Navigating the sustainability landscape: Top three trends

With myriad regulatory and non-regulatory information being published across the globe, in multiple languages, navigating the corporate sustainability landscape of mandatory reporting and compliance trends can be complicated.  

In the last six months alone, Enhesa has published 1,186 developments on corporate sustainability — 282 focused on environment, 511 on social, and 393 on governance. Among the most trending topics was corporate culture, sustainable products strategy, climate change, and sustainable investments.  

In a recent webinar about Sustainability Reporting, Sustainability and ESG expert, Paula Galbiatti Silveira, detailed the top three trends affecting the compliance landscape today.

1. Development and revision of voluntary international sustainability standards

The Global Reporting Initiative (GRI) develops standards on impact materiality, which are structured in three series: the Universal Standards; the Sector Standards; and the Topic Standards. GRI’s focus now is on updating old standards and developing new voluntary standards that are globally applicable. Most recently, for example, the GRI published a New GRI 101: Biodiversity 2024, and a public consultation on a new GRI Topic Standard for Climate Change, and an updated GRI Energy Standard. 

Concerning sustainability disclosures for specific sectors, since 2021 the GRI has published new sector standards for the oil and gas sector, the coal sector, the agriculture, aquaculture and fisheries sector, and, most recently the mining sector. The next sector standard the GRI is working on is for textiles and apparel, expected to be released in Q1 2026. 

Similarly, the International Sustainability Standards Board (ISSB) has also published voluntary standards that are globally applicable. With a focus on financial materiality — evaluating the effects of sustainability-related risks and opportunities on a company’s cash flow or enterprise value — and investor-focused sustainability disclosures, future standards are targeting biodiversity and the ecosystem, human capital, and human rights. 

Turkey, Nigeria, and Brazil have already adopted these new voluntary standards, while Canada, the UK, Taiwan, Malaysia, the Philippines, Japan, Hong Kong, Singapore, India, and Australia, among other countries are currently in the process of adopting them.  

These developments in global voluntary sustainability standards and the adoption of ISSB standards for mandatory use in national jurisdictions are shifting the compliance landscape at a rapid pace. 

Businesses need to be aware of the standards adopted by their country as well as in the countries where they operate, supply from, and place products on the market, as sustainability issues influence the company’s whole value chain.

2. New regulations and national standards mandating sustainability reporting

The Corporate Sustainability Reporting Directive (CSRD) has enforced the transition from a voluntary compliance landscape to a mandatory one. Remarkably, the CSRD provides more detailed sustainability reporting requirements. For the first time, reporting companies will have to follow mandatory European Sustainability Reporting Standards (ESRS) to ensure reported information is comparable. The CSRD has also adopted “double materiality”, making it mandatory for companies to consider both their impact on people and the planet — as well as the impact the planet and people have on their business — in their sustainability reports. 

When broken down into environmental, social, and governance reporting standards, the ESRS adopted so far consist of two general standards — five for environment, four for social, and one for governance. The E, S, and G categories are as follows:

Environment 

• Climate change 
• Pollution 
• Water and marine resources 
• Biodiversity and ecosystems 
• Resource use and circular economy 

Social 

• Own workforce 
• Workers in the value chain 
• Affected communities 
• Consumers and end users 

Governance 

• Business conduct 

At the time of writing, five countries have transposed the CSRD: France, Hungary, Finland, Romania, and Czech Republic. Many other countries, such as Sweden, Latvia, Ireland, Spain, Germany, and the Netherlands are currently holding consultations or awaiting approval on draft proposals.  

3. Regulatory trends on sustainability topics

While sustainability reporting requires companies to inform or report on what they’re doing, providing a summary of a company’s sustainability strategy and actions, it doesn’t tell companies what to do. This is where compliance comes in. 

In addition to sustainability reporting obligations, new regulations covering E, S, and G topics demonstrate a commitment to address global sustainability concerns. Before considered “good practice”, many issues are now subject to legal obligations. Here, we want to focus on developments for deforestation-free products, whistleblowing protection, and human rights due diligence. 

EU Deforestation Regulation (EUDR) 

The new EU regulation on deforestation-free products details rules on exporting products associated with forest degradation — for example: soy, wood, beef, palm oil, coffee, cocoa, and derived products like chocolate and furniture. The regulation prohibits companies from exporting, making available, or placing on the market commodities associated with deforestation and forest degradation or derived products listed in Annex I, unless they’ are deforestation-free, covered by a due diligence statement, and have been produced according to the relevant legislation of the country of production. Companies must implement a mandatory due diligence system and a statement confirming the manufacture and use of the commodity, with the ability to trace it back through imports and exports. Companies must also widely report, including via the internet, on their due diligence system. Entered into force in 2023, requirements won’t apply until December 2024, but will inherently require corporations to prepare for those new obligations ahead of time. 

UK Environmental Act 

Similarly, the UK Government introduced Schedule 17 of the Environment Act to tackle illegal deforestation in supply chains. This Act prohibits companies from using illegally produced forest commodities, requiring companies to establish a due diligence and yearly report on its due diligence. Secondary legislation is necessary to implement these requirements. Recently, the UK government announced a focus on four commodities, namely cattle products (excluding dairy), cocoa, palm oil, and soy as key drivers of the UK’s deforestation footprint.

Directive (EU) 2019 / 1937 — Whistleblowing Directive 

Protecting people who report breaches of Union Law in companies with more than 50 workers, the Whistleblowing Directive requires companies to establish an internal reporting channel to allow employees to safely report any breach of EU law. While developing their internal reporting channel, companies must consider their duty of confidentiality towards the reporting entity, as well as the protection of personal data. Companies must also keep records of reports and ensure whistleblowers are safe from dismissal. The deadline for transposing the Directive was 17 December 2021, but Member States were able to postpone transposition until 17 December 2023 for legal entities in the private sector with 50 to 249 workers. Following new national laws transposing the Whistleblowing Directive, companies will need to comply with new requirements on the matter and follow government guidance to ensure compliance.

EU Corporate Sustainability Due Diligence Directive (CSDDD) 

One of the most significant compliance challenges currently relates to mandatory human rights due diligence. There are regulations in force, such as the Norwegian Act relating to enterprises’ transparency and work on fundamental human rights and decent working conditions (Transparency Act), which has been in force since 2022, and the German Act on Corporate Due Diligence Obligations in Supply Chains, which entered its second phase of application in January and now encompasses companies with 1,000 employees or more. 

At the EU level, on 15 March 2024, the European Council reached an agreement on the draft Corporate Sustainability Due Diligence Directive (CSDDD), which aims to establish obligations to identify, prevent, mitigate, communicate, and remedy adverse impacts on human rights and the environment in their value chain. The agreed text would include an adaption scheme for in-scope companies (which applies from the moment the CSDDD enters into force):

• companies with more than 5000 employees and EUR 1500 million turnover would have 3 years to comply with the CSDDD; 
• companies with more than 3000 employees and EUR 900 million turnover would have 4 years to comply; and 
• companies with more than 1000 employees and EUR 300 million turnover would have 5 years to comply.

Non-compliant companies would be subject to administrative supervision with penalties including fines of up to 5% of the worldwide turnover plus compensation for damages. The CSDDD is now sent back to the European Parliament to consider the approval of the compromise text with a final vote in the plenary.