Climate regulations in 2025: What to expect & how to prepare?

As the CSRD reporting deadline looms near and the new Trump presidency casts a net of uncertainty over the state of climate disclosures in the United States, climate regulations are top of mind for many global corporations.

There have been significant shifts in the regulatory landscape on both sides of the Atlantic, emphasizing the urgency for companies to adapt and act. We recently hosted a webinar with leading experts to address and analyze some of these moving parts. Here are some of the top takeaways from the session, featuring former CEO of the Global Reporting Initiative and current BCG Partner and Director, Tim Mohin, co-founder and CEO of CO2 AI, Charlotte Degot and Head of Sustainability at CO2 AI, Dr. Ramana Gudipudi.

Current state of climate regulations

The regulatory environment is rapidly evolving, with significant developments in both the European Union and the United States.

The EU has been at the forefront, implementing directives like the Corporate Sustainability Reporting Directive (CSRD) and the Carbon Border Adjustment Mechanism (CBAM).

Whereas in contrast, under the new Trump administration, the US has seen a shift towards deregulation, with the withdrawal from the Paris Climate Accord and a focus on incentivizing fossil fuels. However, states like California are stepping up, implementing stringent climate disclosure laws that extend beyond federal requirements.

Tracking the emerging the regulatory ambiguity is crucial

As if the patchwork of regulations didn’t already pose enough challenges, emerging regional disparities are adding further regulatory ambiguity. Recently, discussions around an EU Omnibus Package have surfaced, aiming to streamline sustainability directives—including CSRD and CSDDD—by reducing compliance burdens for businesses and aligning reporting and due diligence requirements.

While at first glance this might seem like a good move, companies like Nestlé, Unilever, Mars have warned against revisiting EU Sustainability Reporting laws. In an open letter to European Commission leaders, the signatory companies stated:

”Investment and competitiveness are founded on policy certainty and legal predictability. The announcement that the European Commission will bring forward an “omnibus” initiative that could include revisiting existing legislation risks undermining both of these.”

Companies that fall under the ambit of CSRD have already made significant investments in preparing for compliance. Revisiting these regulations at this stage could not only disrupt progress but also create uncertainty around future requirements, potentially impacting long-term sustainability planning and corporate strategy.

For companies, tracking these emerging regulatory shifts is the only way to stay ahead and dodge any curveballs.

US spotlight: states expected to step up to the federal administration’s backtracking over climate regulations

Shifting gears from Europe, let’s take a look at the United States now. Since President Trump’s inauguration on 20th January, several executive orders have been signed that reverse the previous administration’s climate-related policies. Some of the major policy changes include:

• Withdrawing the United States from the landmark Paris climate agreement aimed at global cooperation on climate change.
• Declaring a “national energy emergency” and urging oil and gas expansion including through federal use of eminent domain and the Defense Production Act.
• Pushing for the elimination of environmental justice. The Trump administration has already scrapped a Biden-era screening tool to track pollution in underserved communities but the staff is working to keep the underlying data alive.

As a result of these policy shifts, we are witnessing increased action from individual states, to stay the course on effective climate action. Besides California’s pioneering laws (SB219) on reporting of GHG emissions and climate-related financial risks, other actions include:

• 24 U.S. states have committed to the Paris Agreement Goals.
• Individual philanthropists like Michael Bloomberg have come forward. He pledged over $20m to maintain USA's funding and reporting requirements for the Paris Climate Agreement and UNFCCC membership.
• States like New York, Illinois, Minnesota and Washington are developing similar climate-disclosure laws as California and other states are expected to follow suit.

California’s climate regulations have a huge impact since California is the world’s fifth largest economy and the state regulations will apply to 75% of Fortune 500 Companies.

What is the cost of inaction for companies?

The cost of doing nothing is not theoretical; it’s measurable, and it’s massive. For companies, this isn’t just about corporate social responsibility; it’s about long-term survival and growth.

Here are some of the consequences of inaction, outlined by the climate experts during the session (source: BCG article, The Cost of Climate Inaction Can Spur Collective Action):

1. Economic Impact: Up to 20% cumulative global GDP loss by 2100 if current trends continue
2. Sectoral Risks: Business operations worldwide will suffer from disrupted supply chains, higher costs, and revenue loss. In agriculture, 25x higher risk of crop failure by 2050. In infrastructure, 30% of global rail and road assets to be exposed to extreme weather.
3. Global Consequences: More frequent & severe disasters (wildfires recently). Significant impacts on food security, livelihoods, and essential services and rising inequality and worsening poverty.

Strategies for effective corporate climate action

To navigate this complex landscape, companies are encouraged to adopt a structured approach to sustainability:

1. Accurate measurement: Establish robust systems for measuring emissions at both corporate and product levels. Automation and granularity in data collection are key to identifying hotspots and driving decarbonization.
2. Setting targets: Develop clear transition plans with specific targets and initiatives. This strategic roadmap is essential for translating sustainability goals into actionable results.
3. Supply chain collaboration: Work closely with suppliers to improve data quality and support their decarbonization efforts. This collaborative approach ensures that sustainability extends throughout the value chain.
4. Cascade across your organization: Embed sustainability across all business functions. This requires a cultural shift where sustainability is not siloed but integrated into the core operations and strategy of the company.

Using tools like CO2 AI, companies can get a quick grip on their emissions data and stay ahead of the curve. Companies like Reckitt have improved their emissions accuracy 75x by tracking data for 25,000 products, using CO2 AI to calculate their corporate and product-level carbon footprint.  The Economist Group reduced its carbon footprint by 30% since 2020 by prioritizing key product hotspots like paper manufacturing, printing, and logistics, which they identified using our robust solution.

There is still time to equip your organization with the foundational capabilities needed to move the needle on climate action. Come talk to our team if you need help.