ESG regulation guide: Navigating the new normal.

Recent research projects that unabated climate change will reduce global GDP by 20%, or $38 trillion, by mid-century. And, policymakers are responding by strengthening environmental, social, and governance (ESG) protections. According to ESG Book, the number of ESG rules has grown by 647% since 2000. Today, companies face more than 5,000 climate policies and 3,100 ESG laws that affect how they manage and report on sustainability efforts. These rules cover everything from reducing greenhouse gas (GHG) emissions and ensuring fair wages to protecting personal data. Adding to the complexity, these regulations can vary widely across different countries and industries. For instance, industries with high pollution levels, like manufacturing and chemicals, often face stricter rules. Additionally, some regions, like the European Union (EU), ban thousands of product ingredients, while the U.S. may ban only a few. 

But following these rules to the letter is not enough. It’s not just about ticking boxes or meeting minimum requirements. To stay ahead, companies must change how they operate to create lasting value, reduce risks, and contribute positively to society and the environment. Businesses that aim to meet the highest standards will not only be compliant but also more transparent and accountable. This approach builds trust with stakeholders, improves profits, and gives companies a competitive edge. It also helps them avoid risks like hefty fines and damage to their brand reputation. 

To help companies navigate this changing landscape, this guide will break down the most critical ESG regulations and offer strategies for handling them effectively.

“81% of companies not subject to the CSRD still intend to comply.”

Workiva survey

Understanding the ESG regulatory framework

To navigate ESG regulations effectively, start by knowing which laws affect your organization. Some requirements may apply to all sectors, while others are industry-specific. For example, a manufacturer of physical goods will likely face different rules than a financial services provider. Let’s break down the key areas of each ESG pillar:

Environmental: These laws focus on a company’s impact on the environment. Key topics include natural resource usage and impacts, energy consumption, pollution control, waste management, and handling hazardous substances.

Social: Social impact rules are primarily concerned with protecting human rights within a company’s operating sphere. Critical issues include preventing forced labor and human trafficking, ensuring employee welfare, promoting diversity and inclusion, protecting consumers, and fostering community engagement.

Governance: Governance laws regulate corporate behavior and the structures that guide it. This includes board composition and oversight, ethical business practices, anti-bribery and corruption measures, and transparency and accuracy in reporting. 

Keep in mind that double materiality, as instituted by regulations such as the EU CSRD, also looks at outside-in impacts on a company’s financial health. This means considering how ESG issues such as climate change can affect the bottom line. By understanding which regulations fall under each pillar, organizations can better align their strategies, ensure compliance, and demonstrate a commitment to sustainable and ethical business practices.

General ESG reporting requirements

The EU requires extensive ESG disclosures for large companies (CSRD) and financial market participants (SFDR). Additionally, 168 jurisdictions worldwide require IFRS accounting standards, a set of common ESG and financial disclosure standards.

Environmental regulations

1. Climate disclosures: Companies must report climate impacts and / or risks in jurisdictions like the EU (CSRD, SFDR), some U.S. states, Canada, the UK, India, and Japan. The UK imposes additional energy and emissions disclosure requirements via the SECR.

2. Energy and emissions: Major emitters, such as manufacturers and industrial processors, are subject to various energy and emissions rules. These include GHG reporting (U.S., Canada, California, and Australia), carbon pricing (75 regions), border carbon pricing (the EU CBAM), and energy efficiency standards (the EU, Maryland, New York, and Canada). China, Taiwan, Canada, and Australia are also considering CBAM rules, and the UK is expected to start its own CBAM in 2027. Some U.S. states like New York and Vermont also require large emitters and fossil fuel extractors to contribute to state-managed climate funds. California, Massachusetts, and Maryland are considering similar rules.

3. Natural resources: The EU Deforestation Regulation (EUDR) requires companies to ensure that their supply chain is not linked to deforestation. 

4. Toxic substances: Many governments have enacted regulations governing the management of hazardous or toxic substances. For example:

• EU F-Gas Regulation: This rule, which impacts manufacturers in the refrigeration, air conditioning, and foam sectors in particular, mandates the phase-down and reporting of fluorinated GHGs (F-gases).

• Restriction of Hazardous Substances (RoHS): RoHS limits the use of certain hazardous materials in electronic products. More than 15 regions, including the EU, the UK, Taiwan, Singapore, Australia, South Korea, and California, have implemented RoHS rules.
• Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH): The European Chemicals Agency (ECHA) oversees chemical safety policies for various areas in the EU. Under REACH, companies must document the use of certain chemical substances, assess risks, and register the information with ECHA. There is also a mandatory disclosure requirement for any Substances of Very High Concern (SVHC), and certain substances are restricted under REACH. The EU also bans or restricts the use of more than 2,500 chemicals in personal care products. REACH-like regulations also exist in the UK, Switzerland, and several other countries.
• Toxic Substances Control Act (TSCA) and subsequent amendment: In the U.S., chemical and harmful substances are regulated under the TSCA by the Environmental Protection Agency (EPA). Companies must ensure their ingredients are in the TSCA inventory or register any new chemicals. It's worth noting that, of the 86k+ chemicals listed in the TSCA inventory, the EPA has only banned or restricted 14 substances. However, some states are addressing the gap by introducing stricter policies. As of February 2025, 40 U.S. states have adopted rules banning or restricting the use of toxic substances, such as mercury, heavy metals, PFAS, phthalates, lead, etc.
• Prohibition of Certain Toxic Substances Regulation (PCTSR): Canada governs chemical substances through the Canadian Environmental Protection Act (CEPA), the Chemicals Management Plan (CMP), and the PCTSR. The PCTSR limits the use of specific hazardous substances, similar to the EU's RoHS. A planned update to PCTSR aims to impose further restrictions.
• Microplastics restrictions: Microplastics can cause various adverse health and environmental impacts. As a result, several regions, including the EU, the UK, Canada, the U.S., and others, ban or limit the use of microplastics in consumer products. Companies must eliminate microplastics from their products within the required timeframes for each region.

5. Recycling and the circular economy: The EU has established various policies concerning waste and recycling, sustainable products (ESPR), circular economy frameworks, e-waste (WEEE), batteries, and consumer rights to repair products. In the U.S., 25 states and Washington, D.C. have enacted e-waste laws. Additionally, 33 states have adopted Extended Producer Responsibility (EPR) policies to ensure manufacturers play a role in the recycling and disposal of products. Canada employs EPR programs across thirteen provinces to handle recycling and e-waste.

6. Greenwashing and product labels: 

• Anti-greenwashing laws: Companies operating in the EU (Green Claims), UK, California, or Washington must comply with regulations governing the types of sustainability claims that can be made. Canada provides anti-greenwashing guidance.
• Product labels: The EU, the UK, Canada, and the U.S. require manufacturers to classify, label, and package chemical substances clearly, including details on risks and safe handling instructions. Certain industries may have additional labeling requirements. For example, fragrance allergen disclosures are required in the EU, the UK, California (for cosmetics and cleaning products), and Canada.

Social regulations

1. Supply chain transparency: Large companies are expected to be accountable for environmental and social harm across their supply chain. As such, supply chain due diligence and reporting are required in the EU (CSDDD), Germany (LkSG), Switzerland (VSoTr), and Norway (NTA). 

• Forced labor: Modern slavery disclosures are required in California, the UK, Canada, and Australia. The U.S. has also enacted a law (UFLPA) that bans the import of goods from Xinjiang Uyghur region of China due to forced labor concerns.
• Conflict minerals: Companies are required to disclose the use of conflict minerals in the U.S. and the EU. 

2. Working conditions and labor practices: 

• Health and safety: Many countries have occupational laws that set minimum health and safety standards for workers. 
• Labor practices: Policies that govern minimum wage, working time, overtime pay, equal employment opportunities, and diversity are also common. Examples include Equal Employment Opportunity (EEOC) laws in the U.S. and the Working Time Directive in the EU. Companies that are subject to the CSRD will also need to report on various aspects of their workforce, including diversity, workforce management, employee relations, etc.

3. Pay transparency: Gender pay gap reporting is required in the EU and the UK. In the U.S., ten states require or will require pay transparency. Notably, California requires companies to report pay data by gender, race, and ethnicity and mandates disclosure of pay scales in job postings.  

4. Product safety: Product safety policies and regulations to ensure that products are safe for consumer use are relatively widespread. Typically, they include mandatory safety standards and bans on specific products and/or materials. 

5. Data privacy and security: Privacy and data protection laws are in place in 120 jurisdictions around the globe. In the EU, a set of policies bundled under the Declaration of Digital Rights and Principles address digital rights for individuals, including data privacy and other protections. 

Governance regulations

1. Board diversity: Board diversity disclosures are required in the U.S. (Nasdaq listed companies and three states), Canada, the UK, and 11 other countries. The EU also requires that at least 40% of non-executive director posts be allocated to women by June 30, 2026.

2. CEO pay transparency: Companies must disclose the ratio of CEO pay to employee pay in the U.S. and UK.

3. Ethical business conduct: The UK requires companies to “comply or explain” how they meet leadership standards set out in the Corporate Governance Code.

4. Bribery and corruption: Anti-bribery and corruption laws are common across numerous countries, including the U.S., Canada, Australia, and the UK. Recently, some countries have strengthened their anti-corruption laws by widening the scope and increasing penalties. 

Practical strategies for ESG compliance

As ESG regulations continue to expand, companies face mounting legal, financial, and reputational risks. But, by going beyond minimum requirements and aligning with stakeholder expectations, organizations can achieve compliance while enhancing their competitive edge. Here’s how:

1. Stay informed

• ESG rules evolve fast (e.g., the EU replaced the NFRD with the CSRD, which expands reporting requirements).
• Monitor regulatory updates in all markets in which you operate or plan to in the future.
• Join industry discussions and maintain a compliance calendar to track deadlines.

2. Conduct a gap analysis

• Identify applicable ESG laws (including any sector-specific regulations).
  • For example, food and beverage companies may also need to consider agricultural regulations that were not covered in this article.
  • Consider hiring a legal expert who specializes in your industry and / or operating locations.
• Compare them against current policies, controls, disclosures, and stakeholder expectations to spot improvement areas.

3. Upgrade data management

• Assign clear responsibilities for data collection, verification, and oversight.
• Ensure you accurately track all material ESG metrics for your organization, such as emissions, waste, and labor practices.
• Invest in systems or ESG software that automate data tracking, analysis, and reporting.
• If required, engage reputable third-party auditors for assurance.

4. Integrate ESG into governance and risk management

• Integrate ESG risks—like climate events or labor disputes—into overall risk management. Create contingency plans to respond to ESG-related crises.
• Form cross-functional governance teams that report to senior leadership. These teams should include representatives from Finance, Operations, HR, and Legal.
• Appoint an ESG or Sustainability Committee at the board level to boost top-down accountability.
• Tie executive compensation to ESG performance and provide training on emerging trends.

5. Build a culture of sustainability and transparency

• Develop clear ESG policies and train employees.
• Collaborate with suppliers and stakeholders on ESG goals.
• Encourage creative ideas and solutions that drive environmental and social improvements across all operational areas.
• Be transparent about both successes and challenges to foster trust and enhance your brand.

6. Set measurable targets, track progress, and innovate

• Define ambitious, measurable ESG objectives and track them regularly.
• Look for ways ESG initiatives can drive innovation, from efficient processes to sustainable product designs.
• Capture insights from every success and setback to refine your ESG approach, ensuring ongoing improvement and adaptability.

7. Future-proof your strategy

• Stay ahead by conducting scenario analyses to anticipate potential challenges.
• Invest in flexible technology that can address new reporting standards with minimal friction (e.g., flexible data architectures, artificial intelligence for predictive risk analyses, etc.).
• Collaborate with NGOs, industry groups, and peers to jointly influence new regulations, share best practices, and stay ahead of emerging ESG trends.
• Exceed current regulations when possible—preparing your organization for future rules and market expectations.

Case study 

Trane Technologies has integrated ESG into its core strategy, setting ambitious 2030 goals for reducing greenhouse gas emissions and creating value through sustainability. By the end of 2023, Trane reduced its customers’ carbon emissions by 157 million metric tons of CO₂e and achieved a 15.2% improvement in emissions efficiency from its 2019 baseline. The company also delivered strong value, with 2023 marking the third year of adjusted EPS growth of 20% or more. Additionally, Trane has been named to prestigious lists like the JUST 100, Corporate Knights 2025 Global 100, and TIME’s World’s Best Companies in Sustainable Growth—some of these for multiple years.

Turn ESG compliance into a competitive advantage with Aquent

As we look to the future, it's clear that ESG compliance will continue to grow in importance. Companies that embrace this reality and proactively address ESG issues will be better positioned to mitigate risks, seize opportunities, and create long-term value for all stakeholders. By viewing ESG compliance not as a burden but as an opportunity for innovation, differentiation, and value creation, businesses can turn regulatory requirements into a source of competitive advantage. In doing so, they not only ensure their own long-term success but also contribute to building a more sustainable and equitable world for future generations. Aquent—a global leader in workforce solutions—can accelerate your journey by providing specialized sustainability services and expert talent to help you exceed compliance benchmarks. From navigating complex regulations to orchestrating transformative ESG initiatives, Aquent empowers you to turn sustainability goals into a clear competitive edge.

Looking to bolster your sustainability efforts? Aquent Sustainability is here to help. Whether you're building an in-house Sustainability Team or need an expert to advise on best practices, our sustainability recruitment and consulting services help companies grow their impact. Get in touch.

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