The past few years have been a roller coaster of new regulations and expectations around sustainability. It can be a lot for small organizations to navigate. Knowing these top sustainability reporting trends can help your business prepare for what’s coming this year and in the future:
1. Deeper reporting requirements for large and small companies.
A number of new regulations are coming into effect in 2026. These include:
o The European Union’s (EU’s) Corporate EU’s Corporate Sustainability Due Diligence Directive (CSDDD) for large, non-listed companies *
o The Corporate Sustainability Reporting Directive (CSRD) expands disclosure requirements across Europe
o California enacts new climate reporting rules: SB 253 and SB 261
Click here for a free downloadable summary of the new CA laws.
Small and medium-sized enterprises (SMEs) need to be aware that while these regulations may not affect them directly, they may be required to track and report ESG data if they are part of a larger company’s value chain. This especially applies to energy use and greenhouse gas emissions data.
*Note that originally, the CSDDD affected companies that do business in the EU and have 500 or more employees and turnover of 150 million euros. After recent changes, the CSDDD now applies to companies with 1000 or more employees and a turnover of 450 million euros.
2. Demonstrating progress through credible data is key.
You’ll see increased expectations for verifiable and detailed data, as well as targets aligned with global goals. Companies of all sizes will face more pressure to use global standards and frameworks for disclosing impacts such as their greenhouse gas emissions. Environmental and social outcomes will be evaluated alongside financial performance.
Fortunately, frameworks and standards such as GRI, ISSB, and TNFD continue to become more aligned; this will save companies from duplicating reporting efforts.
“Businesses that can demonstrate measurable, credible progress will stand out in an increasingly data-driven sustainability landscape.”
3. Businesses need to address risks through both reporting and action.
Sustainability concerns are becoming a core part of enterprise risk management (ERM) because they affect a company’s financial, legal, and operational risks. This includes risks related to labor practices, compliance failures, community impacts, physical damage from severe weather events, and more.
“Reporting climate and nature-related risks is no longer enough. In 2026, stakeholders will expect evidence of ownership, including scenario planning, board oversight, and integration into enterprise risk management frameworks. This means identifying physical and transition risks across operations and supply chains, linking them to mitigation plans, and assigning internal accountability. Companies that fail to move from disclosure to action may face investor pressure, litigation, or reputational damage.”
~ Institute of Sustainability Studies
Small businesses need to be aware that larger companies are responsible for assessing and disclosing their supply chain risks. This includes everything from supplier labor practices to single-source dependency for materials.
4. Messaging about ESG continues to evolve.
Partly due to Republican childishness that has discouraged use of the term, “ESG,” businesses have felt obligated to use alternative messaging. However, despite far-right efforts, smart businesses are leaning into sustainability rather than retreating from it. When communicating about their ESG efforts, companies may focus on discussing how ESG reduces risk and increases value for stakeholders.
“In 2026, more companies will frame their efforts in terms of resilience, value creation, and risk management, focusing on substance over slogans. While the language may shift, the underlying imperatives around climate, equity, and transparency will continue to drive strategic change. Clear, credible communication will be critical to maintaining stakeholder trust.”
~Institute of Sustainability Studies
5. Companies are discovering the benefits of "Sustainable IT."
Companies’ IT systems often have a significant negative impact on the environment. This includes high water usage for cooling (for AI uses, in particular), high energy consumption, and hazardous e-waste when hardware is disposed of. Because of this, companies are realizing that “Sustainable IT,” also called “green IT” can be a factor in helping them achieve sustainability objectives. According to the Institute of Sustainability Studies:
“Organizations will pay closer attention to the environmental impact of their IT systems – not just from an energy perspective, but through the full life cycle of hardware, software, and cloud usage. “
For example, companies are using more energy-efficient hardware (such as Energy Star certified products), sourcing from suppliers that prioritize sustainability, and using Internet of Things (IoT) technology. The benefits of sustainable IT will be substantial; however, it can involve significant investments in the near term.
Example of IoT system for energy monitoring
Source: Energly
6. The EU now requires Digital Product Passports for certain product groups.
Beginning in 2027, Digital Product Passports (DPP) will become mandatory in the European Union (EU) for certain product groups, such as textiles. These passports will contain detailed data on sourcing, materials, emissions, and end-of-life handling. The passports are intended to support circular economy goals and to enhance transparency for consumers and regulators.
“Introduced under the Ecodesign for Products Regulation (ESPR), the DPP is a structured digital record that provides life cycle data for each product in a standardized format. It contains essential data such as material composition, carbon footprint, repairability, and end-of-life instructions…”
Small companies that do business in the EU should be aware that these passports will require supplier engagement. In other words, clients who need to develop digital product passports may reach out to you for information about your sourcing and other data points.
7. Companies need to demonstrate responsible water stewardship.
This year brings increased scrutiny of organizations’ water use by regulators, investors, and the public. Why? Water-related risks, due to factors such as drought, are becoming more prevalent. This is especially true for high-impact sectors such as food, fashion, and manufacturing. Companies are expected to be transparent about their water sourcing and consumption, as well as wastewater treatment.
Small businesses need to be aware that larger companies will be under pressure to demonstrate their stewardship of water and resilience to water-related risks. This ranges from measuring and reducing water use operationally, and across their value chains. You can prepare by collecting water-related data for your organization, including how you manage effluents.
8. The focus on climate adaptation and resilience continues to grow.
We need drastically greater efforts to combat climate change, or we can expect 40% more disasters globally (in 2030, compared to in 2015), according to the United Nations. Because of this, large companies are expected to share their plans for responding and adapting to extreme weather events.
“Sectors vulnerable to extreme weather and lacking resilience investments may face significant operational and financial challenges, potentially harming credit quality. Risks can arise from commodity shortages, geopolitical tensions and logistical issues, affecting the entities directly involved and downstream sectors reliant on critical goods and services.”
~S&P Global
Small businesses need to be aware that larger companies in their value chain will be increasingly required to report their adaptation and resilience plans. This may include assessing supplier vulnerabilities.
9. Nature and biodiversity losses affect companies' financials.
“As nature deteriorates and biodiversity declines faster than ever, the world is beginning to recognize how deeply we all depend on nature. It is not just society in general; it is also businesses. Still, most companies have never asked themselves what the depletion of nature and mismanagement of nature-related risks will mean for their future. With six of the nine planetary boundaries already breached, nature risk is clearly financial risk that needs to be incorporated into an organization’s risk management practices.”
Expect to see more regulations around deforestation and environmental degradation, such as the EU’s deforestation regulation (EUDR). The EUDR will apply to large and medium-sized enterprises by December 2026. It will apply to small and micro enterprises (< 250 employees) in June 2027.
While only a few companies globally report on this, expect the number to increase each year. More companies are also pledging biodiversity protection commitments. Small businesses should be aware that larger companies may request information about supplier nature-related impacts as well.
Source: Food and Agriculture Organization of the United Nations
10. Policies remain in flux, but supply chains will be increasingly affected by regulations.
While some regulations, such as the E.U. Corporate Sustainability Due Diligence Directive, have been scaled back or postponed, the trend is for sustainability regulations to increase and to affect more and more companies.
Now is the time to start your own due diligence, so that you can prepare for upcoming sustainability reporting obligations. The important thing to know is that, when you begin, your reporting does not need to be perfect. You can make improvements as you gain experience. The most important task that you can do now is to begin your reporting journey. Work out the kinks now, not when penalties come into play for you.