Preparing for new sustainability regulations: A global compliance checklist

Sustainability reporting has transitioned from a voluntary exercise to a mandatory requirement for businesses globally, reshaping how organisations approach transparency and accountability. With sustainability regulations like the CSRD, the SEC Climate Disclosure Rules in the US, and the UK’s SDR, companies are now compelled to disclose their ESG impacts. 

For businesses, this shift is not just about compliance; it is a pivotal element of a robust business sustainability strategy. Navigating these evolving regulations demands a well-designed compliance strategy, ensuring organisations align with global standards and position themselves for long-term success. Continue reading as we share actionable steps you can take to prepare for new sustainability regulations.

Understanding key global sustainability regulations

Sustainability reporting regulations are evolving rapidly worldwide to increase corporate transparency, accountability, and alignment with global climate goals. Below are some of the most influential frameworks governing sustainability reporting globally. However, there are also several voluntary reporting standards that businesses can use to comply with sustainability regulations. 

Corporate Sustainability Reporting Directive (CSRD) – European Union

The CSRD significantly expands sustainability reporting requirements in the EU, replacing the Non-Financial Reporting Directive (NFRD).

• Scope: Applies to a wide range of companies, including large non-EU businesses operating within the bloc.
• Requirements: Companies must disclose ESG performance aligned with the European Sustainability Reporting Standards (ESRS).
• Objective: Ensures consistent, comparable, and transparent ESG reporting across industries to support the EU’s climate neutrality goals.

SEC Climate Disclosure Rules – United States

Proposed by the Securities and Exchange Commission (SEC), these rules aim to enhance climate-related disclosures by publicly traded companies.

• Scope: Applies to US-listed companies.
• Requirements: Companies must report climate-related risks, governance practices, and greenhouse gas emissions in Scope 1, 2, and potentially Scope 3.
• Objective: Align with frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) to improve investor transparency.

UK Sustainability Disclosure Requirements (SDR)

The SDR framework integrates existing requirements and new obligations for UK companies.

• Scope: Covers publicly traded companies, asset managers, and pension schemes.
• Requirements: Aligns with TCFD recommendations and aims to incorporate the International Sustainability Standards Board (ISSB) standards.
• Objective: Supports the UK’s net-zero target by requiring transparent ESG disclosures.

Why businesses need a compliance strategy 

A well-designed compliance strategy is essential for businesses navigating the complexities of sustainability regulations. Beyond avoiding penalties, it provides opportunities to strengthen reputation, improve efficiency, and drive positive environmental and social impact. Regulations like the EU’s CSRD and the SEC’s climate disclosure rules impose significant legal and financial penalties for non-compliance, which can strain resources and damage stakeholder relationships. 

Moreover, in today’s market, transparency is a critical driver of stakeholder trust. Investors, customers, and partners increasingly demand clear, accurate sustainability disclosures that align with frameworks like TCFD or Global Reporting Initiative (GRI). In other words, a compliance strategy ensures businesses meet these expectations while positioning themselves as responsible and forward-thinking entities. This commitment to accountability also fosters internal integration of ESG principles, creating a culture of sustainability. 

Furthermore, demonstrating adherence to high standards enhances brand reputation, builds customer loyalty, and attracts investment opportunities. Many regulations promote resource efficiency and waste reduction, helping businesses optimise operations, reduce costs, and future-proof against evolving requirements. Ultimately, by embedding sustainability into their operations, companies can adapt to shifting market conditions, sustain long-term growth, and contribute meaningfully to global climate and ESG goals.

Global compliance checklist 

By following these steps, businesses can establish a comprehensive compliance strategy that not only ensures alignment with sustainability regulations but also drives operational efficiency, accountability, and long-term growth.

Step 1 – Understand the regulatory landscape

The first step is to research and understand the sustainability regulations that apply to your business. This may include frameworks like the EU’s CSRD, the SEC Rules in the US, or the ISSB standards. Stay updated on regulatory changes in all regions where your business operates and consult with legal or compliance experts to gain a clear understanding of the requirements.

Step 2 – Assess current compliance and identify gaps

Conduct a comprehensive audit of your current ESG practices to evaluate compliance with relevant regulations. Identify gaps in areas such as data collection, reporting processes, and supply chain transparency. Prioritise addressing high-risk areas to reduce the likelihood of non-compliance.

Step 3 – Develop a data collection and management system

Accurate ESG data is critical for compliance. Establish robust processes for collecting and managing data across all operations. Align these practices with recognised frameworks like the TCFD, GRI, or the ESRS. Implement tools to ensure data accuracy and consistency.

Step 4 – Build a reporting framework

Create a structured framework for sustainability reporting that meets the specific obligations of the regulations you follow. Define clear timelines and assign responsibilities for preparing and submitting reports. Engaging third-party auditors to validate disclosures can enhance credibility and ensure accuracy.

Step 5 – Appoint compliance leadership

Designate a dedicated compliance officer or team to oversee sustainability efforts. Ensure that the board of directors is engaged and committed to ESG accountability. Develop internal governance structures and policies to guide compliance across the organisation.

Step 6 – Conduct risk assessments and develop mitigation plans

Perform a materiality assessment to identify key environmental, social, and governance risks. Develop actionable mitigation strategies to address high-priority issues, such as emissions reduction or supply chain due diligence. Regularly monitor risks and adjust strategies as needed to stay proactive.

Step 7 – Improve supply chain transparency

Map your supply chain to understand its sustainability impact. Conduct due diligence to ensure suppliers comply with human rights and environmental standards. Communicate clear expectations to suppliers and incorporate sustainability requirements into contracts to promote accountability.

Step 8 – Train and engage employees

Educating employees about sustainability regulations and their role in compliance is essential. Provide training to help them understand their responsibilities and foster a company-wide culture of ESG principles and ethical practices. Regular updates on new regulations ensure that employees remain informed and aligned with organisational goals.

Conclusion

By taking the above steps, organisations can not only avoid penalties but also unlock opportunities for growth, efficiency, and enhanced reputation. A proactive compliance strategy positions businesses to meet the demands of investors, regulators, and consumers while contributing meaningfully to global climate and ESG goals.

To help your organisation confidently navigate the ever-changing sustainability reporting landscape, enrol in our comprehensive CSRD training. Designed to provide practical insights and tools, it equips businesses with the knowledge needed to align with the ESRS and ensure compliance with the CSRD. Don’t wait; start building your compliance strategy today and gain a competitive edge.