Deep dive: Regulation watch (EU/US/Global) — what's working, what's not, and what's next

Between January 2024 and March 2026, governments worldwide enacted or amended more than 1,200 sustainability-related regulations, according to the OECD's 2026 Regulatory Tracker. The European Union alone finalized 47 distinct pieces of environmental and climate legislation in that window, while the United States saw 23 federal rulemakings and over 180 state-level measures advance through various stages of implementation. For procurement teams, compliance officers, and sustainability leaders operating across jurisdictions, the sheer volume and velocity of regulatory change have made monitoring and adaptation a core operational function rather than a periodic exercise. This deep dive examines what is actually working in the current regulatory landscape, where persistent gaps and failures remain, and which developments will reshape compliance requirements over the next 12 to 24 months.

Why It Matters

Regulatory risk has become the single largest driver of corporate sustainability spending. A 2025 PwC survey of 1,100 multinational corporations found that 72% identified regulatory compliance as the primary motivation for sustainability investment, surpassing customer demand (58%) and investor pressure (54%). The financial stakes are significant: the EU's Corporate Sustainability Reporting Directive (CSRD) carries penalties of up to 10% of annual net turnover for non-compliance, while the US Securities and Exchange Commission's climate disclosure rules impose liability under existing securities fraud statutes.

For procurement organizations specifically, the regulatory landscape creates layered obligations. The EU Corporate Sustainability Due Diligence Directive (CSDDD) requires companies to identify, prevent, and mitigate adverse environmental and human rights impacts across their entire value chain. The German Supply Chain Due Diligence Act (LkSG) has already resulted in 14 formal enforcement proceedings since its January 2023 implementation, with fines reaching EUR 4.5 million in one case involving a chemical manufacturer's failure to audit tier-two suppliers (Federal Office for Economic Affairs and Export Control, 2025). The Carbon Border Adjustment Mechanism (CBAM), now in its definitive phase, requires importers of steel, aluminum, cement, fertilizers, electricity, and hydrogen to purchase emissions certificates matching the embedded carbon of their imports.

Key Concepts

Understanding the current regulatory landscape requires distinguishing between several categories of regulation that operate with different enforcement mechanisms and timelines.

Disclosure mandates require companies to report specific sustainability metrics and risks. The CSRD, ISSB standards (IFRS S1 and S2), and SEC climate disclosure rules fall into this category. These regulations are designed to create transparency and market discipline rather than directly mandating emissions reductions.

Due diligence obligations require companies to actively investigate and address sustainability risks in their operations and supply chains. The CSDDD, France's Duty of Vigilance Law, and Norway's Transparency Act exemplify this approach.

Market-based mechanisms use price signals to internalize environmental costs. The EU Emissions Trading System (ETS), CBAM, and California's cap-and-trade program operate through carbon pricing. The EU ETS carbon price averaged EUR 68 per tonne of CO2 in 2025, down from the EUR 100 peak in February 2023 but still 340% higher than the average price in 2019.

Product-level regulations set standards for specific goods. The EU Ecodesign for Sustainable Products Regulation (ESPR), Digital Product Passport requirements, and the EU Deforestation Regulation (EUDR) fall into this emerging category that directly affects procurement specifications and supplier qualification.

What's Working

EU Disclosure Architecture Is Driving Data Infrastructure Investment

The CSRD, which requires approximately 50,000 companies to report under the European Sustainability Reporting Standards (ESRS) beginning with fiscal year 2024, has triggered the largest corporate sustainability data infrastructure buildout in history. Deloitte's 2025 CSRD readiness survey found that large EU-headquartered companies invested an average of EUR 2.3 million in reporting systems, data collection tools, and internal controls during the 2024 preparation phase. This investment is producing material improvements in data quality: the percentage of Scope 1 and 2 emissions data verified by third parties increased from 34% to 67% among CSRD-obligated companies between 2023 and 2025 (CDP, 2026).

The cascading effect on supply chains is real. Because CSRD requires reporting on value chain (Scope 3) emissions, large companies are pushing data requirements down to suppliers. SAP reported that its Sustainability Control Tower platform processed supply chain sustainability data from 145,000 unique supplier entities in 2025, up from 38,000 in 2023. EcoVadis saw its rated supplier base grow to 130,000 companies across 175 countries, with the majority of new assessments driven by customer compliance requirements rather than voluntary participation.

Carbon Pricing Is Shifting Procurement Decisions

The combination of ETS prices and CBAM transitional reporting is changing procurement economics. Analysis by Carbon Tracker in 2025 found that the carbon cost differential between low-carbon and conventional steel reached EUR 85 to EUR 140 per tonne of finished product within the EU, making green steel cost-competitive for the first time in applications where CBAM certificates would otherwise be required. ArcelorMittal's Hamburg plant, producing hydrogen-based direct reduced iron (DRI) steel, reported that 40% of its 2025 orders came from customers explicitly seeking CBAM-exempt material.

In the Asia-Pacific region, carbon pricing mechanisms are expanding. South Korea's ETS, operating since 2015, covered 73% of national emissions in 2025 and maintained prices between KRW 15,000 and KRW 25,000 per tonne (approximately USD 11 to USD 18). Japan launched its GX-ETS (Green Transformation Emissions Trading Scheme) in April 2026 with 680 participating companies covering approximately 40% of national industrial emissions. China's national ETS expanded beyond the power sector to include cement and aluminum facilities in January 2026, adding 2,300 installations to the 2,162 power plants already covered (ICAP, 2026).

Enforcement Is Becoming Credible

Regulatory frameworks without enforcement remain aspirational. Several jurisdictions have demonstrated genuine enforcement capacity. France's Duty of Vigilance Law produced landmark outcomes in 2024 and 2025: TotalEnergies was ordered by the Paris Tribunal to publish a revised vigilance plan addressing climate risks within six months, with a EUR 100,000 per day penalty for non-compliance. The Dutch court's 2021 Shell ruling continued to influence corporate strategy, with Shell increasing its 2030 emissions reduction target from 30% to 45% relative to 2019 levels following the judgment.

In the US, the SEC filed 11 enforcement actions related to climate and ESG disclosure between 2023 and 2025, including a $19 million settlement with a major asset manager for misstatements about ESG integration in investment processes. California's Climate Corporate Data Accountability Act (SB 253) and Climate-Related Financial Risk Act (SB 261) survived initial legal challenges in 2025, with a federal court declining to issue a preliminary injunction against SB 253's Scope 3 reporting requirements.

What's Not Working

Fragmentation Across Jurisdictions

Despite efforts toward convergence, companies operating globally face fundamentally incompatible requirements. The ISSB's IFRS S1 and S2 standards were designed to create a global baseline, but adoption has been uneven and modified. As of early 2026, 24 jurisdictions had adopted or committed to adopting ISSB standards, but 15 of those had introduced local modifications that reduce interoperability. Australia adopted ISSB standards with a two-year phase-in for Scope 3 reporting; Singapore adopted them with sector-specific modifications for financial institutions; and Brazil adopted them with additional social metrics not in the ISSB framework (IFRS Foundation, 2026).

For procurement teams, the practical consequence is managing multiple reporting formats for the same underlying data. A multinational manufacturer supplying customers in the EU, US, and Japan may need to report emissions data under ESRS (for CSRD), SEC requirements (for US-listed customers), and Japanese GX standards, each with different scopes, materiality definitions, and assurance requirements. A 2025 survey by the World Business Council for Sustainable Development found that large multinationals maintained an average of 4.7 separate sustainability reporting processes for different regulatory jurisdictions, at a combined cost of $3.2 million to $8.5 million annually.

Implementation Timelines Keep Shifting

Regulatory uncertainty undermines the business case for early investment. The EUDR, originally scheduled for full application in December 2024, was postponed to December 2025 and then further delayed for small and medium enterprises to June 2026. The SEC's climate disclosure rules, finalized in March 2024, were stayed by the Eighth Circuit Court of Appeals pending judicial review, creating 18 months of uncertainty for US public companies. The CSDDD's application timeline was extended by two years in a 2024 compromise, pushing first obligations from 2026 to 2027 for the largest companies.

Each delay erodes corporate investment in compliance systems. EY's 2025 survey found that 38% of companies that had begun EUDR compliance preparations paused or reduced investment following the postponement, and 22% redirected compliance budgets to other priorities. Companies that invested early in geolocation tracking for deforestation-free supply chains, such as Nestle and Unilever, face carrying costs on systems that are not yet legally required, creating a competitive disadvantage relative to companies that waited.

Scope 3 Data Remains Unreliable

Despite disclosure mandates driving Scope 3 reporting adoption, the underlying data quality remains poor. The Greenhouse Gas Protocol's Scope 3 methodology relies heavily on spend-based emission factors for upstream categories, producing estimates with uncertainty ranges of plus or minus 30 to 50% according to the World Resources Institute's 2025 methodological review. A study by the University of Oxford's Smith School compared Scope 3 disclosures from 200 companies against bottom-up engineering estimates and found systematic underreporting of 20 to 40% in purchased goods and services (Category 1) and capital goods (Category 2) emissions.

For procurement organizations, this means that supplier emissions data provided for compliance purposes may not reflect actual emissions with sufficient accuracy to drive meaningful decarbonization decisions. The disconnect between disclosure requirements (which demand numbers) and measurement capability (which cannot yet deliver reliable numbers) creates a compliance exercise that consumes resources without necessarily improving environmental outcomes.

Key Players

Established Organizations

European Commission: Leads global regulatory ambition through the European Green Deal legislative package, including CSRD, CSDDD, CBAM, ESPR, and EUDR. The Commission's DG Environment and DG Financial Stability employ approximately 2,800 staff working on sustainability regulation.

US Securities and Exchange Commission: Finalized climate disclosure rules in March 2024 under Chair Gary Gensler. Enforcement division has increased ESG-related investigation capacity with a dedicated task force of 22 attorneys and analysts.

International Sustainability Standards Board (ISSB): Established under the IFRS Foundation to create global baseline sustainability disclosure standards. IFRS S1 and S2 became effective January 2024 and have been adopted or endorsed by 24 jurisdictions.

Emerging Regulators

Singapore Exchange Regulation (SGX RegCo): Implemented mandatory climate reporting for listed companies aligned with ISSB standards, positioning Singapore as the ASEAN hub for sustainable finance regulation.

Japan Financial Services Agency (JFSA): Driving the GX-ETS and mandatory ISSB-aligned disclosure for Tokyo Stock Exchange Prime Market companies, creating the largest Asian carbon market outside China.

Brazilian Securities Commission (CVM): Adopted ISSB standards with local enhancements for biodiversity and social impacts, reflecting the regulatory priorities of major emerging economies.

Investors and Enablers

EcoVadis: Largest sustainability ratings platform for supply chains with 130,000 rated companies. Revenue exceeded EUR 400 million in 2025, driven primarily by regulatory compliance demand.

Persefoni: AI-powered carbon accounting platform serving over 4,000 enterprise customers. Raised $250 million in Series C funding in 2025 to expand regulatory reporting capabilities.

Climate Arc: Regulatory intelligence platform tracking 3,400 sustainability regulations across 140 jurisdictions, used by compliance teams at 350 multinational corporations.

Action Checklist

• Map all applicable sustainability regulations across operating jurisdictions using a regulatory intelligence platform, updating quarterly at minimum
• Establish a cross-functional regulatory response team spanning procurement, legal, sustainability, and finance with clear accountability for each regulatory obligation
• Invest in primary data collection from tier-one suppliers for Scope 3 emissions, targeting activity-based rather than spend-based methodologies for the top 80% of procurement spend
• Implement CBAM-ready processes for any imports of covered goods into the EU, including embedded emissions calculations and certificate procurement
• Conduct a gap analysis between current sustainability data systems and CSRD/ESRS reporting requirements, prioritizing double materiality assessment and value chain data
• Build supplier due diligence processes that satisfy CSDDD requirements, including risk mapping, corrective action plans, and grievance mechanisms
• Prepare for Digital Product Passport requirements under ESPR by auditing product-level environmental data availability and traceability systems
• Engage with industry associations and standard-setting bodies to advocate for regulatory convergence and practical implementation timelines

FAQ

Q: How should procurement teams prioritize when facing multiple overlapping regulatory deadlines? A: Prioritize by enforcement risk and financial exposure. CSRD obligations for fiscal year 2025 reporting (due in 2026) carry the highest near-term compliance risk for EU-operating companies due to mandatory third-party assurance and significant penalties. CBAM definitive phase obligations (purchasing certificates from January 2026) have direct cost implications for importers of covered goods. CSDDD requirements, while potentially the most operationally demanding, do not apply until 2027 for the largest companies, providing more preparation time. Build compliance systems that generate data reusable across multiple regulatory frameworks rather than creating separate workstreams for each regulation.

Q: What is the realistic cost of comprehensive regulatory compliance for a mid-size multinational? A: For a company with EUR 500 million to EUR 2 billion in revenue operating across the EU and at least one other major jurisdiction, total annual sustainability regulatory compliance costs typically range from EUR 1.5 million to EUR 4 million. This includes reporting systems and software (EUR 200,000 to EUR 600,000), external assurance (EUR 150,000 to EUR 400,000), internal staff (2 to 5 FTEs at EUR 80,000 to EUR 120,000 fully loaded), supplier data collection and verification (EUR 300,000 to EUR 800,000), and legal and advisory services (EUR 200,000 to EUR 500,000). Companies that invest in integrated data platforms serving multiple regulatory frameworks can reduce total costs by 25 to 35% compared to those maintaining separate compliance workstreams.

Q: Will ISSB standards actually achieve global regulatory convergence? A: Partial convergence is the realistic outcome. ISSB standards provide a useful common language for climate-related financial disclosures, and adoption across major capital markets (UK, Australia, Singapore, Japan, Brazil, Canada) creates significant coverage. However, the EU has maintained its own ESRS framework with broader scope (including impact materiality alongside financial materiality) and more granular requirements. The US has pursued its own approach through the SEC. The practical result is a two-tier system where ISSB provides a baseline that most jurisdictions layer additional requirements on top of. Companies should design their data architecture around the most demanding applicable framework (typically ESRS) and then map outputs to other requirements.

Q: How are Asia-Pacific regulations evolving and what should global companies prepare for? A: The Asia-Pacific region is the fastest-moving regulatory frontier. Japan's GX-ETS and mandatory ISSB-aligned disclosure for Prime Market companies will affect approximately 1,800 listed entities. South Korea is expanding its ETS coverage and introducing mandatory ESG disclosure for all listed companies by 2027. India's Business Responsibility and Sustainability Reporting (BRSR) framework became mandatory for the top 1,000 listed companies in 2023 and is expanding to cover the top 5,000 by 2027. ASEAN has adopted a regional taxonomy for sustainable finance that will inform national regulations across 10 member states. Companies with significant Asia-Pacific operations or supply chains should engage with local regulatory developments now rather than treating the region as a secondary compliance priority.

Sources

• OECD. (2026). Sustainability Regulatory Tracker: Global Policy Developments 2024-2026. Paris: Organisation for Economic Co-operation and Development.
• PwC. (2025). Global CEO Survey: Sustainability Regulation and Corporate Investment. London: PricewaterhouseCoopers International.
• CDP. (2026). Corporate Climate Disclosure Quality Assessment: Impact of Mandatory Reporting Frameworks. London: CDP Worldwide.
• Federal Office for Economic Affairs and Export Control (BAFA). (2025). LkSG Enforcement Report 2024. Eschborn: BAFA.
• International Carbon Action Partnership (ICAP). (2026). Emissions Trading Worldwide: Status Report 2026. Berlin: ICAP.
• IFRS Foundation. (2026). ISSB Standards Adoption Tracker: Jurisdictional Implementation Status. London: IFRS Foundation.
• World Resources Institute. (2025). Scope 3 Measurement Accuracy Assessment: Methodological Review and Improvement Pathways. Washington, DC: WRI.
• Carbon Tracker Initiative. (2025). Carbon Price Impact on Industrial Procurement: Steel, Cement, and Aluminum. London: Carbon Tracker.
• EY. (2025). EU Deforestation Regulation Readiness Survey: Corporate Preparedness and Investment Status. London: Ernst and Young Global Limited.