How US sustainability regulations compare to EU standards in 2025

In recent years, the global push for sustainability has led to a significant rise in regulations aimed at promoting environmental stewardship, social accountability, and corporate transparency. Governments and organisations are increasingly recognising the critical role of corporate sustainability in addressing climate change and fostering long-term resilience. 

This regulatory evolution is evident in regions like the US and the EU, where frameworks are being implemented to drive decarbonisation, enhance corporate accountability, and incentivise sustainable practices. Continue reading as we explore the similarities and differences between US and EU sustainability regulations, highlighting their different approaches to achieving sustainability goals. 

Overview of sustainability regulations in the US 

At the federal level, key regulations like the Securities and Exchange Commission (SEC) climate disclosure rules mandate that publicly traded companies disclose their climate-related risks and greenhouse gas emissions. These measures are designed to enhance corporate transparency and align with international frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD). 

The Inflation Reduction Act (IRA), another landmark initiative, provides substantial funding and tax incentives for clean energy, carbon capture, and electric vehicle adoption, accelerating the transition to a low-carbon economy. The Environmental Protection Agency continues to enforce updated Clean Air Act regulations to limit emissions from power plants and industrial sources, further complementing federal sustainability goals.

State-level regulations add another layer of action, with states like California and New York leading the way. California’s aggressive emissions reduction targets and renewable energy mandates have set a high standard, while New York’s Climate Leadership and Community Protection Act prioritises equity and clean energy deployment. Other states are adopting Renewable Portfolio Standards (RPS) and zero-emission vehicle mandates, contributing to a patchwork of regional efforts that collectively drive progress.

Alongside these regulations, voluntary frameworks such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Science-Based Targets initiative (SBTi) provide additional avenues for companies to align with global sustainability practices. Investor demand for ESG transparency further drives corporate participation in these voluntary initiatives, particularly in sectors such as energy, transportation, and agriculture.

Overview of sustainability regulations in the EU 

Sustainability regulations in the EU are among the most comprehensive and stringent globally, reflecting the bloc’s commitment to achieving ambitious climate goals and driving sustainable business practices. At the heart of the EU’s regulatory approach is the Corporate Sustainability Reporting Directive (CSRD), which significantly expands corporate reporting obligations compared to its predecessor, the Non-Financial Reporting Directive (NFRD).

The CSRD requires a wide range of companies, including smaller and non-EU businesses operating within the bloc, to disclose detailed information about their ESG performance. Reports must align with the European Sustainability Reporting Standards (ESRS), ensuring consistency and comparability across industries. This Directive underscores the EU’s focus on transparency and corporate accountability in driving sustainability.

Another cornerstone of the EU’s sustainability strategy is the European Green Deal, which aims to make Europe the first climate-neutral continent by 2050. This overarching policy framework encompasses initiatives like the EU Taxonomy for Sustainable Activities, which provides a classification system for identifying sustainable economic activities. By offering clear guidelines, the taxonomy helps businesses and investors direct capital towards projects that align with the EU’s climate objectives.

In addition to regulatory frameworks, the EU has implemented strict measures targeting specific sectors. The Emissions Trading System (ETS) is a flagship mechanism for reducing greenhouse gas emissions, setting a cap on emissions for industries while allowing companies to trade carbon allowances. Complementing this, the Circular Economy Action Plan focuses on resource efficiency, waste reduction, and the promotion of sustainable consumption and production patterns. 

The EU also enforces rigorous product and supply chain standards, requiring businesses to meet high environmental and social criteria. Legislation like the proposed Corporate Sustainability Due Diligence Directive (CSDDD) ensures that companies assess and mitigate human rights and environmental impacts within supply chains.

Key similarities between US and EU regulations

Commitment to climate goals

Both the US and the EU are aligned with the Paris Agreement and share a commitment to reducing greenhouse gas emissions and achieving net-zero targets by mid-century.

Emphasis on corporate transparency

The SEC’s climate disclosure rules in the US require publicly traded companies to report climate-related risks and emissions, akin to the EU’s CSRD, which mandates ESG reporting for a wide range of companies. Both regions emphasise alignment with global frameworks like the TCFD.

Sector-specific measures

Both adopt specific regulations for key industries such as energy and transportation. The EU’s ETS and the US’s Clean Air Act update target emissions reductions in industries, though their approaches differ.

Support for renewable energy

Both regions offer incentives for renewable energy deployment, with the IRA in the US and the EU’s Renewable Energy Directive driving clean energy adoption.

Focus on circularity and sustainability

Both regions promote resource efficiency and waste reduction, with the EU’s Circular Economy Action Plan and various US state-level initiatives encouraging similar practices.

Differences between US and EU regulations

While there are some similarities between US and EU sustainability regulations, there are also some differences that are important to note. 

Scope and coverage

The EU’s CSRD applies to a broader range of companies, including non-EU businesses operating in the region, while the SEC’s climate disclosure rules focus only on publicly traded US companies. Furthermore, the EU has a more comprehensive focus on supply chain accountability through proposed legislation like the CSDDD.

Enforcement and penalties

The EU imposes stricter penalties and binding legal requirements for non-compliance, while the US relies more on voluntary frameworks, with some federal and state-level regulations. EU regulations often include specific timelines for compliance, such as carbon neutrality by 2050, which are absent or less binding in US legislation.

Approach to carbon pricing

The EU’s ETS is a well-established carbon pricing mechanism, while the US lacks a federal carbon pricing scheme, relying instead on state-level initiatives (e.g., California’s cap-and-trade programme).

Focus areas

The EU places greater emphasis on the circular economy, biodiversity, and supply chain due diligence, while the US focuses heavily on market-driven incentives, renewable energy, and domestic energy transition policies.

Stakeholder engagement

EU standards require broader stakeholder accountability, including impacts on communities, workers, and supply chains. Meanwhile, US standards tend to prioritise investor-focused transparency and economic competitiveness.

Geopolitical influence

The EU’s sustainability framework has global implications due to its requirements for companies operating in or trading with the EU. On the other hand, US standards are primarily domestic, with less extraterritorial application compared to the EU.

Final thoughts

As sustainability regulations grow more stringent, businesses face increasing pressure to comply with complex standards like the EU’s CSRD and the US’s SEC climate disclosure rules. While these regulations share common goals, their differences require organisations to develop tailored strategies to meet requirements. Non-compliance can lead to significant consequences, including financial penalties, reputational damage, and reduced market competitiveness.

To help businesses navigate these challenges, our ESG reporting and CSRD training courses provide the knowledge and tools needed to comply with EU regulations and establish effective sustainability practices. By equipping your team with the expertise to meet reporting standards and align with global frameworks, your organisation can stay ahead of regulatory demands and gain a competitive edge.