Climate Regulations on the Horizon: What Companies Need to Know

By Lucie Paumier (OPF 2026 Summer Sustainability Associate), Elaine Liu (OPF 2026 Summer Strategy Consultant), Laura Latorre (Sustainability Training & Community Coordinator), Abby Dateo (Senior Associate), and Julia Akker (Associate Director), OPF.

The past two years have reshaped the sustainability reporting landscape, and not in a single direction either. Around the world, governments are taking very different approaches: some are embedding new sustainability requirements into law (Malaysia, Australia, Mexico), whilst others are scaling back or reconsidering existing mandates (U.S.). In many markets (EU, California, Australia), policymakers land somewhere in the middle - trying to find a balance between maintaining climate and sustainability objectives, whilst simplifying compliance requirements for businesses.

Nonetheless, there is still progress toward greater global alignment. As of August 2026, almost three years since the ISSB launched IFRS S1 and S2, its global sustainability standards, more than 45 jurisdictions are using them. By 2027, companies in 18 jurisdictions will be issuing reports. These standards are the closest to being a common language for sustainability reporting, with IFRS S1 covering general sustainability-related disclosures, and IFRS S2 focusing specifically on climate. They require companies to disclose sustainability-related risks and opportunities that could reasonably be expected to affect enterprise value, covering governance, strategy, risk management, metrics and targets, and climate-related information.

At the same time, one theme has emerged as the new center of gravity: data centers and AI. Sustainability reporting has traditionally focused on disclosing emissions, energy use, and supply chain impacts, but the rapid expansion of artificial intelligence is adding a new layer of complexity. With booming data center construction, increasing AI software and hardware development, generative AI use, and rising energy demands, the pressure for government regulation over these activities is rising as well. We are already seeing this conversation emerge across major markets, such as U.S. state-level AI legislation*, the EU Energy Efficiency Directive’s requirement for data centers, and Singapore’s proposed Digital Infrastructure Bill.

Another major regulatory theme is accountability for environmental claims. Rules such as the EU’s Empowering Consumers for the Green Transition Directive (Directive (EU) 2024/825) and California’s AB 1305 Voluntary Carbon Market Disclosures Act (in place since 2024) are raising the bar for companies making claims like "green," "eco-friendly," "climate-neutral," "net zero" and "made with recycled materials". These regulations are shifting the burden: companies may market an environmental claim only if they can prove it, and vague or un-evidenced terms are increasingly off the table.

Some may say that sustainability is slowing down, but in fact sustainability regulation is still accelerating. Governments disagree on how much to mandate and how fast, but the direction is the same everywhere: more disclosure and accountability rules, with over 45 jurisdictions now reporting against a shared IFRS standard that didn't exist three years ago. For companies, the real risk in 2026 isn't whether regulation is coming, because it is, in various forms. The challenge for companies is tracking the growing patchwork of requirements, timelines, and definitions across markets.

So where does this leave businesses trying to navigate the changing landscape? The answer depends heavily on where they operate. North America is seeing a rise in targeted, issue-specific regulation; Europe continues to push forward with broader supply chain accountability and Asia-Pacific emerges as a key region for sustainability disclosure adoption.

How Regulations Are Shifting by Region

Below, we break down the developments shaping each region and what they mean for sustainability professionals.

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*As of March 2026, lawmakers in 45 states had already introduced 1,561 AI-related bills