Regulatory Jeopardy

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Regulatory Jeopardy

Regulatory Jeopardy

How can businesses with global operations remain fully compliant with competing environmental-related regulations?

This year, a raft of new environmental-related regulations are set to come into force for certain businesses that will impose stricter reporting requirements and, in some cases, compel businesses to restructure their operations in order to comply. These new regulations create a significant degree of uncertainty for multinational firms in particular, primarily due to growing divergence between jurisdictions.

Our latest Risk & Resilience research data reveals, almost a fifth (19%) of global executives cited environmental, social and governance (ESG) risk, and the failure to comply with new ESG requirements including related legislation, regulation, or reporting requirements, as their top concern this year.

Environmental regulations timeline

January

2025

March

2025

June

2025

July

2025

August

2025

October

2025

November

2025

December

2025

2026

2027

2028

2029

2030

Shifting the dial
European regulatory landscape
Corporate sustainability reporting
ESG regulation in the spotlight
Convergence meets divergence
A complex picture

Shifting the dial: emissions targets and a regulatory crackdown in Europe

Regulators are imposing increasingly strict and complex red tape on businesses across the globe. There are now regulations requiring businesses to collect and report data on a host of environmental issues, from waste management and biodiversity to greenhouse gas emissions and business travel. Executives of small and medium-sized businesses, in particular, could be forgiven for struggling to keep up with their regulatory obligations and reporting deadlines. This is especially true for firms operating in the EU, where a number of regulations have been introduced following the establishment of legally binding climate targets covering all key sectors of the economy.

European regulatory landscape

Since the European Green Deal was approved in 2020, a host of initiatives have come into force, with the goal of reaching climate neutrality by 2050. In July 2021, the goals set out in the European Green Deal were enshrined into law, courtesy of the European Climate Law8. After the EU’s goal of reducing emissions by at least 55% by 2030 became legally binding, the ‘Fit for 55’ package was adopted, which set out a host of initiatives to help sectors decarbonise. This included extending the remit of the EU emissions trading system (a carbon tax covering domestic production of emissions intensive activities such as cement production) creating a new social climate fund9.

Alongside setting ambitious emissions targets, the EU has also substantially increased the reporting burden on firms. The Corporate Sustainability Reporting Directive (CSRD) came into force in 2023 and requires companies to disclose non-financial information pertaining to the environmental impact of their activities. At the same time, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) looks set to foster a new era of corporate accountability.
However, on 3rd April 2025, the European Parliament voted in favour of postponing the implementation dates for the CSRD and CSDDD. The move forms part of the European Commission’s Omnibus simplification package, intended to simplify regulation in the EU, enhance competitiveness and boost inward investment.

The CSRD’s reporting requirements are still being introduced in phases, with large companies now required to report from 202811. The scope of the CSRD will then expand further in 2029, when listed small and medium-sized enterprises will need to report. However, there are ongoing discussions around refining the CSRD’s reporting thresholds, with the aim of reducing the number of businesses that will fall within its scope. These reforms are expected in the second phase of the Omnibus simplification package.

Corporate sustainability reporting

The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) is indicative of how the regulatory landscape is changing. Historically, companies have focused on the direct impacts, both potential and actual, that their operations have on the environment.

Regulators are now turning their attention to activities across the whole supply chain. By July 2027, EU Member States will need to implement the CS3D into national law, with requirements to implement due diligence around human rights and environmental impacts throughout their supply chains.12
In 2028, large EU companies with over 5,000 employees and a net turnover exceeding €1.5 billion, as well as non-EU companies meeting the same turnover threshold operating within the EU, will be required to comply with the CSDDD. EU companies with more than 3,000 employees and a net turnover above €900 million, along with equivalent non-EU companies, will be in the same position13.

Despite the new timelines, the depth of the reporting requirement means that businesses will need to begin preparing for the CSDDD this year.

Convergence meets divergence

“It is imperative businesses take a long-term view and integrate climate considerations into their core business strategy. Global businesses should consider implementing a robust governance structure around climate risk, which may come in the form of a dedicated climate risk committee and investing in data.”

Juan Duan
Head of Financial Climate Risk at Beazley

The introduction of the EU’s Omnibus Simplification package on the 26th February 202514 is symptomatic of the increasing efforts to streamline and standardise requirements, both at a national level and supranational level to help ease the burden of environmental regulation on businesses. The reforms have had a mixed reaction, however, with some investors concerned that hiding information on sustainability credentials could be a barrier to investment15. A further harmonisation of ESG reporting standards across Europe is expected in October 2025, when an additional update to the package is set to be announced.

Elsewhere, to eliminate the patchwork of global sustainability standards, the ISSB (International Sustainability Standards) has created a global standard that, if adopted, will remove the need for firms to produce multiple reports tailored to each market16.
These examples of growing convergence are in marked contrast to the regulatory landscape in the US. Since the new administration took office in the US, there has been a flurry of executive orders that have rolled back on environmental commitments, and the US has withdrawn from the Paris climate agreement16. It has also been reported that the new administration has halted all pending environmental litigation and reassigned four career Justice Department attorneys who were focused on environmental issues17.

With the US seemingly moving in the opposite direction to the EU, global businesses with operations in both markets are stuck in the middle and must be alert to the risks that this situation will create.

“The broad and diverse patchwork of environmental regulation across the globe is more volatile than ever. Recent political developments in the US have created uncertainty, with the growing anti-ESG sentiment in certain US states leaving many unsure about how best to navigate the regulatory landscape. This causes instability, and (alongside other measures) threatens harmonisation, standardisation and multilateralism: elements of the post-war economy that we have come to rely on for global stability and business.”

Wynne Lawrence
Partner at Clyde & Co

A complex picture

While the pipeline of environmental regulation shows no sign of abating in certain jurisdictions, it is being turned on its head in others. Our Risk & Resilience data reveals that 82% of global executives feel prepared[ii] to counter the threat posed by ESG risk this year, up from 72% last year. Are businesses dulled to the danger, or just getting better at managing the intricacies of global environmental regulation?

“With increasing levels of divergence, having a dedicated sustainability function is now a necessity for global businesses, and legal and compliance teams need to understand the regulatory landscape and ensure compliance with different standards in different jurisdictions. While ensuring compliance with local regulation is a key tenet of any corporate strategy, setting a strategic direction when your business is being pulled in two or more directions is extremely challenging.”

Wynne Lawrence, Partner at Clyde & Co

Shifting the dial

European regulatory landscape

European regulatory landscape

Since the European Green Deal was approved in 2020, a host of initiatives have come into force, with the goal of reaching climate neutrality by 2050. In July 2021, the goals set out in the European Green Deal were enshrined into law, courtesy of the European Climate Law8. After the EU’s goal of reducing emissions by at least 55% by 2030 became legally binding, the ‘Fit for 55’ package was adopted, which set out a host of initiatives to help sectors decarbonise. This included extending the remit of the EU emissions trading system (a carbon tax covering domestic production of emissions intensive activities such as cement production) creating a new social climate fund9.

Alongside setting ambitious emissions targets, the EU has also substantially increased the reporting burden on firms. The Corporate Sustainability Reporting Directive (CSRD) came into force in 2023 and requires companies to disclose non-financial information pertaining to the environmental impact of their activities. At the same time, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) looks set to foster a new era of corporate accountability.
However, on 3rd April 2025, the European Parliament voted in favour of postponing the implementation dates for the CSRD and CSDDD. The move forms part of the European Commission’s Omnibus simplification package, intended to simplify regulation in the EU, enhance competitiveness and boost inward investment.

The CSRD’s reporting requirements are still being introduced in phases, with large companies now required to report from 202811. The scope of the CSRD will then expand further in 2029, when listed small and medium-sized enterprises will need to report. However, there are ongoing discussions around refining the CSRD’s reporting thresholds, with the aim of reducing the number of businesses that will fall within its scope. These reforms are expected in the second phase of the Omnibus simplification package.

Corporate sustainability reporting

ESG regulation in the spotlight

Convergence meets divergence

“It is imperative businesses take a long-term view and integrate climate considerations into their core business strategy. Global businesses should consider implementing a robust governance structure around climate risk, which may come in the form of a dedicated climate risk committee and investing in data.”

Juan Duan
Head of Financial Climate Risk at Beazley

The introduction of the EU’s Omnibus Simplification package on the 26th February 202514 is symptomatic of the increasing efforts to streamline and standardise requirements, both at a national level and supranational level to help ease the burden of environmental regulation on businesses. The reforms have had a mixed reaction, however, with some investors concerned that hiding information on sustainability credentials could be a barrier to investment15. A further harmonisation of ESG reporting standards across Europe is expected in October 2025, when an additional update to the package is set to be announced.

Elsewhere, to eliminate the patchwork of global sustainability standards, the ISSB (International Sustainability Standards) has created a global standard that, if adopted, will remove the need for firms to produce multiple reports tailored to each market16.
These examples of growing convergence are in marked contrast to the regulatory landscape in the US. Since the new administration took office in the US, there has been a flurry of executive orders that have rolled back on environmental commitments, and the US has withdrawn from the Paris climate agreement16. It has also been reported that the new administration has halted all pending environmental litigation and reassigned four career Justice Department attorneys who were focused on environmental issues17.

With the US seemingly moving in the opposite direction to the EU, global businesses with operations in both markets are stuck in the middle and must be alert to the risks that this situation will create.

“The broad and diverse patchwork of environmental regulation across the globe is more volatile than ever. Recent political developments in the US have created uncertainty, with the growing anti-ESG sentiment in certain US states leaving many unsure about how best to navigate the regulatory landscape. This causes instability, and (alongside other measures) threatens harmonisation, standardisation and multilateralism: elements of the post-war economy that we have come to rely on for global stability and business.”

Wynne Lawrence
Partner at Clyde & Co

A complex picture

Beth Diamond, Group Chief Claims and Litigation Officer at Beazley discusses the impact of environmental regulations.

Spotlight Snapshots

Competing regulations are forcing businesses to make tough decisions when it comes to compliance. Executives must understand the global footprint of their business and identify which jurisdiction enforces the highest standards.

External advice is crucial, and executives should engage with both the regulators themselves and their industry peers to understand how best to comply with regulations whilst maintaining profitability.
There is a clear role for the insurance industry, which is well-placed to provide clear guidance to firms of all sizes and sectors. For multinationals, global insurance solutions can provide comprehensive, tailored coverage to businesses across a host of specialty lines.

Insurers can also help businesses mitigate the impact of regulation coming down the track, advising clients on how best to future proof their operations and prepare for likely reporting requirements.