Global ESG Regulations: What They Mean for Your Organization

Sustainability & ESG / April 2, 2024

By Mary Riddle

ESG regulations graphic

The current state of climate and sustainability reporting regulations is evolving rapidly as states, countries, and economic blocks recognize the need for more transparent, consistent, and comprehensive reporting to address climate change and sustainability challenges.

What are some of the significant new ESG regulatory requirements coming into play worldwide?

This article will explore the current state of ESG regulations globally, what they mean for your organization and what companies need to do to comply.

ESG regulations are a set of guidelines and standards that organizations must follow to ensure they are operating in an environmentally and socially responsible manner. These regulations cover a wide range of topics, including climate change, human rights, labor practices, and corporate governance.

ESG regulations aim to encourage organizations to consider their operations’ impact on the environment and society and take steps to mitigate any negative effects. By complying with these regulations, organizations can demonstrate their commitment to sustainability and responsible business practices.

United States ESG Regulation

SEC’s Climate Ruling

In March, the SEC adopted new rules aimed at enhancing and standardizing climate-related disclosures by public companies. While the final rule significantly scaled back certain requirements from the proposal, these rules are a response to investors’ demand for more consistent, comparable, and reliable information about the financial effects of climate-related risks on companies and how these risks are managed.

Companies must disclose climate-related risks that materially impact their business, strategy, results of operations, or financial condition, including both actual and potential impacts. Companies must also report on their expenditures for mitigation or adaptation activities, as well as governance and oversight of their climate strategy.

Large accelerated filers and accelerated filers are required to disclose material Scope 1 and Scope 2 greenhouse gas (GHG) emissions. These companies will also be required to procure assurance reports from third-party accreditors, but this requirement will be phased in over time. 

In their financial statements, companies must also include the impacts and potential impacts of severe weather events and natural disasters, and they are required to disclose any expenditures related to carbon credits and renewable energy credits if used to contribute to their climate targets.

Disclosures in financial statements must include the impacts of severe weather events and other natural conditions, costs and expenditures related to carbon offsets, and renewable energy credits if used significantly to achieve climate-related targets.

The new SEC rule is in line with global trends toward more comprehensive, transparent, and comparable climate and ESG-related disclosure requirements.

California ESG Regulation

Even before the SEC issued their final ruling, California enacted two significant pieces of legislation, SB 253 and SB 261, as part of its Climate Accountability Package. These laws require companies that do business in California to disclose their emissions and climate-related financial risks.

SB 253 – Climate Corporate Data Accountability Act (CCDAA)

SB 253 requires large public and private U.S. companies doing business in California, with revenues exceeding $1 billion per year, to disclose their Scope 1, 2, and 3 greenhouse gas emissions. The reporting requirement begins in 2026 for 2025 data and requires all emissions disclosures to be audited and verified by an independent third-party auditor. Additionally, emissions disclosures will be made publicly available through a digital registry.

SB 261 – Climate-Related Financial Risk Act (CRFRA)

SB 261 requires U.S. entities that do business in California and have total annual revenues of at least $500 million prepare and submit reports on climate-related financial risks and mitigation strategies. These reports must be made available on company websites and submitted to the state once every two years, with the first round of reports submitted no later than January 1, 2026. Consistent with recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD) framework, reports must include information about costs associated with compliance, insurance, and transition risks.

United Kingdom ESG Regulation

The U.K. became a global climate leader in 2008, when it became the first country in the world to set long-term legally binding climate goals with the passing of the Climate Change Act, which set legally binding targets for reducing greenhouse gas emissions and established a framework for developing five-year carbon budgets to pace the reduction efforts. Since then, the UK has also helped lead global efforts to consolidate sustainability disclosures, aiming to enhance transparency, facilitate informed investment decisions, and promote sustainable practices across industries.

Streamlined Energy and Carbon Reporting (SECR)

SECR came into play in the U.K. in 2019 and required close to 12,000 UK companies to annually report energy use, efficiencies, and greenhouse gas emissions. The framework applies to UK-incorporated listed companies, large unlisted companies, and limited liability partnerships.

Sustainability Disclosure Standards (SDS)

While not yet finalized or implemented, in August 2023, the UK government announced its intention to create an official set of corporate disclosures on sustainability-related risks and opportunities. The UK government has said that the Sustainability Disclosure Standards will be published on or before July 2024 and will be based on the IFRS Sustainability Disclosure Standards from the International Sustainability Standards Board (ISSB).

European Union ESG Regulation

The Corporate Sustainability Reporting Directive – CSRD

CSRD is a European regulation that seeks to create enhanced, comprehensive, and consistent guidelines for sustainability reporting. It standardizes the way in which companies report on their impact on people and the environment, allowing stakeholders to make more informed comparisons. It significantly increases the number of companies that need to provide sustainability information, and corporations are phased into this regulation, depending on company size and turnover. Both private and public companies are required to comply with CSRD.

Timeline for Implementation

Timeline for Reporting

Corporate Criteria for CSRD Compliance

(reporting on data from FY 2024)

Companies that are already subject to NFRD AND meet two of the three qualifications:

  • More than 250 employees
  • Net turnover of greater than €40 million
  • Balance sheet total of greater than €20 million.

(reporting on data from FY 2025)

Companies that are NOT already subject to NFRD AND meet two of the three qualifications for required reporting in 2026 on data from FY 2025:

  • More than 250 employees
  • Net turnover of greater than €40 million euros
  • Balance sheet total of greater than €20 million.

All listed small and medium enterprises (SMEs), with the exceptions of small companies who do NOT meet or exceed at least two of the following criteria:

  • Net turnover of €700,000 or more
  • Balance sheet total of €350,000 or more
  • 10 or more employees.

(reporting on data from FY 2027)

Non-EU companies that generate €150 million or more in the EU and meet one of the two qualifications:

  • One or more large or listed subsidiaries in the EU
  • One branch in the EU that generates more than €40 million in net turnover.

What does CSRD include?

CSRD requires companies to report on social and environmental matters, human rights, and corporate governance, including how they manage their sustainability and climate-related risks and opportunities. Companies are also required to digitally tag their reports, making them machine-readable, and have their reports audited by accredited third-party auditors.

ESG regulations are becoming increasingly important for organizations around the world. They are not only a way to demonstrate your commitment to sustainability and responsible business practices, but they can also significantly impact your operations.

By complying with ESG regulations, your organization can:

  • Improve your corporate reputation:
    Demonstrating your commitment to sustainability and responsible business practices can improve your reputation and attract socially conscious customers and investors.
  • Mitigate risks:
    ESG regulations require organizations to identify and mitigate risks related to climate change, human rights, and other ESG factors. By doing so, you can protect your organization from potential legal, financial, and reputational risks.
  • Attract investors:
    Many investors are now looking for companies that are committed to sustainability and responsible business practices. Complying with ESG regulations can make your organization more attractive to these investors.
  • Improve efficiency:
    ESG regulations often require organizations to track and report on their environmental and social impact. By doing so, you can identify areas where you can improve efficiency and reduce costs.

Things You Can Do to Prepare

The evolving ESG and climate regulatory landscape is complex, but there are things that companies can do right now to prepare:

Stay Informed:
Stay current with the latest ESG regulations in the countries where you operate. This will help you identify any new requirements and ensure you are complying with all relevant regulations. Consider a sustainability training program to help your team stay current with jurisdictional regulations.

Materiality Assessment:
If your company has not yet undertaken a materiality assessment, this should be one of your top priorities. Materiality assessments help determine sustainability goals and priorities and provide insight into which areas of ESG should be prioritized and resourced. Additionally, materiality assessments are required under many climate disclosure and sustainability regulations. This will help you address any issues before they become a problem.

Data Collection & Management Preparation:
You can’t manage what you can’t measure, and in order to report on your company’s sustainability performance, you need to understand what it is. Investing in data management tools and sustainability reporting expertise is a critical step for companies of all sizes in their sustainability journeys.

Engage a Sustainability Expert in Sustainability Communications:
Sustainability reporting can feel daunting, but we are here to help. OBATA has a team of sustainability reporting experts, ready to help dive into your organization’s sustainability strategy.


ESG regulations are becoming increasingly important for organizations around the world. By complying with these regulations, your organization can demonstrate its commitment to sustainability and responsible business practices, mitigate risks, and attract investors. Stay informed about the latest ESG regulations and invest in the right technology to ensure compliance and drive your organization toward a more sustainable future.

Contact us to learn how we can simplify the complex for your organization.