Eighty-seven percent of executives in the United States say they’ve maintained or increased their sustainability investments this year, despite the political climate. They’re just doing it more quietly: nearly a third are ramping up efforts while pulling back on public messaging.
Regulators have taken a different course. As regulatory timelines shift and sustainability rules fragment across jurisdictions from Brussels to Washington, the burden of compliance is getting heavier and harder to manage and justify.
Without consistent guidance, timelines, or standards, and just bare reasons why, even the most proactive organizations now struggle to keep pace with regulators’ blurred lines, finding it harder to engage in and make meaningful, measurable progress. Nearly half of C-suite leaders surveyed in the U.S. say ESG (environmental, social and governance) regulatory rollbacks will lead to increased supply chain disruptions. Forty-one percent expect higher consumer prices as unmanaged climate risks ripple through operations, and 59 percent worry that loosening standards will accelerate labor violations and worker mistreatment.
These aren’t theoretical concerns. They’re operational threats, and they’re compounding as compliance systems strain under the weight of fragmentation, fatigue and policy backtracking. What’s needed isn’t more rules or fewer rules. What’s needed is better rules. Regulations that are coherent across borders, clear in expectations and objectives, and practical for companies to implement at scale.
Business leaders and regulators must work together to build a new regulatory regime focused on smart regulations, one that drives measurable impact without creating unmanageable complexity.
The map is gone and pressure is mounting
Customers, investors, and business partners still demand action on key sustainability topics like emissions reduction, addressing labor rights violations, and ethical sourcing, but the roadmap to meet those demands is no longer clear. Governments stepped back from their boldest sustainability regulatory commitments. The United States Securities and Exchange Commission stopped defending climate disclosure rules in court, and European Union leaders proposed watering down the Corporate Sustainability Due Diligence Directive, among others, leaving companies to navigate a patchwork of requirements and a rapidly shifting policy landscape largely on their own. The result is confusion, misalignment and rising risk.
Only 13 percent of companies say they’re on track to comply with four major ESG regulations: California’s Climate Corporate Data Accountability Act, Canada’s Modern Slavery Act, and the EU’s Corporate Sustainability Reporting Directive and Carbon Border Adjustment Mechanism. Meanwhile, 19 percent haven’t started collecting ESG data from their supply chains, and 15 percent are still in wait-and-see mode. The hesitation is understandable, but it’s also dangerous.
When compliance becomes a moving target, progress stalls. The most committed teams are burning out under mismatched mandates, and reputational, financial, and legal risks are multiplying, especially for companies with global footprints.
Compliance fatigue is setting in
The foundation for today’s sustainability regulations was built on good intentions, and they reflect meaningful progress. But in many cases, implementation has proven challenging as frameworks don’t always align with how companies actually operate on the ground. This misalignment can lead to redundant reporting, inconsistent definitions, and one-size-fits-all approaches that stifle innovation instead of rewarding it, resulting in a significant readiness gap.
More than 75 percent of companies rated for the first time fell into the high-risk category for sustainable procurement, lacking even the most basic supplier engagement practices. Yet, many regulations assume these systems already exist and offer little flexibility for businesses still building them.
This mismatch is creating compliance fatigue. Teams are spending more time checking boxes than driving progress. Leaders who should be advancing strategy are instead stuck chasing rigid, or albeit moving, requirements that don’t reflect the realities of sustainability in practice.
For instance, the excessive narrative detail required under the initial Corporate Sustainability Reporting Directive rule, risks diluting the key messages and distracting stakeholders from the most important metrics and key performance indicators. Such compliance frameworks don’t allow companies to focus on what’s most important: building resilience in the face of complex challenges. Disconnected standards and broken accountability make it harder to identify weak points in supply chains before they become crises.
Tech is the bridge, but policy has to catch up
Companies are now turning to technology to close data gaps and meet stakeholder expectations. Fifty-seven percent of companies report using ESG risk mapping tools, 49 percent have supplier engagement platforms in place, and 34 percent are building supply base maps. Nearly 90 percent plan to increase their investment in ESG-related tech this year.
Yet even with this momentum, the system lags. One-third of executives admit they’ve reported ESG data based on estimates rather than facts, because gathering accurate, verifiable information remains costly and complex.
Technology is enabling transparency, efficiency and scale. But its full value won’t be realized until regulation aligns with the challenges faced and the tools companies already use to deal with these. Real-time supplier data, dynamic risk scoring, and digital traceability are already active across global supply chains. Yet policy still demands static reports and manual disclosures. Regulation should scale what’s working, not stand in its way.
Where does regulation go from here?
The answer isn’t less oversight. It’s smarter oversight. Smart regulation should reward outcomes, not just activity. It should reduce duplication across jurisdictions, flex to the maturity levels of different industries, and support technologies that help companies operate more transparently and efficiently. To drive sustainability forward, regulators must:
Eliminate the one-size-fits-all baseline. Companies just beginning their sustainability journeys don’t have the same infrastructure as global leaders. Smart regulation should scale expectations to reflect a company’s maturity level, raising the bar without breaking progress.
Integrate rules with the systems companies already use. Nearly 90 percent of companies plan to increase their investment in ESG tech this year. They’re using digital supplier engagement platforms, risk mapping tools, and audit software to track performance and close data gaps. Smart regulation should recognize those tools as valid, verifiable sources of ESG data.
Clarify, not multiply, requirements. Companies operating in multiple regions are juggling overlapping standards, inconsistent definitions and duplicated audits. Streamlined, globally aligned and recognized frameworks would not only ease compliance burdens but strengthen the quality and comparability of ESG data overall.
Companies aren’t asking for shortcuts. They’re asking for vision and structure. If the goal is better outcomes on climate, labor, and supply chain risk, regulation must reflect it in the systems that drive it.
Image credit: Beatriz Camaleão/Unsplash
