Global ESG Landscape: Key Legal and Regulatory Shifts

Published on Oct 20, 2025

In the most recent virtual meeting of WLG's Environmental, Social & Governance (ESG) Group, members compared rapidly evolving ESG developments across the United States, China, and Europe. Common themes included uneven regulatory momentum, escalating disclosure obligations, scrutiny of green claims and supply chains, and mounting complexity in the U.S. around DEI. The discussion underscored the importance of credible reporting and harmonized cross-border compliance strategies.

 

 United States

  • The ESG landscape remains fragmented, with state-level initiatives diverging from federal priorities. Companies must evaluate compliance obligations jurisdiction by jurisdiction.
  • California continues to lead, with three key laws that impose climate-risk and emissions disclosure requirements beginning in 2026. These laws apply broadly to any company "doing business” in California, often with minimal in-state presence or revenue thresholds, and require substantiation of all net-zero, carbon-neutral, and offset-related claims.
  • Anti-DEI trends and recent court rulings are reshaping how corporations approach diversity, equity, and inclusion. Hiring, scholarship, and promotional programs are under new scrutiny.
  • Global organizations cannot assume DEI policies developed outside the U.S. are compliant domestically; every program should be reviewed with state-specific legal input.

China

  • ESG has transitioned from a conceptual framework to a key driver of business and policy, guided by top-down regulatory mandates.
  • Government agencies are rolling out standardized sustainability disclosure rules, pushing companies toward mandatory ESG reporting.
  • Green finance continues to expand, with rapid growth in bonds and funds dedicated to renewable energy, electric vehicles, and carbon-reduction technologies.
  • Artificial intelligence is increasingly used for carbon accounting and supply-chain optimization, requiring ethical oversight.
  • Chinese companies are benchmarking against international ESG frameworks to maintain global market access, especially in the context of the EU’s carbon border adjustment mechanism.
  • Outbound investment into Southeast Asia, Africa, and Latin America increasingly integrates ESG standards as part of corporate risk and reputation management. 

European Union

  • The EU is adjusting its ESG agenda to balance competitiveness with sustainability objectives, delaying some Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) obligations.
  • Proposed amendments would simplify reporting requirements, raise applicability thresholds for non-EU companies, and focus due diligence efforts primarily on Tier-1 suppliers.
  • Even with potential delays, regulators and NGOs continue to enforce rules on greenwashing, deforestation, and labor practices. Companies face legal and reputational risks if they fall short on transparency.
  • Labor-related ESG issues—such as pay transparency, equal opportunities, and anti-discrimination—are gaining prominence, and gender balance rules for listed company boards will phase in beginning in 2026.
  • Executive compensation structures increasingly include defined, measurable ESG targets, reflecting investor demand for verifiable accountability.
  • National regulators are issuing pragmatic guidance, such as Baltic authorities clarifying that defense-sector financing can be consistent with ESG principles if controversial weapons are excluded.
  • The EU is developing a framework to standardize ESG ratings and improve comparability across rating providers.  

Bottom-line

Companies operating across jurisdictions must treat ESG compliance as an integrated, forward-looking discipline rather than a patchwork of disclosures.

  • Be proactive: Develop governance frameworks that track evolving regional requirements and assign clear ownership for ESG data, assurance, and reporting.
  • Strengthen evidence: Maintain verifiable data, measurable KPIs, and robust substantiation for climate and social claims to withstand investor and regulatory scrutiny.

  • Plan globally, act locally: Tailor strategies to state, national, and regional expectations—especially in California, China, and the EU—while aligning underlying data systems.
  • Prioritize credibility: As greenwashing enforcement and DEI scrutiny intensify, transparent and consistent communication across jurisdictions will be key to preserving trust and access to capital.