The sustainability landscape is evolving quickly, and 2025 is a crucial year for businesses to prepare for upcoming regulations and begin reporting on sustainability disclosure requirements. Starting January 2026, companies worldwide must comply with rigorous sustainability regulations, reporting on their 2025 performance. This makes 2025 a critical year to prepare.
Here is why 2025 is the ideal year for preparing for sustainability reporting, what regulations will affect you in 2026, and recommendations on how to navigate this shift effectively.
The Rising Tide of Sustainability Regulations
Historically, sustainability reporting was voluntary. It began with a small group of companies opting to disclose their environmental, social, and governance (ESG) metrics. Over time, regulations tightened, and now businesses are looking at a future where sustainability disclosure is mandatory for both large corporations and small to medium enterprises (SMEs).
Key Regulations Taking Effect in 2026:
Starting January 1, 2026, businesses will be required to comply with various regulations depending on their location, sector, and markets.
Europe – Corporate Sustainability Reporting Directive (CSRD)
The EU is leading the charge on sustainability disclosure. Affecting approximately 50,000 organizations, the CSRD will require companies of all sizes—especially those operating within the EU or those with ties to EU markets—to disclose detailed ESG data and complete a comprehensive double materiality assessment. These requirements are much stricter than previous ones and will expand the scope to include SMEs, even those not headquartered in the EU.
Reference our CSRD implementation timeline to determine if/when your company will be affected.
Australia – Australian Sustainability Reporting Standards (ASRS)
Australia is introducing its own set of regulations similar to those in Europe, but with a local context. The ASRS aims to standardize the reporting of environmental impacts, social responsibility, and governance standards. Modeled after IFRS, Australia’s ASRS S1 has general requirements for sustainability-related financial information and ASRS S2 mandates climate-related disclosures.
Group 1 Entities’ first annual reporting period commences on January 1, 2025; reports will be due on 2025 information in 2026. Group 2 and 3 Entities first annual reporting period commences in 2026 and 2027, respectively.
Reference our ASRS implementation table to determine if/when your company will be subject to ASRS.
International Regulations – IFRS Sustainability Reporting Standards
The International Financial Reporting Standards (IFRS) are set to impact countries like Australia, Hong Kong, Singapore, and many more. This standardization will make reporting more consistent internationally, requiring companies to provide comprehensive and consistent disclosures about their sustainability-related financial risks and opportunities, focusing on material effects on their financial position and performance. IFRS S2 is not yet mandatory in most jurisdictions (climate-related disclosures) but is becoming widely adopted, and IFRS S1 is voluntary (sustainability-related financial information).
For more information on which global jurisdictions are impacted by IFRS, visit our IFRS page or watch our webinar: Sustainability Legislation in the Asia-Pacific Region.
Canada - Canadian Sustainability Disclosures Standards (CSDS)
In line with global trends, Canada’s sustainability regulations are modeled after the International Financial Reporting Standards (IFRS) and will be enforced by the Canadian Securities Administrators (CSA). For entities adopting the CSDS voluntarily from January 1, 2025, there is a phased approach to disclosure requirements. Specifically, while climate-related disclosures are expected from the reporting period beginning on or after January 1, 2025, disclosures encompassing all sustainability-related risks and opportunities are required from the reporting period starting on or after January 1, 2027.
These initiatives reflect Canada's commitment to aligning with international sustainability practices and enhancing the quality and comparability of sustainability information disclosed by Canadian companies.
Recommendations for Preparing in 2025
To ensure that your company is ready for the shift to mandatory sustainability reporting, here are key actions to take in 2025:
1. Conduct a Materiality Assessment
A materiality assessment is a key step in your sustainability journey. Some regulations, like the CSRD, require a robust double materiality assessment while other standards and regulations outline a voluntary financial materiality assessment. In line with compliance requirements and best practices, it’s encouraged to conduct a double materiality assessment to understand, identify, and prioritize the impacts, risks, and opportunities that are most important to your organization and stakeholders.
2. Start Tracking Your ESG Data Now
Sustainability reporting is all about transparency. Start tracking environmental and social data to ensure compliance with future regulations. This includes:
- Energy consumption and carbon emissions.
- Water usage, waste generation, and resource efficiency.
- Social impacts like community engagement, employee diversity, and human rights efforts.
This data will form the foundation of your disclosures, and the more accurate and comprehensive it is, the smoother your transition to mandatory reporting will be.
3. Engage an Auditor Early
It’s never too early to start preparing for third-party verification of your ESG data. Engaging an auditor who specializes in sustainability reporting can help ensure your data is accurate, credible, and ready for external study. Start the process now, as these audits can be time-consuming and costly.
4. Involve Your Stakeholders
Effective sustainability reporting isn’t just about numbers—it’s about involving your organization’s key stakeholders, from the board of directors to employees and customers. Engage with stakeholders to align your sustainability goals with broader organizational strategies. Foster a culture of sustainability that is ingrained in your operations and reflects in your disclosures.
5. Invest in Technology for Sustainability Tracking
To meet the growing demand for reliable and real-time ESG data, companies will need robust systems. Invest in technology solutions that allow you to track, store, and report on sustainability metrics efficiently. Materiality assessments, stakeholder engagement portals, and value chain mapping tools like Socialsuite will help you stay compliant and track your progress.
6. Educate Your Team and Suppliers
Make sure that your teams and suppliers understand the new regulations and their implications. Conduct training and awareness programs to educate everyone involved in your sustainability efforts about the importance of compliance, transparency, and continuous improvement.
7. Engage in Scenario Planning and Risk Management
Sustainability regulations will only continue to evolve. Be prepared by engaging in scenario planning to anticipate regulatory changes and their potential impact on your business. Understand your risks, opportunities, and how changes in regulation might affect your market position.
Prepare Now for a Sustainable Future
2025 is the year to take proactive steps toward sustainability compliance. With 2026 marking the start of mandatory sustainability disclosures, businesses must act now to stay ahead of these transformative changes. To stay ahead of the curve, companies should start tracking their ESG data, conduct a materiality assessment, engage early and often, and invest in technology solutions.
The shift toward mandatory sustainability regulations presents both challenges and opportunities. Businesses that take proactive steps now will not only meet these requirements but also gain a competitive edge by building trust with stakeholders, improving operational efficiency, and contributing positively to global sustainability goals.
The future is green, and the time to act is now.
