Trend watch: regulation watch (eu/us/global) in 2026

By 2025, approximately 50,000 companies worldwide fell under the EU's Corporate Sustainability Reporting Directive (CSRD), representing a fourfold increase from the 11,700 entities previously covered under the Non-Financial Reporting Directive. This seismic regulatory shift—combined with divergent approaches in the US and emerging frameworks across Asia-Pacific—has created the most complex compliance landscape in corporate history. For investors navigating 2026, understanding these regulatory currents is no longer optional; it's the foundation of informed capital allocation.

Why It Matters

Climate regulation has moved from aspirational frameworks to enforceable mandates with material financial consequences. The EU's CSRD requires companies to report across 12 European Sustainability Reporting Standards (ESRS), covering everything from Scope 1-3 emissions to biodiversity impacts and social governance. Non-compliance penalties vary by member state, with Germany imposing fines up to €10 million or 5% of annual turnover (European Commission, 2024).

In stark contrast, the US SEC's climate disclosure rules—adopted in March 2024—are effectively dead. After the SEC voluntarily stayed the rules in April 2024 pending litigation, the agency voted in March 2025 to withdraw its defense entirely. The Eighth Circuit placed the case in abeyance, and current SEC leadership has called the rules "costly and unnecessarily intrusive" (SEC, 2025).

This transatlantic divergence creates a two-speed regulatory world. Companies with global operations must navigate EU requirements that increasingly serve as the de facto global standard, while US-only firms face a patchwork of state-level mandates—most notably California's SB 253, which requires companies with over $1 billion in revenue to disclose Scope 1, 2, and 3 emissions beginning in 2026-2027.

Regulatory Framework	Status (2025-2026)	Scope	Key Deadlines
EU CSRD	Active, with Omnibus modifications	~50,000 companies	Wave 1: 2025 reports; Wave 2: 2028 (revised)
US SEC Climate Rules	Stayed/Abandoned	N/A	Indefinitely delayed
California SB 253	Active	>$1B revenue	Scope 1-2: 2026; Scope 3: 2027
ISSB Standards	Adopted by 24+ jurisdictions	Varies by jurisdiction	2025-2026 implementation

Key Concepts

Double Materiality represents the cornerstone of EU reporting requirements. Unlike traditional financial materiality, which focuses solely on how sustainability issues affect the company, double materiality requires disclosure of both financial risks from climate and the company's impact on climate and society. This bidirectional approach fundamentally changes how companies must think about sustainability data.

The Omnibus Simplification Package, proposed in February 2025, represents the EU's response to industry concerns about compliance burden. Key changes include raising employee thresholds from 250 to 1,000 employees, increasing turnover requirements to €450 million annually, and delaying Wave 2 reporting from 2026 to 2028. The European Parliament reached agreement on Omnibus I in December 2025, with full adoption expected by mid-2026.

State-Level US Fragmentation has emerged as the primary regulatory force in America. Beyond California, Illinois HB 3673 and Colorado HB 25-1119 (both 2025) create additional disclosure requirements. The PROTECT USA Act, introduced in Congress, seeks to shield US companies from EU Corporate Sustainability Due Diligence Directive (CSDDD) requirements—signaling the political tension between global harmonization and regulatory sovereignty.

What's Working and What Isn't

What's Working

Early Movers Gaining Competitive Advantage: Companies that invested in CSRD-compliant data infrastructure during 2023-2024 are now positioned to attract EU-focused capital. Unilever's implementation of integrated sustainability reporting—combining financial and ESG data streams—reduced their audit preparation time by 40% and provided investors with standardized, comparable metrics (Unilever Annual Report, 2024).

Technology-Enabled Compliance: Platforms like Workiva, Sphera, and SAP's sustainability solutions have matured significantly. Microsoft's deployment of cloud-based carbon tracking across its global operations enabled real-time emissions monitoring for over 1.1 million supplier nodes, demonstrating that scale and accuracy are achievable with proper investment (Microsoft Sustainability Report, 2025).

Regulatory Harmonization Efforts: The International Sustainability Standards Board (ISSB) standards, adopted by 24+ jurisdictions including the UK, Singapore, and Australia, are creating convergence pathways. Companies complying with ISSB frameworks find significant overlap with CSRD requirements, reducing duplicative reporting burdens.

What Isn't Working

SME Compliance Burden: Despite Omnibus relief, small and medium enterprises face disproportionate challenges. A 2024 survey by the Federation of Small Businesses found that 67% of UK SMEs lack dedicated sustainability personnel, and average compliance costs exceeded €50,000 annually—representing 2-5% of revenue for many firms.

Scope 3 Data Quality: Across all frameworks, Scope 3 emissions remain the weakest link. Only 23% of companies report Scope 3 with "high confidence" according to CDP data, as supply chain complexity and third-party data reliability continue to challenge even well-resourced enterprises.

Enforcement Inconsistency: EU member states have transposed CSRD into national law with varying rigor. While Germany and France maintain robust enforcement mechanisms, other jurisdictions lack the regulatory infrastructure to ensure compliance, creating potential arbitrage opportunities that undermine the framework's integrity.

Key Players

Established Leaders

Deloitte, KPMG, EY, and PwC dominate the sustainability assurance market, providing limited assurance services now mandated under CSRD. These firms have invested billions in building sustainability practices, though capacity constraints remain a concern as Wave 2 entities come into scope.

SAP and Oracle have integrated sustainability modules into their enterprise resource planning systems, enabling automated data collection and reporting aligned with ESRS requirements.

Morningstar Sustainalytics and MSCI provide the ESG ratings and data that investors rely upon, though both face ongoing scrutiny regarding methodology transparency and consistency.

Emerging Startups

Normative (Sweden) offers carbon accounting software specifically designed for CSRD compliance, with automated Scope 1-3 calculations and ESRS-aligned reporting templates.

Sweep (France) provides a SaaS platform for carbon management and CSRD reporting, notable for its supply chain engagement features that help companies improve Scope 3 data quality.

Persefoni (US) has emerged as a leading carbon accounting platform, recently expanding its CSRD and ISSB capabilities despite the uncertain US regulatory environment.

Key Investors & Funders

The European Investment Bank (EIB) has allocated €1 trillion to climate action, increasingly conditioning financing on CSRD compliance.

BlackRock continues to engage portfolio companies on sustainability disclosures, though its approach has evolved from prescriptive mandates to "materiality-focused" engagement following political pressure.

Breakthrough Energy Ventures (backed by Bill Gates) funds climate technology companies, with particular focus on those enabling accurate emissions measurement and reporting.

Examples

Siemens AG's Integrated Reporting Transformation: Siemens invested €200 million in sustainability data infrastructure between 2022-2024, creating a unified platform connecting financial and ESG reporting. Their 2025 CSRD-compliant report demonstrated how manufacturing companies can achieve audit-ready sustainability data through embedded sensors, automated data pipelines, and integrated materiality assessments. The company reduced reporting preparation time by 35% while improving data granularity (Siemens Sustainability Report, 2025).
Nestlé's Supply Chain Transparency Initiative: Facing Scope 3 reporting requirements covering 95% of their emissions, Nestlé implemented blockchain-based traceability across 15,000 suppliers. By 2025, the company achieved 78% supplier-verified emissions data—compared to an industry average of 34%—demonstrating that agricultural supply chains can achieve regulatory-grade transparency with sufficient investment and supplier engagement (Nestlé Creating Shared Value Report, 2025).
London Stock Exchange Group's Regulatory Navigation: As both a regulated entity and a provider of market infrastructure, LSEG faced complex multi-jurisdictional requirements. Their approach—building a flexible data architecture capable of producing outputs compliant with CSRD, ISSB, and anticipated SEC rules—offers a template for companies operating across regulatory regimes. The group's 2025 disclosures met all applicable frameworks from a single data source, reducing compliance costs by an estimated 25% (LSEG Sustainability Report, 2025).

Action Checklist

Conduct a jurisdictional mapping exercise to identify all applicable regulatory requirements based on operational footprint, revenue thresholds, and listing jurisdictions
Perform a double materiality assessment aligned with ESRS requirements, engaging both internal stakeholders and external experts
Audit current data infrastructure against CSRD requirements, prioritizing Scope 3 data quality improvements and supply chain engagement
Establish or strengthen sustainability governance, including board-level oversight and management incentive alignment
Develop a transition plan with science-based targets, as CSRD increasingly requires disclosure of Paris-aligned pathways
Monitor Omnibus developments and adjust implementation timelines accordingly, particularly for Wave 2 companies

FAQ

Q: My company operates only in the US—do EU regulations affect us? A: Potentially yes. If your company has EU subsidiaries, branches, or generates over €150 million (rising to €450 million under Omnibus) in EU revenue, CSRD may apply. Additionally, California's SB 253 and SB 261 create similar disclosure requirements for companies with over $1 billion in revenue operating in the state. Furthermore, investor expectations increasingly reflect EU standards regardless of legal requirements.

Q: What is the timeline for the CSRD Omnibus changes? A: The European Parliament reached agreement on Omnibus I in December 2025. Full adoption is expected by mid-2026. Key changes include delaying Wave 2 reporting to 2028 (for FY 2027), raising thresholds to 1,000 employees and €450 million turnover, and extending transitional provisions for Wave 1 companies through 2026.

Q: How should companies prioritize between competing frameworks (CSRD, ISSB, SEC)? A: Build a flexible data architecture capable of serving multiple frameworks from a single source. Prioritize CSRD compliance as it represents the most comprehensive requirements—companies meeting CSRD standards will generally satisfy ISSB and (if they ever become effective) SEC requirements with minimal additional effort.

Q: What assurance requirements apply under CSRD? A: Limited assurance is mandatory from Year 1, provided by statutory auditors or accredited sustainability assurers. The EU is evaluating a transition to reasonable assurance, which would require more rigorous verification procedures. Companies should prepare for this escalation by strengthening internal controls and data quality processes now.

Q: How are penalties enforced for non-compliance? A: Penalties vary by member state. Germany imposes fines up to €10 million or 5% of annual turnover. Beyond financial penalties, non-compliance risks reputational damage and may affect access to capital markets and financial products subject to EU Sustainable Finance Disclosure Regulation (SFDR) requirements.

Sources

European Commission. (2024). Corporate Sustainability Reporting Directive: Implementation Guidelines. https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en
U.S. Securities and Exchange Commission. (2025). SEC Votes to End Defense of Climate Disclosure Rules. Press Release 2025-58.
Deloitte. (2024). Heads Up: Frequently Asked Questions About the E.U. Corporate Sustainability Reporting Directive.
California Legislature. (2023). Senate Bill 253: Climate Corporate Data Accountability Act.
International Sustainability Standards Board. (2024). IFRS S1 and S2 Adoption Status Report.
CDP. (2024). Global Climate Disclosure Report: Scope 3 Data Quality Analysis.