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5 steps to be regulatory ready: where companies need to be

In recent years, the number of draft laws and regulations aimed at increasing transparency regarding the social and environmental effects of enterprises’ activities has increased significantly.

These policies include the Securities and Exchange Commission’s (SEC) Climate-Related Disclosure Streamlining and Standardization, California Senate Bill 253 on Corporate Climate Data Liability, and California Senate Bill 261 on Greenhouse Gases: Climate-Related Financial Risks, with others are discussed. While the SEC’s climate disclosure rule is still under debate, California regulations are moving forward, with the first wave of reporting expected to begin in 2026.

Companies need to be aware of their legal obligations and start preparing now.

Organizations, especially those that already generate voluntary sustainability reports aligned with frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD), the Global Reporting Initiative (GRI) or Sustainability Accounting Standards (SASB), will be at good position to respond to these new regulations.

This is because these regulations contain some familiar elements, such as emissions reporting; Environmental, Social and Governance (ESG) Strategies; identifying and quantifying some climate-related risks and opportunities; and more. However, companies that haven’t yet established a sustainability program or disclosed information to companies like EcoVadis or CDP (formerly known as the Carbon Disclosure Project) may feel overwhelmed and already behind the times.

Other companies may find that they are not directly subject to the new regulations and therefore believe that they will not be affected by their rulings.

However, many ESG-oriented regulations also take into account responsibility for the company’s value chain. Consider the EU’s Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D). These two provisions go hand in hand, requiring companies to establish practices to address significant environmental impacts they identify, as well as impacts on human rights. The scope extends from the company’s own operations and those of its subsidiaries to impacts related to the operations of its supply chains.

So while the organization itself may not be directly linked to regulation, its value chain may be. Companies should therefore prepare to respond to the needs of their customers and other stakeholders covered by the new regulations.

There are four tactical steps companies can take to be ready:

  • Define your legal obligations – consider which regulations apply and/or will apply in your organization. In a few cases, there are initial periods where additional information will be required in future years.
  • Conduct a readiness gap assessment – take stock of your current practices in relation to the new disclosure requirements. Develop action plans and strategies to fill these gaps.
  • Calculate greenhouse gas emissions – start with scopes 1 and 2 that are directly related to your business. Some companies will also need to start assessing Scope 3, which is value chain engagement. Once you have calculated your emissions, consider defining your approach in what is called an “Inventory Management Plan.” This document describes the process by which your organization collects, calculates and manages greenhouse gas data and serves as an important third-party assurance or verification tool.
  • Report required non-financial information – use platforms like TCFD to effectively communicate and address stakeholders on relevant ESG topics. By doing this, you demonstrate maturity by reporting on your company’s ESG goals, strategy, goals and performance.

Putting it all together

Once you have identified and established stakeholder responsibilities and reporting deadlines, the fifth step is to start building a collaborative team that can properly address these challenges. Engaging your finance, operations, supply chain and legal teams will support the success of your sustainability program. This will enable your organization to synergize and streamline work, leverage existing resources and best practices, and enable your company to disclose information securely. Sustainability and related ESG reporting is a journey.

The new regulations are intended to help you with this, but we know that with increasing tension and noise, it can be difficult to see the forest through the trees. Our ESG experts can help you conduct a preparedness gap assessment, conduct Scope 1, 2 and 3 greenhouse gas emissions inventories, support strategy development, generate reports aligned with various frameworks such as TCFD, GRI and SASB, and much more.

Contact our team today for help with sustainability reporting and disclosure for your company!