Deep Dive: Regulation Watch (EU/US/Global) — From Pilots to Scale: The Operational Playbook

Climate regulation has reached an inflection point. What began as voluntary frameworks and regional experiments has crystallized into a dense web of mandatory requirements affecting companies across every major economy. For businesses operating in Asia-Pacific—increasingly the manufacturing hub for global supply chains—understanding how to scale compliance from pilot programs to enterprise deployment is now a strategic imperative. This operational playbook maps the regulatory landscape, identifies the standards reshaping buyer requirements, and provides actionable guidance for implementation at scale.

Why This Matters

The regulatory acceleration is unprecedented. In 2024 alone, the EU's Corporate Sustainability Reporting Directive (CSRD) began phased implementation, the Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase, and the International Sustainability Standards Board (ISSB) standards were adopted by multiple jurisdictions. Simultaneously, the U.S. Securities and Exchange Commission finalized (though subsequently stayed) climate disclosure rules, while Asian economies from Japan to Singapore announced their own mandatory disclosure frameworks.

For companies in Asia-Pacific, this regulatory convergence creates both compliance obligations and competitive opportunities. An estimated 70% of global manufactured goods pass through Asia-Pacific supply chains. As European and North American buyers face disclosure requirements for Scope 3 emissions—those occurring in their supply chains—demand for climate data and low-carbon products from Asian suppliers is surging.

The financial stakes are substantial. The EU CBAM alone is projected to impose costs of €3-5 billion annually on Asian exporters of steel, aluminum, cement, fertilizers, electricity, and hydrogen by 2030. Companies that cannot provide required carbon intensity data face potential exclusion from premium markets. Conversely, suppliers demonstrating verifiable low-carbon credentials can capture emerging green premium markets worth an estimated $12-15 trillion globally by 2030.

The Regulatory Landscape: Key Standards Shaping Buyer Requirements

EU Carbon Border Adjustment Mechanism (CBAM)

CBAM represents the most consequential trade-related climate regulation to date. The mechanism requires importers of covered goods (iron, steel, aluminum, cement, fertilizers, electricity, hydrogen) to purchase CBAM certificates corresponding to the carbon price that would have been paid if goods were produced under EU carbon pricing rules.

The transitional phase (October 2023 - December 2025) requires importers to report embedded emissions without financial liability. From January 2026, financial obligations begin, with free allocation to EU producers phased out by 2034.

For Asian exporters, the operational requirements are significant:

• Emissions data: Suppliers must provide product-level carbon intensity data using EU-specified methodologies
• Verification: Third-party verification of emissions data will be required
• Systems integration: Data must flow through EU's CBAM registry and reporting systems
• Documentation: Production process documentation to support emissions claims

Early pilots among Asian steel producers show that achieving CBAM-ready data systems requires 12-18 months of implementation effort, highlighting the urgency of beginning compliance work now.

ISSB Standards and Jurisdictional Adoption

The ISSB's IFRS S1 (general sustainability disclosure) and IFRS S2 (climate-related disclosure) standards are becoming the global baseline for corporate sustainability reporting. Unlike voluntary frameworks, ISSB standards are designed for integration into securities regulation.

Adoption is accelerating across Asia-Pacific:

• Japan: Mandatory for prime-listed companies from April 2025
• Singapore: Phased mandatory adoption for listed companies beginning 2025
• Hong Kong: Climate-related disclosure aligned with ISSB required from 2025
• Australia: Mandatory climate disclosure legislation passed, phased implementation from 2024

The convergence around ISSB creates operational efficiencies for multinational companies—one reporting framework can satisfy multiple jurisdictional requirements. However, the standards require significant capability building, particularly for Scope 3 emissions measurement and climate scenario analysis.

EU Battery Regulation and Digital Product Passport

The EU Battery Regulation, entering force from February 2024 with phased requirements through 2030, represents a template for product-specific sustainability regulation. Key requirements include:

• Carbon footprint declarations: Required for industrial and EV batteries from February 2025
• Carbon footprint performance classes: Maximum carbon footprint thresholds from 2028
• Battery passport: Digital product passport required for EV and industrial batteries from February 2027
• Due diligence: Supply chain due diligence for raw materials

For Asian battery manufacturers and their supply chains, this regulation creates immediate compliance obligations. The digital product passport requirement, in particular, demands systems capable of tracking and certifying product-level sustainability data throughout the value chain.

The Operational Playbook: From Pilot to Scale

Phase 1: Regulatory Mapping and Materiality Assessment (Months 1-3)

Before building compliance systems, companies must understand their specific regulatory exposure. This requires:

Regulatory inventory: Map all current and pending regulations affecting your products, markets, and operations. Include not just direct obligations but also indirect requirements (e.g., as supplier to companies with their own obligations).

Materiality assessment: Prioritize regulations by financial impact, implementation timeline, and strategic importance. Focus resources on high-materiality obligations first.

Gap analysis: Assess current data systems, processes, and capabilities against regulatory requirements. Identify critical gaps requiring investment.

A multinational electronics manufacturer conducting this assessment found that seven distinct regulatory frameworks created overlapping but non-identical requirements for carbon disclosure. Mapping these overlaps enabled a unified data architecture serving multiple compliance needs.

Phase 2: Data Infrastructure Development (Months 3-9)

Climate compliance at scale requires robust data infrastructure. Key elements include:

Emissions measurement systems: Implement product-level and facility-level emissions tracking. For Scope 1 and 2, this typically involves utility data integration, process emission calculations, and activity-based accounting. For Scope 3, supplier data collection systems and lifecycle assessment capabilities are essential.

Data quality management: Regulatory requirements increasingly distinguish between primary (measured) data and secondary (estimated) data, with preferences or requirements for primary data. Build systems that track data provenance and quality levels.

Audit trails and verification: Anticipate verification requirements by building auditable data trails from the start. Third-party verification of emissions data will become standard; systems designed without audit capability will require costly retrofitting.

Integration with enterprise systems: Climate data must integrate with ERP, supply chain management, and financial reporting systems. Standalone sustainability databases create data silos and reconciliation challenges.

Thai cement manufacturer SCG's compliance program illustrates effective data infrastructure development. The company invested $8 million in emissions monitoring systems across 15 facilities, enabling real-time carbon intensity tracking that now supports CBAM reporting, customer inquiries, and internal decarbonization management.

Phase 3: Supplier Engagement and Value Chain Integration (Months 6-15)

For most companies, Scope 3 emissions represent the majority of their carbon footprint and the primary compliance challenge. Effective supplier engagement requires:

Tiering and prioritization: Not all suppliers can be engaged simultaneously. Prioritize by emissions contribution (typically top 50-100 suppliers represent 70-80% of supply chain emissions), strategic importance, and capability level.

Standardized data requests: Use established frameworks (CDP Supply Chain, ISSB-aligned questionnaires) to standardize data requests. Custom questionnaires burden suppliers and reduce response rates.

Capacity building: Many suppliers, particularly SMEs, lack climate data capabilities. Provide training, tools, and technical assistance to enable participation. The upfront investment in supplier capability yields more reliable data than passive data requests.

Commercial integration: Link sustainability performance to commercial relationships through preferred supplier programs, volume commitments, or pricing mechanisms. Data quality and emissions performance improve dramatically when connected to commercial incentives.

Apple's Supplier Clean Energy Program demonstrates scaled supplier engagement. Beginning with pilot programs involving a handful of suppliers in 2015, the program expanded to over 320 suppliers committed to 100% renewable electricity by 2024, representing 95% of direct manufacturing spend. Success factors included clear requirements, technical support, and commercial consequences.

Phase 4: Reporting System Development (Months 9-18)

Compliance requires not just data but reporting systems capable of generating regulatory submissions. Key considerations include:

Multi-framework capability: Build systems that can generate outputs for multiple regulatory frameworks from common data. This reduces duplication and ensures consistency across reports.

Assurance readiness: Design reports and underlying systems to support limited or reasonable assurance from the start. Retrofitting assurance capability is significantly more expensive than building it in initially.

Continuous updating: Regulations evolve. Build systems with flexibility to incorporate new requirements without complete redesign. Modular architectures with separation between data layer and reporting layer provide this flexibility.

Internal controls: Climate disclosures in financial filings require internal controls comparable to financial reporting. Establish clear ownership, approval processes, and control frameworks.

Phase 5: Continuous Improvement and Performance Management (Ongoing)

Compliance is not a one-time project but an ongoing operational capability. Sustaining performance requires:

KPI monitoring: Track compliance metrics (data completeness, data quality, reporting timeliness) and improvement metrics (emissions intensity, supplier engagement rates).

Regulatory horizon scanning: Monitor regulatory developments continuously. New requirements typically provide 18-36 months implementation runway; companies tracking developments can begin preparation before requirements are finalized.

Competitive benchmarking: Compare performance against peers and best practices. As disclosure becomes mandatory, competitive comparison becomes possible and strategically valuable.

Real-World Examples

1. Samsung SDI Battery Compliance Program

Korean battery manufacturer Samsung SDI faced immediate exposure to EU Battery Regulation requirements. The company's compliance program included:

• Deployment of product-level lifecycle assessment (LCA) capabilities covering battery cell production
• Integration with supplier data systems for raw material provenance tracking
• Development of digital product passport infrastructure ahead of regulatory deadlines
• Investment of approximately $15 million in compliance systems and verification

Early compliance positioning enabled Samsung SDI to market "EU Battery Regulation ready" products, capturing customer preference in competitive tenders.

2. Tata Steel Europe CBAM Preparation

Tata Steel, with significant European operations and integrated supply chains spanning India, prepared for CBAM through a coordinated cross-border program:

• Harmonized emissions accounting methodologies across European and Indian facilities
• Implemented product-level carbon intensity tracking enabling CBAM certificate calculations
• Developed customer-facing carbon data portals allowing buyers to access verified emissions information
• Explored pathways to reduce carbon intensity, including hydrogen-based steelmaking pilots

The program demonstrated that integrated multinationals can leverage scale to achieve compliance efficiency across jurisdictions.

3. Singapore Exchange Sustainability Reporting

Singapore Exchange (SGX) led regulatory adoption in Asia-Pacific with mandatory climate disclosure requirements aligned with TCFD (and subsequently ISSB). SGX's approach included:

• Phased implementation beginning with largest listed companies
• Extensive capacity-building programs for listed companies and their advisors
• Development of centralized climate data repository enabling benchmarking and analysis
• Integration of climate disclosure with broader sustainability reporting requirements

By 2024, over 80% of SGX-listed companies provided climate-related disclosures, with data quality improving each reporting cycle.

Action Checklist

• Complete regulatory exposure mapping covering all markets, products, and value chain positions within 90 days
• Prioritize regulations by financial materiality, timeline, and strategic importance
• Conduct gap assessment of current data systems against regulatory requirements
• Develop 18-month compliance program plan with clear milestones and resource allocation
• Begin Scope 3 supplier engagement with top 50 suppliers by emissions contribution
• Evaluate systems investments for emissions measurement, reporting, and digital product passports
• Establish regulatory monitoring function or engage advisory support for horizon scanning

Frequently Asked Questions

Q: How do we prioritize when facing multiple regulatory requirements with overlapping timelines?

A: Prioritize by financial materiality first. Regulations with direct financial consequences (CBAM, mandatory disclosure linked to capital access) take precedence over those with reputational consequences only. Where financial materiality is similar, prioritize by timeline, beginning preparation for requirements effective soonest. Look for synergies—many regulations require similar underlying data, so investment in data infrastructure serves multiple compliance needs.

Q: Can we rely on industry associations or consortia for compliance, or must we build our own capabilities?

A: Industry-level initiatives (common methodologies, shared platforms, collective advocacy) can reduce compliance costs and improve consistency. However, each company remains individually liable for its disclosures. Build sufficient internal capability to understand, validate, and take responsibility for data and reports, even when leveraging shared resources.

Q: What's the appropriate level of investment in compliance systems versus waiting for regulatory clarity?

A: Waiting carries significant risk. Regulations now in force or entering force within 24 months are unlikely to change substantially. Begin compliance work immediately for these requirements. For proposed regulations or regulations with longer timelines, invest in flexible data infrastructure that can adapt as requirements finalize. The cost of building compliance capability during enforcement deadlines significantly exceeds proactive investment.

Q: How do we handle supplier non-cooperation with data requests?

A: Build supplier engagement gradually. Start with data requests aligned with established frameworks (CDP, ISSB). Provide capacity-building support for suppliers lacking capability. Make data provision a condition of ongoing supplier status, with clear timelines for compliance. For critical suppliers who refuse to engage despite support, develop contingency plans including alternative sourcing. Experience shows that sustained engagement with clear commercial consequences achieves high supplier participation over 12-24 months.

Sources

• European Commission. (2024). Carbon Border Adjustment Mechanism: Guidance for Implementation. Available at: https://taxation-customs.ec.europa.eu/
• ISSB. (2023). IFRS S1 and S2 General Requirements for Disclosure of Sustainability-related Financial Information. IFRS Foundation.
• European Commission. (2023). EU Battery Regulation (2023/1542). Official Journal of the European Union.
• Singapore Exchange. (2024). Sustainability Reporting Requirements. Available at: https://www.sgx.com/
• CDP. (2024). Supply Chain Report 2024. Available at: https://www.cdp.net/
• World Bank. (2024). State and Trends of Carbon Pricing 2024. Washington, DC: World Bank Group.
• Deloitte. (2024). CBAM Implementation Guide for Asian Exporters. Deloitte Southeast Asia.