ESG Enforcement Key Takeaways

Published on Feb 25, 2025

WLG colleagues in the ESG Group met on February 25 to discuss ESG practices and regulatory updates, sharing updates from across jurisdictions. 

Here are the key takeaways: 

  1. The European Commission has released an "omnibus package" to simplify ESG regulations. The changes include reducing reporting requirements by 25% overall and 35% for small and medium-sized companies. This recalibration of ESG compliance aims to balance regulatory oversight with business practicality.
  2. The SEC is subtly reshaping ESG engagement through nuanced regulatory interpretations in the United States. New rules are making it more challenging for institutional investors and environmental groups to coordinate activism, potentially dampening ESG pressure on corporations. This includes stricter reporting requirements for investors who move from passive to active investment strategies.
  3. Chinese companies are facing increasing global scrutiny on ESG practices, particularly in supply chain management. The BYD case in Brazil highlights the growing international expectations for responsible business practices, forcing Chinese firms to adapt to complex cross-border ESG compliance requirements.
  4. In Italy, emerging regulations on forced labor are becoming increasingly stringent, with potential border-level enforcement. The approach goes beyond compliance, focusing on ethical business practices and using judicial mechanisms like administrative oversight to guide companies toward more responsible supply chain management.
  5. Japan is in a transitional phase of ESG adoption, observing and learning from European regulatory frameworks. The market is characterized by the unique challenge of balancing renewable energy development with local community interests. Lawyers are playing a critical role in mediating environmental conflicts, particularly in solar and wind projects, indicating a grassroots approach to ESG integration.
  6. Global Perspective: Despite political fluctuations and pushback against ESG initiatives, there's a consistent underlying trend toward integrating human rights, labor standards, and sustainability into corporate governance. The discussion revealed that while political winds may shift, the fundamental expectation of responsible business practices continues to grow globally.