Interview: Practitioners on Regulation Watch (EU/US/Global) — Value Pools and Emerging Standards Shaping Buyer Requirements

American companies are spending an average of $677,000 annually on climate-related disclosure activities alone, with first-year ESG compliance implementation costs reaching $640,000 according to SEC estimates. For institutional investors, the burden escalates further—averaging $1.37 million per year to collect, analyze, and report climate data. These figures represent just the beginning of a regulatory transformation that practitioners describe as the most significant shift in corporate accountability since Sarbanes-Oxley. In conversations with sustainability directors, compliance officers, and procurement leaders across multiple industries, a consistent theme emerges: the organizations that treat emerging standards as strategic opportunities rather than compliance burdens are capturing disproportionate value in an increasingly sustainability-conscious marketplace.

Why It Matters

The regulatory landscape for sustainability has undergone a dramatic bifurcation between 2024 and 2025, creating what practitioners characterize as a "dual-track compliance environment." While the SEC's climate disclosure rule—adopted in March 2024—remains stayed following legal challenges and the agency's January 2025 decision to withdraw its defense, the European Union's Corporate Sustainability Reporting Directive (CSRD) has proceeded with phased implementation beginning January 2025.

For US companies, this divergence creates both complexity and opportunity. According to recent data, 93% of S&P 500 companies now voluntarily disclose Scope 1 emissions, while 78% report Scope 3 value chain emissions—a significant increase from 64% in 2021. This voluntary disclosure trend persists despite federal regulatory uncertainty because of three interconnected drivers: investor demand, customer requirements, and the extraterritorial reach of EU regulations.

The CSRD directly applies to US companies with EU subsidiaries meeting specific thresholds (>€25M assets, >€50M revenue, or >250 employees), with US parent company reporting requirements beginning in 2029 for fiscal year 2028 data. However, the indirect impact arrives much sooner—76% of manufacturers surveyed report they are not yet meeting CSRD value chain disclosure requirements that their European customers are demanding.

The global sustainability services market reached $38 billion in 2023, with ESG reporting software crossing the $1 billion threshold in 2024 and projected to grow at 19-30% CAGR over the next five years. State-level regulations in California (SB 253 and SB 261), New York, Washington, and Illinois continue expanding despite federal stagnation, creating a patchwork that practitioners describe as "CSRD-lite with American characteristics."

Key Concepts

Carbon Offsets and Credits: Tradeable instruments representing verified greenhouse gas emission reductions or removals. The voluntary carbon market reached approximately $1.4 billion in 2024, with prices ranging from $6 to $1,200 per tonne CO₂e depending on credit quality. The Integrity Council for the Voluntary Carbon Market's Core Carbon Principles (CCPs) have become the emerging benchmark for high-quality offsets, while the Science Based Targets initiative's 2024 revisions now permit offset use for Scope 3 emissions under specific conditions.

Supply Chain Due Diligence: Systematic processes for identifying, preventing, and remediating environmental and human rights risks throughout value chains. The EU's Corporate Sustainability Due Diligence Directive (CSDDD), adopted in 2024 with implementation beginning July 2027, establishes legal liability for companies failing to address adverse impacts in their supply chains. US companies supplying EU customers increasingly receive sustainability data requests requiring disclosure across multiple ESG dimensions.

Transition Plans: Documented strategies detailing how organizations will achieve stated climate commitments, including interim targets, capital allocation decisions, and governance mechanisms. CSRD requires transition plans aligned with the Paris Agreement's 1.5°C pathway, while California's SB 261 mandates climate-related financial risk disclosures for companies with >$500 million in annual revenue.

Digital Product Passport (DPP): Electronic records containing product sustainability data—including materials composition, carbon footprint, repairability, and recyclability—accessible via QR codes or NFC tags. The EU's Ecodesign for Sustainable Products Regulation (ESPR) mandates DPPs beginning with batteries in 2024-2026, followed by electronics and textiles through 2027. US exporters to EU markets must prepare for sector-specific DPP requirements that directly feed into their customers' CSRD reporting obligations.

Biodiversity and Nature-Related Disclosures: Emerging requirements addressing corporate impacts and dependencies on natural capital. The Taskforce on Nature-related Financial Disclosures (TNFD) framework, launched in September 2023, is increasingly referenced in investor engagements and procurement specifications. CSRD's ESRS E4 standard specifically addresses biodiversity and ecosystems, requiring companies to disclose nature-related impacts across their value chains.

What's Working and What Isn't

What's Working

Integrated sustainability data platforms are delivering measurable ROI for early adopters. Practitioners report that companies implementing unified carbon accounting, supply chain traceability, and disclosure management systems are reducing compliance costs by 40-60% compared to organizations using fragmented spreadsheet-based approaches. The key success factor is selecting platforms that map to multiple frameworks simultaneously—CSRD, SEC (if reinstated), GRI, CDP, and ISSB standards.

Third-party verification partnerships established proactively are creating competitive advantages. Companies that secured relationships with qualified assurance providers before the 2024-2025 demand surge report both lower costs and faster timelines. CSRD requires mandatory third-party audits transitioning from limited to reasonable assurance, and practitioners note that verification capacity remains constrained despite significant market expansion.

Cross-functional governance structures have proven essential for effective implementation. Organizations with dedicated steering committees integrating procurement, finance, legal, operations, and sustainability functions consistently outperform those treating compliance as a siloed sustainability team responsibility. The most successful structures include executive-level sponsorship with clear accountability matrices and board-level reporting mechanisms.

What Isn't Working

Reactive compliance strategies are proving costly and ineffective. Companies waiting for regulatory finalization before building data infrastructure face compressed timelines, premium consultant fees, and increased error rates. The practitioners interviewed consistently emphasized that 2029 CSRD deadlines for US parent companies require multi-year preparation—organizations starting in 2027 will struggle to meet requirements.

Inconsistent standard interpretation creates friction across value chains. Buyers using different platforms, definitions, and metrics generate duplicative data requests that burden suppliers. The absence of interoperability between major sustainability reporting platforms means suppliers often complete near-identical questionnaires for multiple customers, with some reporting 15-20 separate requests annually.

Scope 3 data quality limitations remain the most significant technical challenge. Despite 78% of S&P 500 companies reporting Scope 3 emissions, practitioners estimate that only 30-40% of these disclosures meet the specificity and verification standards that CSRD and emerging buyer requirements demand. The gap between reported and accurate emissions data creates both compliance risk and credibility concerns.

Key Players

Established Leaders

Salesforce has positioned its Net Zero Cloud platform as a comprehensive solution for carbon accounting, supplier engagement, and regulatory reporting across multiple frameworks including CSRD and SEC requirements.

SAP offers the Green Token solution enabling blockchain-verified sustainability claims for supply chain traceability, with specific capabilities for ISCC, REDcert, and EUDR compliance verification.

Microsoft leads corporate procurement of carbon removal credits, with commitments exceeding 2.5 million tonnes of nature-based removal by 2030 while maintaining its 2030 carbon negative commitment.

Workiva provides connected reporting solutions specifically designed for CSRD compliance, integrating financial and sustainability data with built-in audit trail capabilities.

Schneider Electric has established itself as a leader in supply chain decarbonization services, helping companies develop Scope 3 reduction programs and supplier engagement strategies.

Emerging Startups

Normative offers AI-powered carbon accounting specifically designed for CSRD compliance, with automated Scope 1-3 calculations and regulatory mapping capabilities.

Sweep provides end-to-end carbon management software targeting mid-market companies navigating EU regulatory requirements with US operations.

Persefoni has developed climate management and accounting software serving both corporate enterprises and financial institutions with multi-framework disclosure support.

Watershed offers enterprise carbon accounting with particular strength in Scope 3 supplier data collection and engagement automation.

Greenly provides carbon accounting solutions scaled for SMEs, addressing the supply chain data requirements that large buyers are cascading to smaller suppliers.

Key Investors & Funders

Breakthrough Energy Ventures continues leading climate tech investments with particular focus on companies enabling measurement, reporting, and verification infrastructure.

Generation Investment Management has deployed significant capital into sustainability software and services companies positioned for regulatory-driven growth.

TPG Rise Climate maintains active investments across climate solutions including ESG data and analytics platforms.

Congruent Ventures focuses specifically on sustainability software and climate tech companies addressing the compliance and measurement space.

The US Department of Energy through various programs including the Office of Clean Energy Demonstrations provides funding for projects requiring rigorous climate measurement and verification protocols.

Examples

Walmart's Project Gigaton demonstrates large-scale supply chain emissions reduction through buyer requirements. The initiative engaged over 4,500 suppliers by 2024, avoiding more than 750 million metric tons of emissions since 2017. Walmart's approach combines supplier scorecards, technical assistance programs, and procurement preferences for high-performing suppliers—creating a market-based mechanism that practitioners cite as a model for translating buyer requirements into supplier action.

Apple's Supplier Clean Energy Program illustrates how technology companies are operationalizing Scope 3 requirements. By 2024, over 320 suppliers had committed to 100% renewable electricity for Apple production, representing more than 16 gigawatts of clean energy capacity. The program includes direct investment in renewable energy projects, power purchase agreement facilitation, and supplier capacity building—demonstrating that buyer requirements can accelerate decarbonization beyond simple disclosure mandates.

The Federal Buy Clean Initiative represents emerging US government procurement requirements for low-carbon materials. Beginning in 2024, federal construction projects require Environmental Product Declarations (EPDs) for concrete, asphalt, steel, and glass. California's parallel requirements (effective July 2024) mandate embodied carbon disclosure for commercial buildings exceeding 100,000 square feet. Practitioners report that these requirements are rapidly becoming baseline expectations across public and private construction, with compliant manufacturers capturing significant market share advantages.

Action Checklist

• Conduct a jurisdictional analysis to identify all applicable regulations including CSRD applicability through EU subsidiaries, California requirements, and sector-specific mandates
• Perform a double materiality assessment evaluating both financial impacts from sustainability factors and organizational impacts on environment and society
• Implement an integrated sustainability data management platform capable of mapping to multiple frameworks (CSRD ESRS, ISSB, GRI, CDP) simultaneously
• Establish Scope 3 data collection protocols with key suppliers, prioritizing the 80% of value chain emissions typically concentrated in 20% of suppliers
• Secure third-party verification partnerships before demand peaks, ensuring assurance provider capacity for upcoming reporting cycles
• Develop or update climate transition plans aligned with 1.5°C pathways, including interim targets, capital allocation, and governance mechanisms
• Create cross-functional governance structures with clear accountability matrices spanning procurement, finance, legal, operations, and sustainability functions
• Assess product portfolio exposure to Digital Product Passport requirements for EU market access
• Review carbon offset procurement strategies against emerging quality standards including IC-VCM Core Carbon Principles and SBTi guidance
• Establish supplier engagement programs that translate buyer requirements into actionable decarbonization support

FAQ

Q: How should US companies prioritize between SEC rules (if reinstated) and CSRD requirements? A: Practitioners consistently recommend building toward CSRD compliance as the more comprehensive baseline. CSRD's double materiality approach, mandatory Scope 3 reporting, and third-party assurance requirements exceed anything the SEC rule proposed. Companies compliant with CSRD will substantially exceed SEC requirements if the federal rule is eventually implemented. The ESRS standards provide a robust framework that maps reasonably well to ISSB standards now being adopted across 57% of global GDP jurisdictions.

Q: What timeline should companies follow for CSRD preparation if they're starting in 2025? A: For US parent companies facing 2029 reporting deadlines (covering FY 2028 data), practitioners recommend a four-year preparation cycle: Year 1 (2025) focuses on jurisdictional analysis, materiality assessment, and platform selection; Year 2 (2026) addresses data infrastructure buildout and supplier engagement programs; Year 3 (2027) involves dry-run reporting and verification provider selection; Year 4 (2028) executes live data collection with audit preparation. Companies with EU subsidiaries reporting earlier face compressed timelines requiring immediate action.

Q: How are carbon offset quality standards evolving and what should buyers prioritize? A: The Integrity Council for the Voluntary Carbon Market's Core Carbon Principles have emerged as the primary quality benchmark, with additional rigor from the CFTC's February 2024 guidance on carbon offset futures contracts. Buyers should prioritize carbon dioxide removal (CDR) credits over avoidance/reduction credits, seek Article 6-adjusted credits eliminating double-counting concerns, and require verification from established registries (Verra VCS, Gold Standard, Climate Action Reserve). The SBTi's 2024 revisions permitting offsets for Scope 3 under specific conditions will likely increase demand for high-quality removal credits.

Q: What are the most significant compliance gaps companies typically discover? A: Practitioners identify three consistent gaps: First, Scope 3 data quality—most companies lack supplier-specific emissions data, relying on industry averages that fail CSRD specificity requirements. Second, biodiversity and nature-related disclosures—the ESRS E4 standard requires assessments most companies have never conducted. Third, supply chain due diligence documentation—CSDDD requires systematic processes that go far beyond current code-of-conduct approaches to demonstrate active risk identification, prevention, and remediation across value chains.

Q: How do Digital Product Passport requirements affect US exporters? A: US companies selling batteries, electronics, textiles, or construction materials into EU markets face phased DPP requirements beginning 2024-2027. The immediate action is mapping product portfolios against ESPR categories, then building data collection infrastructure for materials composition, manufacturing emissions, and end-of-life handling. DPP data directly feeds customers' CSRD reporting, so US suppliers who cannot provide compliant product-level sustainability information risk losing EU market access or facing significant procurement disadvantages.

Sources

• Harvard Law School Forum on Corporate Governance. "Climate and Sustainability Regulations: 2024 End-of-Year Review." January 2025.
• U.S. Securities and Exchange Commission. "The Enhancement and Standardization of Climate-Related Disclosures for Investors." Final Rule 33-11275, March 2024.
• European Commission. "Corporate Sustainability Reporting Directive (CSRD) Implementation Guidance." European Financial Reporting Advisory Group, 2024.
• Deloitte. "Frequently Asked Questions About the E.U. Corporate Sustainability Reporting Directive." February 2024.
• Integrity Council for the Voluntary Carbon Market. "Core Carbon Principles Assessment Framework." 2024.
• U.S. Environmental Protection Agency. "2024 Revisions to the Federal Acquisition Regulation: Strengthening Federal Sustainable Product and Service Purchasing Requirements." May 2024.
• PricewaterhouseCoopers. "What US Companies Need to Know About the EU's CSRD." 2024.
• Straits Research. "Sustainability Certification Market Size and Outlook, 2025-2033." 2024.