“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 

There are 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. However, there is also growing divergence between economic blocs. As recent developments in the US have shown, the move towards more stringent environmental red tape is by no means universal. This divergence can prove particularly problematic for businesses hoping to comply with regulations in multiple jurisdictions. 

“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

Beginning with convergence, 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 market13.  

In a similar vein, the introduction of the EU’s Omnibus Simplification package on the 26th February 202514 seeks to streamline regulatory requirements, ensuring greater consistency and making it easier for businesses to comply. 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.

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.