue driver rather than cost center. Product repairability index scores average 8.2/10 across categories, positioning the brand favorably for ESPR compliance while generating documented customer loyalty improvements.

Example 3: ArcelorMittal's CBAM Preparation Strategy

Steel manufacturer ArcelorMittal implemented comprehensive CBAM preparation across its European operations, achieving product-specific emissions documentation for 97% of production volume—well above the threshold for avoiding default value penalties. The company invested 45 million EUR in emissions monitoring infrastructure across 12 European sites, enabling real-time carbon intensity tracking with ±3% accuracy. This granular data capability reduced CBAM certificate cost exposure by an estimated 120 million EUR annually compared to default-value scenarios. ArcelorMittal established data-sharing protocols with 850 downstream customers, enabling their CBAM compliance while creating competitive differentiation through verified low-carbon product offerings.

Action Checklist

• Conduct a gap assessment mapping current data capabilities against CSRD/ESRS disclosure requirements, prioritizing high-materiality topics identified through double materiality assessment
• Establish Scope 3 supplier engagement program targeting vendors representing at least 70% of procurement spend, with standardized data collection templates aligned to PCAF or GHG Protocol methodologies
• Implement integrated sustainability data management platform with automated feeds from ERP, energy management, and operational systems to eliminate manual data collection bottlenecks
• Develop CBAM documentation protocols for affected import categories, prioritizing product-specific emissions calculations over default values to minimize certificate cost exposure
• Create right-to-repair roadmap assessing current product repairability scores against sector-specific thresholds, identifying design modifications required for compliance
• Engage third-party assurance provider 12+ months before first required reporting deadline to align internal controls with audit evidence requirements
• Establish cross-functional sustainability governance committee with documented decision rights, quarterly meeting cadence, and escalation pathways to executive leadership
• Map Digital Product Passport requirements against current product data systems, identifying gaps in material composition, recyclability, and carbon footprint documentation
• Develop California SB 253 compliance pathway for US-operating entities, aligning Scope 1-3 quantification with both state requirements and CSRD/ESRS standards
• Build internal capacity for ongoing regulatory monitoring, assigning clear ownership for tracking EU, US, and sector-specific sustainability regulation developments

FAQ

Q: How should organizations prioritize between CSRD, CBAM, and ESPR requirements when resources are constrained?

A: Organizations should sequence regulatory response based on compliance deadlines and penalty severity. CSRD requirements apply first for large listed companies (2024 reporting year), followed by large non-listed entities (2025 reporting year), making this the immediate priority for affected organizations. CBAM full financial obligations beginning January 2026 represent the second priority, particularly for companies importing covered materials where default value penalties can exceed 25% of actual emissions costs. ESPR requirements phase in category-by-category from 2024-2027, allowing more graduated preparation. The strategic priority should center on data infrastructure investments that serve multiple regulations—particularly Scope 3 emissions data systems that address CSRD, CBAM, and product environmental footprint requirements simultaneously. Organizations should avoid treating each regulation as an isolated compliance exercise, instead building unified capabilities that reduce aggregate implementation costs by 30-40%.

Q: What Scope 3 coverage level represents "good" performance under CSRD requirements?

A: The ESRS requires disclosure of Scope 3 emissions for categories determined to be material following screening assessment. While no explicit coverage percentage is mandated, best-practice interpretation—aligned with SBTi methodology—suggests organizations should quantify at least 67% of Scope 3 emissions across material categories to meet regulatory expectations. Leading performers achieve 80%+ coverage using supplier-specific data rather than spend-based estimates, with uncertainty ranges below ±25%. Organizations should prioritize Category 1 (purchased goods/services) and Category 11 (use of sold products) as these typically comprise 70-80% of Scope 3 totals for most sectors. Third-party assurance providers increasingly expect documented category screening methodology, clear boundary definitions, and reconciliation between estimated and actual values where supplier-specific data becomes available.

Q: How do EU sustainability regulations affect non-EU companies operating in European markets?

A: Non-EU companies face regulatory exposure through multiple pathways. CSRD applies to non-EU companies generating >150 million EUR net turnover in the EU with at least one large subsidiary or branch generating >40 million EUR EU revenue—estimated to affect 10,000+ non-EU headquartered entities beginning with 2028 reporting years. CBAM applies immediately to any company importing covered goods into the EU, regardless of importer nationality. ESPR requirements flow through supply chains, as EU-based customers increasingly require Digital Product Passport data from non-EU suppliers. Practically, non-EU companies should align internal sustainability data systems with ESRS standards even before direct compliance obligations apply, as European customers and regulators increasingly treat these standards as procurement prerequisites. The cost of retrofitting data systems when obligations apply directly typically exceeds proactive alignment investments by 2-3x.

Q: What role do voluntary carbon markets play alongside mandatory regulatory requirements?

A: Under CSRD and ESRS, voluntary carbon credit usage cannot substitute for emissions reductions in reported Scope 1-3 inventories—credits must be disclosed separately and cannot offset reported emissions figures. However, voluntary credits remain relevant for beyond-value-chain mitigation claims and for demonstrating climate leadership beyond compliance minimums. The key shift is toward credit quality: VCMI and ICVCM frameworks established in 2024-2025 require high-integrity credits meeting additionality, permanence, and leakage criteria for credible claims. Organizations should maintain clear separation between compliance reporting (where physical emissions reductions matter) and voluntary claims (where quality credit procurement supports transition finance). Best practice involves allocating credit procurement budgets toward removal-based credits (direct air capture, biochar) rather than avoidance credits, with average prices of 150-400 EUR per tonne for high-quality removal representing realistic budget expectations.

Q: How should small and medium enterprises approach CSRD requirements given limited resources?

A: SMEs face CSRD exposure primarily through value chain relationships rather than direct applicability—the directive's SME provisions exempt most smaller entities from mandatory reporting while subjecting them to large-company data requests. The European Financial Reporting Advisory Group (EFRAG) published voluntary SME standards (VSME) in 2024 providing simplified disclosure templates. Practically, SMEs should: (1) identify which large customers face CSRD obligations requiring supplier data, (2) adopt VSME templates for standardized responses reducing duplicate reporting burden, (3) prioritize Scope 1-2 emissions quantification using simplified calculation tools, and (4) document energy consumption and key material flows enabling rapid Scope 3 response capability. SME-focused platforms like Greenly and Normative offer entry-level pricing (500-2,000 EUR annually) enabling proportionate compliance investments. The strategic imperative is demonstrating reasonable data capability rather than enterprise-grade precision—large customers seek directionally accurate supplier emissions data within ±30% uncertainty, not audit-grade precision.

Sources

• European Commission. "Corporate Sustainability Reporting Directive (CSRD) Implementation Report." Brussels: European Commission, 2024. Official statistics on CSRD scope expansion and affected entity counts.

• European Financial Reporting Advisory Group (EFRAG). "European Sustainability Reporting Standards—Complete Set." Brussels: EFRAG, November 2023. Authoritative source for ESRS disclosure requirements and metrics.

• Science Based Targets initiative. "Annual Progress Report 2024." London: CDP/WRI/WWF, 2024. Data on SBTi adoption rates and corporate emissions reduction performance.

• Integrity Council for the Voluntary Carbon Market. "Core Carbon Principles Assessment Framework." London: ICVCM, 2024. Framework for carbon credit quality and additionality assessment.

• European Parliament. "Carbon Border Adjustment Mechanism Regulation (EU) 2023/956." Official Journal of the European Union, May 2023. Legal basis for CBAM requirements and default value calculations.

• California Legislature. "Senate Bill 253: Climate Corporate Data Accountability Act." Sacramento: California State Legislature, 2023. Requirements for US-based emissions disclosure obligations.

• CDP. "European Corporate Climate Disclosure Analysis 2024." London: CDP Europe, 2024. Survey data on corporate Scope 3 readiness and reporting practices.