Corporate sustainability reporting and due diligence regulations are rapidly evolving globally, creating a complex and fragmented landscape that challenges both companies and investors. Sergei Guriev, Professor of Economics and Dean at London Business School, highlights the patchwork nature of these rules, with entities such as the European Union, the US Securities and Exchange Commission (SEC), and the UK developing distinct and sometimes disconnected frameworks. The EU’s Corporate Sustainability Reporting Directive (CSRD) has been operational for some years, while the US SEC’s rules on sustainability disclosure were adopted recently and are set to take effect in this fiscal year. The UK’s regulatory environment is also in flux, reflecting a broader global trend toward increasing corporate accountability on environmental, social, and governance (ESG) issues.

Despite these complexities, companies like The Carlyle Group are navigating the regulatory demands by integrating sustainability considerations into their reporting and investment decisions. According to a representative from Carlyle, the challenge goes beyond regulatory compliance to understanding and quantifying physical climate risk and carbon footprints across diverse portfolio companies, ranging from highly mature firms with established carbon data to smaller, less experienced entities requiring estimation. This regulatory focus has shifted the role of Chief Financial Officers, who now face the dual pressures of reporting ESG data within financial statements and managing reputational risks while crafting coherent corporate sustainability narratives.

Academic research supports the transformative power of such regulations. Marcel Olbert, Assistant Professor of Accounting at London Business School, underscores that transparency regulations—often considered a form of “sunlight”—have driven significant corporate behavioural change, particularly in emissions reduction. More direct policy measures, such as carbon taxes, also influence corporate behaviour globally.

However, not all regulatory developments reflect a tightening of standards. In the European Union, there has been a notable political and corporate pushback that has led to substantial softening of the Corporate Sustainability Due Diligence Directive (CSDDD), originally intended to compel companies to address human rights and environmental issues in their supply chains. In mid-October 2025, the European Parliament’s legal committee approved plans to raise the compliance thresholds drastically—shifting from companies with over 1,000 employees and €450 million in turnover to those with at least 5,000 employees and €1.5 billion turnover. Moreover, requirements for companies to develop transition plans were proposed to be removed. These dilutions are framed as efforts to ease the regulatory burden amidst volatile global economic conditions but have drawn sharp criticism from environmental and human rights advocates who warn the changes undermine the directive’s fundamental goals.

Corporate resistance to the CSDDD has been visible, with industry giants such as TotalEnergies and Siemens publicly urging the EU to abolish the directive altogether. In a jointly signed letter to prominent European leaders, these firms contended that repealing the law would better support Europe's economic competitiveness by cutting excessive regulatory costs. Siemens highlighted the necessity to reform competition laws and reduce burdens across sectors. This stance extends beyond softening rules; it calls for the complete repeal of the directive, surpassing the current negotiations in the European Parliament. Such opposition is not limited to Europe; countries including the US and Qatar have voiced resistance to the directive’s extraterritorial aspects.

The revised CSDDD has been accepted by a coalition of political groups within the European Parliament, including the center-right European People's Party, socialists, and liberals, in what some negotiators described as a reluctant compromise to avoid further political deadlock. The changes have led to internal dissent, exemplified by the resignation of a Dutch Socialist negotiator who opposed the weakening of corporate accountability. The amended proposal is expected to be voted on soon with the aim of finalising negotiations ahead of the directive’s planned implementation in 2027.

Parallel to these developments, the EU is also advancing its reporting frameworks under the CSRD. This directive imposes stringent disclosure requirements on large companies, encompassing environmental, social, and governance topics, with mandates for independent audits and certifications to enhance transparency and comparability. It applies broadly to large and listed companies, including non-EU firms with significant activity in the EU market, reinforcing the bloc's aim to lead on corporate sustainability transparency.

While these EU directives signal a commitment to sustainability, the recent rollbacks reflect tensions between regulatory ambition and political-economic realities. Stakeholders outside Europe also face challenges; for instance, the current US administration has contemplated cutting clean energy funding, and some corporations like Nestlé have withdrawn from methane reduction alliances despite maintaining net-zero goals. Meanwhile, innovation continues in sustainability science, such as research in Chile studying drought-resilient plants to address emerging environmental challenges.

Overall, the evolving corporate sustainability regulatory landscape is marked by significant progress in transparency and accountability, tempered by political compromises and industry resistance. Companies, investors, and regulators must navigate this shifting terrain with careful attention to emerging rules, stakeholder expectations, and the broader imperative of sustainable economic transformation.

📌 Reference Map:

Source: Noah Wire Services