Latest ESG regulations in 2025

Businesses navigating the evolving landscape of corporate sustainability are facing both external and internal challenges in meeting compliance. Managing the complexity of disparate data and information, cross-collaboration and allocation of responsibility, and the standardization of systems and requirements is time-intensive and resource-heavy. But staying ahead of changing environmental, social, and governance (ESG) regulations is crucial. 

In this article, we detail some of the most impactful regulatory developments in ESG, as highlighted by our expert team of speakers — Paula Galbiatti Silveira, Marina Dorileo Barros, and Angelo Bardales — from our webinar on Navigating ESG regulations.

Federal versus state-level climate action in the US

In recent months, the US has witnessed huge regulatory change with the Trump administration reshaping the country’s focus on sustainability. In response, state-level action on climate change mitigation and adaptation has accelerated, with multiple states leading the regulatory charge on environmental preservation as federal efforts pause.

Green New Deal 

Upon taking office, President Trump issued Executive Order 14154 to transition away from the Green New Deal policies by pausing funds from the Inflation Reduction Act and the Bipartisan Infrastructure Act. 

The Green New Deal policies are aimed at boosting the presence of more ‘green’ jobs in the economy. Instead, more action has been instigated to advance alternative domestic energy sources.
 

Climate disclosure rules 

The climate disclosure rules have been under litigation since March 2024. They establish new rules that require publicly traded companies to disclose climate related risks in annual reports and statements. As these were on hold, it was anticipated that the new administration may change its direction. 

And so, in February 2025, the US Securities and Exchange Commission (SEC) announced that it wouldn’t defend the rules in litigation.
 

Paris Agreement withdrawal 

The Paris Agreement is an international treaty focused on reducing the impacts of climate change. It functions as the legally binding agreement between states who pledge to commit to protecting the climate.  

Countries are required to submit climate action plans and Nationally Determined Contributions (NDCs) every five years to demonstrate their continued commitment. 

This year marks the United States’ withdrawal from the Agreement, effective officially within one year, signifying a rollback at the federal level of international climate finance.

Climate action among states 

In response to the Paris Agreement withdrawal, the US Climate Alliance delivered a letter to the UN reaffirming its intent to continue focusing on climate action and align long-term plans with NDCs. The Alliance consists of two dozen US state governors, demonstrating that controlling climate change remains a priority among states, despite federal withdrawal. 

States have continued to implement policies to maintain efforts toward this goal: 

• California’s climate rules apply to public and private companies who meet specific global annual revenue thresholds, mandating the disclosure of greenhouse gas emissions and biannual disclosure of climate related financial risks 

• Colorado’s House Bill 25/119 introduces disclosure of greenhouse gas emissions 

• New York’s Senate reintroduced greenhouse gas emissions and climate risk disclosure bills

Deforestation in the EU

The EU estimates that deforestation accounts for 20% of carbon dioxide emissions, driven by the demand for commodities such as cattle, soy, and palm oil, which require land for agriculture and farming purposes.
 

Regulation on Deforestation-free Products 

The EU has implemented the Regulation on Deforestation-free Products (EUDR) to tackle this ongoing crisis, regulating the import and export of the following commodities associated with deforestation and forest law: 

• Wood 

• Rubber 

• Palm oil 

• Coffee 

• Cocoa 

• Cattle 

• Soya  

The Regulation (EU) 2023/1115 will reshape supply chains in Europe by ensuring products sold on the EU market don’t contribute to deforestation. This will be applicable to all companies operating in or outside of the region wishing to place their products on the European market from December 2025 (or June 2026 for small companies). 

To demonstrate that products are deforestation-free, companies will have to: 

• Trace each commodity back to the exact plot of land it came from 

• Produce due diligence statements confirming compliance with the EUDR, the severity of which will be decided by a ranking of each country’s deforestation risk 

• Produce evidence of whether a commodity or product has been produced in accordance with the applicable legislation of its country of origin, providing benchmarks for products to be categorized into low or high risk

Forced labor in the EU

The International Labour Organization (ILO), in their most recent global estimate of enforced labor in 2021, reported that 28 million people were subjected to forced labor — 40% of which are women, and 12% of which are children.
 

Forced Labor Regulation 

A serious violation of human rights, the EU is taking strict measures to monitor and prohibit the presence of forced labor in the production of products permitted on the market. This is captured by Regulation (EU) 2024/3015 prohibiting products made with forced labor (FLR).  

This regulation concerns the prohibition of exported and commercialized products made with forced labor, including forced child labor, placed or made available on the EU market or offered for sale online. 

The FLR doesn’t create any additional due diligence obligations for companies outside of the existing regulations under the Corporate Sustainability Due Diligence Directive (CSDDD), which mandates addressing risks in their supply chain and enhancing transparency through reporting. 

Further, under the FLR, the European Commission and Member State authorities are able to conduct investigations into potential violations and either ban, withdraw, or dispose of the product(s). 

This rule will apply to all relevant companies from 14 December 2027.

Energy reporting in the EU

As a leading cause of climate change, energy consumption remains a priority to monitor and control. In the face of rising energy costs and environmental damage from toxic emissions, the EU is amplifying renewable energy solutions as an alternative to achieve a greener economy. 

To align with the goal of being more energy efficient, the EU has new binding targets to reach by 2030: 

• 45% renewable energy usage 

• Cut energy consumption by more than 11% 

But the demand for energy continues to rise, largely in response to investments in data centers driven by increased digitalization and artificial intelligence (AI). According to the International Energy Agency, large data centers consume as much electricity in a single year as 350,000 – 400,000 electric vehicles. And as the use of AI continues to grow, the demand for these power-hungry facilities will also increase.

Energy Efficiency Directive 

The revised Energy Efficiency Directive introduced reporting obligations for owners and operators of data centers (and enterprise data centers) that have an installed IT power demand of at least 500 kilowatts.
 

Commission Delegated Regulation 

Further to the efforts of the revised directive, the EU also has the Commission Delegated Regulation (EU) 2024/1364 — a Common Union rating scheme for data centers. 

In force since June 2024, it establishes EU-wide sustainability ratings for data centers and sets the information and KPIs that data centers are responsible for reporting to the European database or corresponding national reporting scheme. 

Under this regulation, data centers need to report on their energy performance, specifically providing information on: 

• The ICT capacity indicators 

• Total energy consumption of the IT equipment 

• Total energy consumption of the data center overall 

• Total renewable energy consumption of the data center, including on-site renewables 

The initial deadline for reporting this information was 15 September 2024. Annual reporting begins from May 2025.

Key takeaways from the webinar

As policies continue to be regulated, or deregulated, companies must stay aware of which emerging or revised legislation will impact their business operations and practices. Our experts shared their top tips for navigating this complex space. 

• Be proactive — don’t wait for changes to happen and then respond reactively, but rather adopt a proactive approach where you prepare for anticipatory developments based on ESG trends and legislation 

• Stay informed — leverage a horizon-scanning compliance solution to be alerted to regulatory changes in your area, industry, and relevant topic 

• Prepare and act — don’t let deregulation keep you from updating and adapting your products, processes, and operations to be more sustainable