Merging of ESG standards and frameworks eases reporting struggles for companies

As companies began to integrate environmental, social and governance matters into their business operations, an unexpected problem arose: what exactly to measure to determine how companies are doing on their sustainability goals. A glut of frameworks filled the market — varying in overlap and content — without consensus from business-to-business or industry-to-industry, let alone other countries, on which to use. 

Until a global consensus is reached, or individual countries implement clear regulatory guidelines, companies are left on their own to parse through which metrics they believe should be captured for their stakeholders. Data one company considers operationally critical could be a non-factor for another.

“In the world of ESG, there's so many subcategories when it comes to the framework and the standards,” David Ly, CEO of surveillance tech firm Iveda, told ESG Dive. “Every country is different. There's no consistency yet for reasons of priority.”

Clarity may be on the horizon, as major standard setters have combined in recent years to form the International Sustainability Standards Board and released a set of inaugural reporting standards in July 2023. Overseen by the International Finance Reporting Standards Foundation, the release included frameworks for companies to report climate-risks and other sustainability-related factors that could pose financial risks.

Support is starting to grow for adoption of the standards, as countries begin declaring voluntary adoption of the standards that go into effect in 2024, with compulsory adoption beginning in 2026. The frameworks also received additional endorsements from global market regulators like the International Organization of Securities Commissions, whose membership includes 95% of global securities market regulators.

“This is a critical moment in advancing IOSCO’s goal of improving climate-risk disclosure for investors,” IOSCO Chair Jean-Paul Servais said when announcing the endorsement in July. “ISSB conducted a robust process and have concluded that these standards serve as an effective and proportionate global framework of investor-focused disclosures on sustainability- and climate-related risks and opportunities.”

Reducing fragmentation

Companies looking for best practices for reporting sustainability or climate risks in the past noted difficulties deciphering what is required of them. The ISSB’s creation in 2021 sought to solve that after IFRS members expressed a demand for an organization that could develop a global framework.

IFRS was established in 2001 to create global accounting standards, so its members believed it would be uniquely prepared to bring the work of multiple organizations under one umbrella. 

The new board absorbed the UK’s Climate Disclosure Standards Board, founded in 2007; the U.S.-based Value Reporting Foundation and its Sustainability Accounting Standards Board, founded in 2011; the International Integrated Reporting Framework, founded in 2013; and the Task Force for Climate-Related Financial Disclosures, founded in 2015 by the Switzerland-based Financial Stability Board. 

Each had a number of businesses voluntarily use their framework, but created a disparate landscape for companies to navigate. 

ISSB’s inaugural standards worked to integrate and distill the frameworks, along with metrics from the World Economic Forum, into a single baseline for companies to report sustainability and climate risks that pose a material risk. The board has also taken on oversight accountability for the companies who previously abided by the prior standards, most recently putting TCFD’s portfolio under its wings.

“By consolidating and inheriting the resources of other investor-focused initiatives … ISSB has been able to reduce fragmentation and align international support for a global baseline of sustainability-related financial disclosures from a broad range of stakeholders,” ISSB Vice Chair Sue Lloyd told the Association of German Banks in August.

The July release included the IFRS S1 standards for sustainability-related disclosures and the IFRS S2 standards for climate-related disclosures.

The S1 standards include disclosure requirements for the governance processes, strategies and performance dealing with sustainability risks that could “reasonably” affect a company’s cash flow. The disclosure framework also requires companies to explain how they monitor and assess sustainability risks.

The IFRS S2 standards, which work in concert with the IFRS S1, are more narrowly focused on climate risks to a company’s bottom line. The standards require companies to disclose their scope 1, scope 2 and scope 3 greenhouse gas emissions, as well any targets they set or are required by law related to climate change.

The framework also requires companies to disclose the amount and percentage of assets or activities it engages in that are vulnerable to physical climate or climate transition risks; how much of its assets and activities align with climate initiatives and how it invests in climate risks mitigation and opportunities.

“The effective implementation and application of [ISSB’s reporting frameworks] is critical to delivering the global baseline of sustainability-related disclosures for capital markets and ensuring that the information provided is of a high quality and comparable,” IFRS said in educational material supporting implementation of the two standards.

‘These decisions can change over time’

Now ISSB has to get the message out and sell companies and governments on why their framework should be the global gold standard — or at least the basis for other frameworks.

The standards’ announcement was endorsed by several groups in the global financial community, including IOSCO; the Financial Stability Board, who established the TCFD; and leaders of the G20 and G7 intergovernmental forums.

Chris Fidler, head of industry codes and standards for the CFA Institute, told ESG Dive that while the ISSB has gained a lot of global support, it still has detractors. An issue for some, according to Fidler, is ISSB’s focus on providing a framework based around the information they believe is material to investors and their portfolio decisions, whereas other frameworks have looked to parse out what information would be beneficial for a broader set of stakeholders. What metrics fall into which category depends on your perspective.

“If your lens is, ‘I'm making an investment … and I have a time horizon of five years and my goal is to get dividends or capital appreciation,’ then you will use that to determine whether or not information is relevant to your goals,” Fidler said. “If you're a policymaker, and your job is to take care of society as a whole, you will have a much different perspective.”

“It's also dynamic,” he added. “These decisions can change over time. Just because something was material yesterday doesn't mean it will be tomorrow and vice versa.”

The Global Sustainability Standards Board’s Global Reporting Initiative framework looks to provide that broader perspective and, as of October 2022, was the most widely used sustainability reporting framework, according to KPMG. More than 10,000 organizations across over 100 countries, including 78% of the world’s 250 largest companies by revenue, use GRI’s reporting framework.

The framework uses a modular system of universal, sector- and issue-specific standards. It’s currently building out topic standards on biodiversity, labor, climate change, pollution and economic impacts over the course of 2024, according to a presentation GSSB Chair Carol Adams gave to ISSB in October 2023.

Rather than look to compete over market share, ISSB and GRI signed a March 2022 memorandum to coordinate and align their activities. If companies want to use ISSB’s standards to disclose their company’s sustainability risks to investors, the GRI’s standards can work in conjunction to broaden disclosure to a broader audience.

“GSSB is committed to cooperating with global, national, and other jurisdictional standard-setting bodies to ensure complementarity and interoperability between standards,” GSSB’s two-year work plan says. “[T]his cooperation may take the form of coordinating work programs, joint standard-setting, or the development of guidance materials, including mapping or linkage documents, to explain the complementarity and alignment between standards.”

Some governments and localities have signaled a willingness to align local measures broadly with ISSB’s sustainability standards. The European Commission has confirmed that ISSB’s standards have a “high degree of alignment” with the E.U.'s new climate reporting standards. Meanwhile, Nigeria, Singapore, Brazil, Hong Kong, Japan, Canada, the United Kingdom and Australia have all begun considering what adoption might look like in their jurisdictions, ISSB Chair Emmanuel Faber said in a September 2023 podcast. 

“Now that our standards are out, the international perspective on their application is just going to be critical at that moment where we're finalizing our adoption strategy and where we need to focus our efforts to support those jurisdictions in their own journey,” Faber said.

Brazil recently took it a step further, announcing it will incorporate ISSB’s standards into its regulations on a voluntary basis starting in January 2024, with it becoming mandatory by 2026. On the same podcast, Faber said the organization expects to release its adoption roadmap by the end of the 2023 calendar year.

As far as the U.S. is concerned, Securities and Exchange Commission Chair Gary Gensler has said his office would consult with ISSB when crafting the SEC’s climate disclosure rule, but would ultimately go its own way. That rule was scheduled to be finalized in October 2023, but no timeline was been given. Gensler, however, believes that the investment sector needs mandatory disclosures to have the information it needs.

“I believe it’s with mandatory disclosures that investors can benefit from that consistency and comparability,” Gensler said in 2021. “When disclosures remain voluntary, it can lead to a wide range of inconsistent disclosures.

The Task Force for Climate-related Financial Disclosures issued its sixth and final progress report in October 2023, and said 19 global jurisdictions accounting for 60% of the global GDP have proposed or finalized climate disclosure requirements that align with TCFD’s framework.

The group, using artificial intelligence technology, found that 58% of companies disclosed information aligning with at least five of TCFD’s recommended disclosures in 2022, up from 18% in 2020, according to an analysis of public company reports from 2020-22. Only 4% of companies had disclosures that aligned with all 11 of TCFD’s recommendations. 

The International Sustainability Standards Board absorbed the task force in 2021, and will assume responsibilities for TCFD reporting companies as part of its growing portfolio.  

TCFD, which was formed in 2015 by the Switzerland-based Financial Stability Board, disbanded in conjunction with the release of this report, believing their mission culminated with the release of ISSB’s inaugural standards in July, which incorporated their work into its framework. TCFD said it was encouraged by how companies have progressed in climate disclosures and believes its recommendations helped drive that push. 

The report found that 97 of the world’s 100 largest companies have either declared support or reported in line with the task force’s recommendations, or both. Additionally, over 80% of the largest asset managers and 50% of the largest asset owners reported in line with at least one of the 11 TCFD recommended disclosures.

“The Task Force on Climate-related Financial Disclosures has been instrumental in advancing consistent climate-related financial disclosures around the world,” FSB Chair Klass Knot said in a release. “Its recommendations serve as the basis upon which the ISSB and various jurisdictions have built disclosure requirements.”

The group found that between 2020-22, the percentage of companies that reported on climate risks or opportunities, board oversight and climate targets significantly increased. In 2022, 62% of analyzed companies reported on climate risks and opportunities; 64% reported on board oversight; and 66% reported climate-related targets, up from 36%, 39% and 42%, respectively.

However, TCFD also noted that not enough companies were sharing useful information about how their businesses could be impacted by climate change, which could hinder efforts to assess and price climate risks. The report found just 25% disclose how they integrate climate-related risks into their overall risk management framework, though that stat is up from 11% in 2020.

[A]lthough companies continue to make progress in their disclosures, significant gaps in data remain,” TCFD Chair Michael Bloomberg said in a letter to Knot. “In particular, reporting the impact of climate change on companies’ businesses, strategies, and financial planning is still lagging behind.”

Though the group’s work is drawing to a close, it announced it will create a free, public and global repository of climate-transition related data. The Net-Zero Data Public Utility will provide a central source of emissions and target data, a move Bloomberg described as a “major step forward in the comparability and availability of data.”

ISSB’s assumption of reporting oversight completes its absorption of TCFD’s work. The group, backed by the International Financial Reporting Standards Board, announced at its inception that TCFD’s climate reporting framework would be incorporated into the sustainability and climate disclosure standards. 

With various global governments and jurisdictions — including the European Union, United Kingdom and Japan — signaling alignment or incorporation of the ISSB’s standards, other disclosure platforms are also coming aboard. 

The environmental disclosure platform and climate research firm CDP announced in October 2023 it will align its disclosure questionnaire with the ISSB’s standards starting 2024. The platform also said it had a record 23,000 companies disclosing through the platform.

Sponsored content

By Reworld

For modern businesses, Environmental, Social and Governance (ESG) criteria have moved rapidly from a niche interest to a central pillar of corporate strategy. Investors, customers and regulators are demanding transparency, yet for many organizations, the path to compliance feels like navigating a labyrinth without a map.

A common refrain among corporate leaders is frustration with the “alphabet soup” of reporting — a lack of clarity on exactly what data needs to be reported, how to measure it and who the target audience actually is. Fortunately, the winds are shifting. The global regulatory landscape is undergoing a major streamlining effort, moving toward a cohesive set of standards that promise to reduce confusion, improve comparability and curb greenwashing.

At the same time, organizations are discovering that some of the most meaningful ESG data originates in areas once considered purely operational. Emissions and waste generation, landfill diversion, recycling and renewable energy recovery rates are increasingly recognized as measurable indicators of environmental performance, operational efficiency and risk management — particularly when supported by proven sustainability partners.

A Fragmented Landscape

Until recently, ESG reporting was largely voluntary and driven by a patchwork of independent frameworks. A company might report its carbon footprint using one standard, its labor practices using another and its governance structure using a third. This fragmentation created significant challenges:

• Inconsistency: Stakeholders couldn’t easily compare the ESG performance of two companies in the same industry.
• Resource Drain: Companies spent inordinate amounts of time collecting disparate data points to satisfy different rating agencies and frameworks.
• Greenwashing Risk: The lack of standardized metrics made it easier for bad actors to “cherry-pick” favorable data, presenting an inflated view of their sustainability efforts.

Recent reports indicate that many organizations still lack a fully established, rigorous ESG reporting framework. Waste and materials management often illustrate this challenge. Data may be scattered across haulers, facilities and internal departments, making it difficult to quantify total environmental impact or demonstrate progress toward goals such as zero waste-to-landfill, emissions reduction, circularity or responsible end-of-life product management.

Moving Toward Consolidation and Clarity

To address these pain points, the industry is witnessing a shift. Major global standard-setters are joining forces to create a unified baseline for sustainability reporting. This isn’t just about making paperwork easier; it’s about establishing a global common language for sustainability performance.

Two major developments highlight this trend:

1. Curbing Greenwashing through Ethics
   Trust is the currency of ESG. If stakeholders cannot trust the data, the entire system collapses. Global standard-setters are proposing stricter ethics guidelines designed to ensure that sustainability claims are backed by verifiable, auditable data. This shift is especially relevant in areas such as waste diversion, recycling, emissions reduction and energy recovery, where documented chain-of-custody and transparent reporting — often enabled through integrated waste partners like Reworld — are essential to validating environmental claims.
    
2. Updating Biodiversity Standards
   The scope of “E” in ESG is also maturing. For years, the primary focus was carbon emissions. Now, the Global Reporting Initiative (GRI) has updated its biodiversity reporting standards, reflecting a growing recognition that nature loss represents a systemic risk to business. This broader lens is prompting companies to examine the full lifecycle of materials, from sourcing and production to secure destruction, recovery and beneficial reuse.

What This Means for Business

The convergence of standards signals the end of the “Wild West” era of ESG. We are moving toward a future where sustainability reporting is as mandatory, standardized and scrutinized as financial reporting.

For corporate leaders, this is a call to action. Waiting for the dust to settle is no longer viable. Organizations must begin treating ESG data with the discipline of financial data, implementing robust internal controls, data management systems and governance structures. That includes gaining visibility into waste streams, materials flows, recovery outcomes and renewable energy generation, increasingly viewed as key performance indicators of operational sustainability and resilience.

By aligning with emerging global standards and leveraging experienced sustainability partners like Reworld, companies can do more than just check a compliance box. They can turn ESG from a reporting burden into a strategic advantage — reducing risk, improving efficiency, strengthening supply chains and building trust in an increasingly scrutinous market.

Less than one-third of senior finance and accounting executives have a fully established ESG reporting framework within their company, with 30% disclosing their framework is limited to specific organization initiatives, according to a data report published in October 2023.

While the majority of surveyed executives said their companies have collected key environmental data, less than 40% have analyzed or used the data to establish benchmarks. 

The report found 97% of executives and 100% of CEOs and chief administrative officers at surveyed companies are involved with their organization’s current state of ESG reporting, despite struggles to establish a proper ESG reporting framework. Findings from the report also indicated that prioritizing ESG initiatives remains “top-of-mind” for most senior executives at companies, with 90% looking to enact new sustainability goals within the next two to five years

Lease accounting and administration software provider Visual Lease surveyed 200 senior finance and accounting executives across the U.S. at private, public and government organizations with more than 1,000 employees for this report.

The heightened scrutiny surrounding ESG, both regulatory and political, has put a spotlight on companies’ environmental and social initiatives, impacting just about every aspect of their operations, including lease management, according to the report. From the surveyed executives, 88% said sustainability factors are a high priority when entering into new lease agreements, with many taking measures such as increasing the number of LEED-certified buildings within their lease portfolios, expanding the number of energy-efficient vehicles in their fleets or switching to renewable energy sources.

“Considering that 40% of global carbon dioxide emissions stem from real estate-related assets, effective lease management serves as an organization’s gateway to not only quantifying and disclosing its environmental impact but, also to tracking its progress against internal and external sustainability goals,” Robert Michlewicz, CEO of Visual Lease, said in a press release.

With the impending climate disclosure rule from the Securities and Exchange Commission on the horizon, the introduction of several climate bills and workforce disclosure regulations in California, in addition to the coalescence of reporting frameworks such as the International Sustainability Standards Board and the Task Force for Climate-Related Financial Disclosures, executives are concerned about what these new measures will mean for their businesses, according to findings from Virtual Lease.

The survey found that 65% of respondent companies will have to report under the SEC’s climate disclosure rule. Without a final rule to compare yet, 37% of the respondent organizations think the SEC’s rule will mirror ISSB’s guidelines, compared to 28% expecting differences. 

Nearly 70% of surveyed senior finance executives said their organizations are not fully prepared to track and measure the environmental impact of their leased and owned asset portfolios in order to comply with new and emerging requirements, according to the report.

The findings indicate companies will need to involve their finance department and evolve their financial strategies to meet regulatory requirements and achieve more strategic ESG outcomes.

The Global Reporting Initiative proposed two standards in November 2023 for how companies should report the effects of climate change and energy use on operations and the broader public. 

The climate change standard incorporates principles of a “just transition” and includes disclosures for climate change transition plans and annual progress on emissions reduction targets. The energy standard would create disclosures for energy management, consumption and generation as part of its framework. 

The organization also timed the standards release with the United Nations’ COP28 climate change forum beginning Nov. 30 2023 in the United Arab Emirates. GRI said it is seeking public input on both documents until Feb. 29, 2024.

The standards, created by the independent Global Sustainability Standards Board, all take a double materiality approach, where companies disclose information material to investors and that could affect a broader set of stakeholders. 

GRI said the two standards will be key to how global organizations are held accountable for their climate change roles. GSSB Chair Carol Adams said the organization timed the releases with the COP28 conference to give decision-makers access to this information before setting new goals or signing new commitments.

“The scientific evidence and international consensus is unequivocal: climate change threatens humanity’s well-being and the planet's health,” Adams said in the release. “That is why there are growing demands for organizations to provide in-depth information about how they are reducing [greenhouse gas] emissions, taking concrete steps to mitigate and adapt to climate change — and how their actions impact on people and the environment.”

The climate change standards will provide guidelines for companies to disclose how they are adapting to climate-related risks and how their operations impact employees, communities, “vulnerable groups” and biodiversity. They would also create disclosure standards for carbon credits and greenhouse gas removals within the supply chain.

The energy standards will give companies a framework to disclose energy policies and commitments, how they use and generate power within the organizations, as well as how power is used both upstream and downstream in the supply chain. The proposed standard would also require companies to report whether energy reductions are happening within their organization or within their larger supply chain.

The standards follow the release of multiple other reports that show how the global community is well off-track in limiting global warming to 1.5° Celsius. The UN Environment Programme released a report earlier that said there’s only a 14% probability that global temperatures don’t rise more than an average of 1.5° C over pre-industrial levels, a target set by the 2015 Paris climate accord.

UNEP’s report said current pledges put the world on track for global temperature rises of between 2.5-2.9°C. UN Secretary General Antònio Guterres said keeping global warming under 1.5°C requires a “just, equitable transition” and jettisoning fossil fuels. 

The International Ethics Standards Board for Accountants proposed compliance standards for sustainability reporting in January 2024 to help companies and asset managers mitigate greenwashing and for evaluating outside sustainability experts’ credentials. 

The standards, which are both profession and framework agnostic, include five “fundamental principles” all sustainability assurance practitioners should abide by: Integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

IESBA said it developed the ethics standards due to the rise in importance of sustainability information to capital markets, consumers, companies and the broader society. “It is of public interest that sustainability assurance practitioners act ethically in order to maintain public trust and confidence in sustainability information,” the ethics proposal stated.

IESBA began developing the International Ethics Standards for Sustainability Assurance in December 2022, after the International Organization of Securities Commissions, whose membership comprises 95% of global securities market regulators, and the Financial Stability Board expressed support. The proposal would update existing IESBA codes relating to sustainability reporting.

The accounting ethics standard-setter said a global ethics baseline for sustainability reporting ethics will help ensure the integrity and objectivity of sustainability reporting. IESBA Chair Gabriela Figueiredo Dias said in the release the standards will serve as a “cornerstone of ethical behavior with far-reaching benefits.”

“Ethics is about acceptable behaviors and right decisions to avoid bias in sustainability information and foster trust,” Dias said. “All users of sustainability disclosures have a vested interest in ensuring ethical choices by the preparers and assurers of such information.”

The organization said entities that perform the sustainability assurance engagements should follow the “most stringent ethics requirements” given the level of public reliance placed on climate-related disclosures as this information is used by a wide range of stakeholders to assess and compare companies’ performances and to make investment and business decisions.

The IESSA standards’ updated glossary of terms defines sustainability information as “information about the opportunities, risks or impacts” of economic, ESG or other sustainability factors on an entity or an entity’s operation on the economy, environment or public. The organization also includes any sustainability information as defined by law, regulations or reporting and assurance frameworks.

In its explanatory memorandum that accompanied the IESSA standards, IESBA said it made the definition “intentionally broad and sufficiently generic” to make it perennially relevant and interoperable with different reporting, regulatory or assurance frameworks.

“The reference to ‘other’ factors is intended to keep the definition flexible and thus evergreen,” the memo said. “Moreover, it is broad enough to cover disclosures made under both single and double materiality perspectives.”

The International Accreditation Forum, comprising 97 global accreditation bodies, plans to stipulate that the IESSA standards be used when authorizing assessment organizations to do assurance work on corporate sustainability disclosures, according to the release.

“Sustainability disclosures are undeniably high on the agenda of investors globally,” IOSCO Chair Jean-Paul Servais said in the release. “Trust in such disclosures will be enhanced when they receive external assurance based upon globally accepted standards regarding ethical behavior and independence that have been developed in the public interest.”

The standards come amid a global push for sustainability reporting regulations and frameworks: From the European Union’s Corporate Sustainability Reporting Directive and the Securities and Exchange Commission’s upcoming climate disclosure rule to global frameworks coalescing around standards from the International Sustainability Standards Board and the Global Reporting Initiative. 

The importance of sustainability reporting has risen alongside issues of greenwashing and social washing — companies making misleading social claims. ESG data and research firm RepRisk found issues of greenwashing rose 35% from September 2022 to September 2023, and companies’ greenwashing incidents made up 25% of climate-linked risk incidents over the same time period.

The International Sustainability Standards Board — borne out of the coalescence of multiple sustainability reporting organizations — has finalized its work plan for 2024-26 and will focus on further driving the streamlining and consolidation of the sustainability reporting landscape, the International Finance Reporting Standards Foundation said on June 24, 2024.

While ISSB will also take on research projects related to biodiversity and human capital, the organization said it will prioritize improving transition plan disclosures and greenhouse gas emissions measurement, continuing to seek full interoperability with the Global Reporting Initiative and expanding its partnership with the Carbon Disclosure Project.

IFRS said the month prior that jurisdictions representing 55% of the global gross domestic product are aligning or incorporating the ISSB standards into their legal or regulatory corporate sustainability reporting frameworks.

ISSB said it received more than 400 public comments in response to its request for comment on its work plan, and commenters said its supporting implementation of its IFRS S1 and S2 sustainability frameworks should be the organization’s “highest priority,” according to ISSB’s feedback statement also released June 24.

ISSB said because of the feedback it received, support for implementing its inaugural sustainable standards will be given the most focus over the next two years. Its new research projects and plans to enhance the Sustainability Accounting Standards Board’s framework will both be given equal attention, but a “slightly lower level of focus” than ISSB’s own standards, according to the feedback statement. The biodiversity project will seek to build off the work of the Taskforce on Nature-related Financial Disclosures, the feedback statement said.

“Since the outset, the ISSB has worked to reduce the complexity of multiple sources of sustainability reporting initiatives, while building on the established expertise and practice associated with market-leading frameworks and standards,” ISSB said in a release. “During the next two years, the ISSB will deliver further harmonization and consolidation of the disclosure landscape in response to market demand.”

The sustainability standards board’s work on transition plans will focus on providing “high-quality, decision-useful information about the plans that companies have … rather than requiring that companies engage in transition planning, per se.” To do so, the organization will assume responsibility for the disclosure-specific materials that the Transition Plan Taskforce developed based on the United Nations-backed Glasgow Finance Alliance for Net Zero, ISSB said in the release.

The organization is not looking to change the reporting requirements in its S2 standard for climate-risk disclosure, it aims to tailor its educational materials to ensure their broad applicability.

The IFRS Foundation also announced it signed a memorandum of understanding with the GHG Protocol, which provides standards for how greenhouse gas emissions should be calculated. As part of its agreement, ISSB had a member appointed to the GHG Protocol Independent Standards Board as an observer to help ensure ISSB is engaged in any updates made to GHG Protocol guidance.

IFRS announced a push towards full interoperability of the ISSB and GRI standards in May 2024 and reiterated that commitment as a part of its work plan. ISSB also said in its June 24 release that CDP officially opened a new platform for more than 75,000 organizations earlier that month and its 2024 questionnaire is aligned with ISSB’s IFRS S2 standards.

“As we embark on our new two-year work plan that will see us strengthen and build out the global baseline of sustainability-related financial disclosures, I am grateful to our partners in the sustainability reporting landscape for their commitment to delivering an efficient, effective sustainability disclosure system for capital markets,” ISSB Chair Emmanuel Faber said in the release.

The Science Based Targets initiative released a new draft update to its Corporate Net-Zero Standard on Nov. 6, 2025, incorporating some of the feedback it received after stakeholder outreach and piloting the initial draft.

The second public consultation draft of SBTi’s net-zero standard update includes more flexible scope-specific target-setting methodologies, including three approaches to scope 1 target setting, additional clarity on scope 2 targets and low-carbon electric purchasing and a scope 3 framework that builds on a discussion paper released in 2024.

The number of corporations with climate targets has more than tripled since 2023, and over 11,000 companies have either set or committed to set SBTi-validated targets, as of the end of June 2025, according to a report from SBTi. Such companies represent 25% of global revenue and over 40% of the global market cap. 

SBTi is working on a major revision of its landmark standard for how global companies and entities should align their climate targets with leading science. The target-validating organization released the first draft of the update in March 2025, followed by a consultation period, open survey and hands-on pilot of the standard.

In addition to scope-specific target-setting criteria, the latest draft introduces an option for companies to take progressive responsibility for their ongoing emissions — to incentivize companies to take early action — and a three-stage cyclical validation process with optional spot checks.

“Businesses are driving global decarbonization, and will be key to achieving our climate objectives,” SBTi CEO David Kennedy said in the Nov. 6 release. “Taking science-based action both reduces emissions and manages transition risks, maintaining competitiveness and offering growth opportunities in a carbon-constrained world.”

The Nov. 6 update also maintains the tailored requirements for companies based on size and location, with further explanations for the thresholds that would make companies fall into each category. Category A companies — large companies and medium companies in high-income countries — will have less flexibility to comply versus Category B companies — medium-sized companies in upper-middle-to-low income countries and any small or micro-sized companies — who would have more flexibility through longer timelines and greater optionality.

The newest draft gives companies three ways to address their scope 1 emissions: by reducing their emissions on a linear path to net-zero, increasing their share of low-carbon emissions over time or by implementing plans to decarbonize assets based on the readiness of the technology. 

Additionally, SBTi is pushing to scale carbon removals and requires all large companies and medium companies in high-income countries to address residual emissions using removals, in part, by 2035 onward.

“With the publication of this updated draft we are taking a further step forward in making science-based climate action more inclusive, actionable, and adaptable for businesses everywhere,” SBTi Chief Technical Officer Alberto Carrillo Pineda said in the release.

Pineda said the updated draft reflects the feedback from hundreds of businesses and experts, but further input is needed to ensure the final standard “is practical, credible and robust.” SBTi is seeking feedback on the second consultation draft until Dec. 8, 2025, and has a survey open for stakeholders.

SBTi plans to publish the final updated corporate net-zero standard in 2026 but companies will not be required to use this version until Jan. 1, 2028.

After years of progress toward consensus on climate risk disclosure, companies face a global regulatory landscape that’s grown in both complexity and scope in 2026. 

U.S. and European Union regulators took steps in 2025 that steered them away from reaching common ground on the issue, leading to increased regional fragmentation. However, a growing number of jurisdictions have climate disclosure laws coming online in 2026 that will require corporations to have concrete governance processes in place for the requisite data. 

Though companies have been touting their sustainability work less, that has not affected corporate climate disclosures at this point, Domini Impact Investments CEO Carole Laible told ESG Dive.

“We haven't seen a lot of rollback on disclosure; people are continuing to put information out there,” Laible said in an interview. “Are some corporations less motivated to integrate their scope 3 emissions into their sustainability reports? Yeah, maybe. They just probably don't feel as much pressure as they [did] in the past.”

Here’s where the global climate disclosure landscape sits in 2026.

Backtracking in the US and EU

The Securities and Exchange Commission quickly looked to abandon defense of its Biden-era climate-risk disclosure rule in court following President Donald Trump’s inauguration. The agency first asked to pause the case, and — after declining to say whether the rule would be upheld — a federal appeals court judge paused the litigation and stayed the rule, according to a September 2025 court filing.

“It is the agency’s responsibility to determine whether its Final Rules will be rescinded, repealed, modified, or defended in litigation,” the September order said.

The SEC rule will remain in limbo, with the case in stasis, until the agency decides to either revisit the rule through typical notice-and-comment or renew its defense in court. The latter is unlikely in the current administration, as SEC Chair Paul Atkins is more broadly focused on rolling back disclosures for U.S.-listed companies. 

“The path to public ownership has become narrower, costlier and overly burdened with rules that often create more friction than benefit,” Atkins said in a speech at the New York Stock Exchange in December 2025.

The climate risk disclosure rule is not on the agency’s latest regulatory agenda, which was released shortly before the September 2025 court order. Ropes & Gray Partner Michael Littenberg said in a blog the agency “is likely to take steps this year to definitively get rid of its Biden-era climate disclosure rules.”

The European Union underwent its own regulatory rollback in 2025. After the European Commission proposed an omnibus bill in February that year, legislators spent much of the year working to simplify the bloc’s corporate sustainability reporting laws. 

Ultimately, the bloc’s co-legislators reached a political agreement that will raise the employee and revenue thresholds for companies to be covered by the Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive. Lawyers at Ropes & Gray estimated that the agreement will lead to 90% of companies being removed from the CSRD’s scope and 70% excised from the CSDDD’s remit.

The pact has been passed by the European Parliament and awaits approval by the European Council, which is expected in early 2026. The reporting timeline for the next wave of CSRD reporting companies and the first wave of entities to comply with the CSDDD has been delayed until 2028.

Though companies have prepared to comply with disclosure regulations, there is little incentive for U.S. companies to be proactive on the issue, according to Bruno Sarda, who leads Ernst & Young’s climate change and sustainability services practice for the Americas. 

“Companies do not have a new requirement to enhance risk disclosures and, frankly, don't see an incentive to do so,” Sarda said in an interview. “There's not as much appetite for companies to take a leading role in breaking new ground. … The incentives for proactive, comprehensive disclosures have not been as compelling as they might have once looked.”

Disclosure requirements still growing

Despite these shifts from the U.S. and the EU, U.S.-based companies face growing disclosure requirements both at home — with California’s climate disclosure laws somewhat online — and abroad. 

California’s climate disclosure laws — Senate Bills 253 and 261 — were set to go into effect in 2026, and somewhat have. A federal appeals court judge issued a preliminary injunction in November 2025 on SB 261, which requires companies with over $500 million in revenue who operate in California to report their climate-related risks. The injunction does not impact enforcement of SB 253, which requires business entities operating in California with annual revenues exceeding $1 billion to annually report their greenhouse emissions.

Despite the pause in implementation of one of the state’s climate laws, 94 companies have voluntarily submitted such reports to the California Air Resources Board’s public docket as of Jan. 29, 2026, including Lime, Pacific Gas & Electric, Schneider Electric and Frontier Airlines. CARB, which is the state agency tasked with implementing the laws, is only looking for companies to make a good faith effort to report their climate-related financial risks and greenhouse gas emission this year, according to enforcement notices it has issued.

CARB is scheduled to adopt the regulations for SB 253 and 261 at a board meeting in February 2026, though the court case that spawned the injunction will likely stretch on. 

The year also brings the possibility that other states adopt some form of climate disclosure regulations for companies. New York reintroduced climate disclosure laws that mirrored California’s in its 2025 legislative session and passed a law in December 2025 requiring certain heavy-emitters in the state to disclose greenhouse gas emissions. 

New York’s emissions reporting law will apply to many waste facilities, along with any fossil fuel suppliers and electric power companies that emit emissions or import power into the state. Companies expected to comply will need to collect their 2026 emissions data and submit it to the state’s Department of Environmental Conservation by June 2027.

Meanwhile, nearly 40 global jurisdictions have adopted or are planning to adopt a form of the climate disclosures aligned with the International Sustainability Standards Board’s frameworks, according to the ISSB’s jurisdictional working group. The standard-setting body operates under the International Financial Reporting Standards Foundation.

Global climate disclosures regulations are active in the United Kingdom and Mexico, and laws in Australia and Spain are set to go online this year that will require large multinationals to disclose climate-related financial risks for fiscal year 2025.

While the view on ESG regulations varies by jurisdiction, asset owners have largely viewed them as a “net-help,” according to Morningstar Sustainalytics’ 2025 Voice of the Asset Owner survey. The survey received responses from over 500 global asset owners of varying sizes, and 55% of asset owners surveyed consider ESG regulation a net positive.

Among asset owners who found ESG regulations helpful, 61% said they have helped standardize frameworks. The portion of asset owners who find ESG rules helpful for standardization purposes have increased 15 percentage points since 2023 and 8 percentage points since 2024. 

A plurality of asset owners (46%) view the regulatory rollbacks in the U.S. and EU as “a step in the wrong direction,” according to Morningstar’s survey. Though, North American asset owners were more likely to see the rollbacks as a positive change (32%) than all other respondents (27%). 

Domini Impact Investment’s Laible said that, while her firm has found “that regulation is always helpful,” private enterprise typically fills gaps where the public market is slow to act. As such, investors play a big role in driving what companies report.

“If you do have a lot of investors asking [for information] — and if it goes from a grassroots consumer to the highest level institutional investor — corporations start providing and disclosing that information,” Laible told ESG Dive. “So I think we're still in a good place there. It's not like we've seen half of the S&P 500 all of a sudden stop producing corporate sustainability reports.”

Companies still prioritizing ESG data, governance for evolving landscape

The varied and changing disclosure landscape requires companies to have governance strategies in place to ensure compliance with jurisdictions they operate in. Companies who are used to issuing climate or impact reports have been working to improve the quality of their data in anticipation of mandatory reporting, according to Dexter Galvin, senior vice president of climate for sustainability ratings company Ecovadis. 

Take eBay as an example, which updated its climate targets in 2025 and released a transition plan earlier this month. The team that manages the company’s environmental, social and governance policies, including Chief Sustainability Officer Renee Morin, sits in the financial office and reports to the company’s corporate governance and nominating committee. The e-commerce company set up an ESG Disclosure Steering Committee in 2024 to help eBay comply with global reporting standards, according to its transition plan. 

“We've seen the writing on the wall with the evolution of disclosure requirements from the European Union, from California, from IFRS and other jurisdictions,” Morin said in an interview. “We then realized we needed a better fit for purpose, and so we've really evolved the ESG Council.”

The company keeps “tight contact and a close eye on what [its] investor audience is looking for in terms of disclosure,” and standards from the ISSB and Global Reporting Initiative have been integrated into the company’s impact reports for multiple years, according to Morin. As such, when jurisdictions adopt or have adopted regulations based on those standards, the company is prepared to expand the boundaries of the data it sought and ensure specific alignment.

“It's not necessarily a big leap or a jump for us, it's more about tweaking the systems in a way that fulfills the requirements and needs of the EU and California and other jurisdictions as well,” Morin said. “I think a lot of companies at this point are looking to level up some of the internal processes and controls around data because of the additional scrutiny that’s in place on when it becomes a regulatory requirement to disclose X, Y or Z.”

In anticipation of growing regulatory requirements, there’s been “a massive shift towards getting higher quality primary data from key suppliers,” Galvin, who also serves as Ecovadis’ climate ambassador, told ESG Dive. Galvin previously helped set up the supply chain program at the Carbon Disclosure Project in 2008 and led CDP’s external-facing activities until November 2024.

Despite some regional pullbacks in the U.S. and EU, Galvin said there is evidence that corporate sustainability work has reached a stage where it can “weather some of the short-term regulatory challenges.” 

He said 87% of companies who reported to Ecovadis last year said they were planning to increase sustainability investments in 2025, and pointed to a Boston Consulting Group report that found the “green economy” is now worth over $5 trillion annually and growing.

“The funny thing is, for years, I pointed to the importance of regulatory certainty, and [how] the need for regulatory certainty was so important to guide corporate investment in this space,” Galvin said in an interview. “But actually, I think we may have reached a stage of market maturity.”