EXECUTIVE SUMMARY
The sustainability agenda has entered a new era: one defined not by alignment, but by divergence. Regulatory recalibration, especially in Europe, has splintered the ESG landscape into three strategic camps: retreat, acceleration, and opportunism. Each camp reflects a deliberate response to uncertainty and carries unique implications for competitive positioning.
While some organisations are pulling back under the guise of efficiency, others are doubling down, strengthening capabilities, enhancing reporting infrastructure, and using this moment to separate from the pack. A third group, primarily in high-emission sectors, is seizing regulatory gaps to monetise sustainability investments. What unites the leaders across all camps is a recognition that ESG capabilities are now business-critical levers of trust, growth, and valuation.
Key Findings:
Strategic Camps Emerge: Companies are clustering into three strategic postures: Regulatory Retreat, Voluntary Acceleration, and Strategic Opportunism, each reshaping how ESG is implemented.
Regulatory Retreat: 80% reduction in CSRD scope prompts companies to delay double materiality, reduce ESG reporting teams, and suspend supplier Scope 3 engagement.
Voluntary Acceleration: Market leaders are advancing ESG regardless of mandates, investing in assurance readiness, AI reporting tools, and cross-functional sustainability integration.
Strategic Opportunism: Carbon-intensive firms are monetising Environmental Attribute Certificates (EACs), building premium green supply chains, and positioning for valuation gains.
Some companies may choose to report voluntarily to respond to stakeholder needs. Distinguish voluntary reporting from reporting before national transposition, and identify the sample and legal basis before making a numerical claim.
Sustainability-related investment performance depends on the index, benchmark, period and risk exposures. An observed index return is not evidence that every ESG-aligned company outperforms or that sustainability capability caused the return.
Choosing a response to regulatory change
The decision framework
We use three possible responses to structure the decision: reduce or resequence work, maintain or expand selected capabilities, or test a commercial opportunity. A company may take different approaches across products and markets. Each choice needs a stated business purpose, evidence of the relevant demand or obligation, and a review trigger.
Three possible responses
Response 1: reduce or resequence work
Begin with the rules that apply to the company, including group and transitional arrangements. Verify the relevant legal scope and implementation before changing the work programme.
- The final Omnibus I Directive narrows the principal CSRD company scope to more than 1,000 employees and more than €450 million net turnover, subject to the applicable group and transitional rules. CSDDD due diligence remains risk-based across the relevant chain of activities. It is not restricted to direct suppliers. Sector-specific ESRS standard-setting was removed. Taxonomy reporting scope should be assessed under Article 8 of the Taxonomy Regulation.
A reduction in mandatory reporting can justify reviewing a project’s scope and sequencing. Before pausing work, identify which customers, lenders, contracts or internal decisions still need the information. Record what would be lost, who accepts that consequence and when the decision will be reviewed.
Check which supplier information is still needed and what it would cost to restore a discontinued data flow.
Confirm which decisions or reporting duties depend on the materiality assessment before postponing it.
Separate work that remains necessary from expenditure that can be deferred or reduced.
Assign responsibility for records, controls and assurance evidence when changing team capacity.
We recommend documenting the expected saving, the capability retained and the risk accepted for each proposed pause. Include a restart plan where rebuilding supplier relationships, evidence or systems could take time.
Review the decision when an applicable rule, customer requirement or material business assumption changes. A change in one reporting obligation does not settle the value of every sustainability activity.
Response 2: maintain or expand capabilities
Some companies may choose to report voluntarily to respond to stakeholder needs. Distinguish voluntary reporting from reporting before national transposition, and identify the sample and legal basis before making a numerical claim.
Where information supports a clear business decision, we suggest defining the output and assigning an owner. For example, product and procurement teams may need supplier emissions information, while finance may need evidence for an investment assessment. Agree who will use the information and how its quality will be checked.
Judge the proposed work against the decisions it should support:
Does the report address the information needs of its intended readers?
Is the materiality assessment supported by evidence and a clear decision process?
Have the relevant stakeholders explained what information they need?
Can the data be traced, checked and updated at a proportionate cost?
For technology decisions, distinguish a provider’s organisational announcements from evidence that a product meets your needs. Assess integration, data ownership and the effort required to keep records current.
CDP announced an organisational restructure in May 2025, with reducing reporting burden among its stated aims.
Before adding a platform or consolidating systems, define the information gap and the controls the solution must support.
Set a budget and review date for voluntary work. Test whether the information is used, whether the expected benefit remains credible and whether the same output can be achieved with less effort.
Response 3: test a commercial opportunity
Where a company sees a commercial opportunity in a lower-carbon product or an attribute certificate, we recommend testing the buyer demand and the scheme’s rules before committing resources. Establish what is being sold, what claim the buyer may make and which evidence supports it.
Resolve four questions before commissioning the work:
Which buyer has expressed demand, and on what terms?
What eligibility, verification and chain-of-custody rules apply?
Who may make the environmental claim, and how will duplicate claims be prevented?
What are the expected costs, revenues and downside if demand is lower than assumed?
We suggest testing a specific proposition through a proportionate pilot. Record the assumptions, the evidence required and the conditions for expanding or stopping. Treat any expected premium or valuation effect as an assumption to test.
What market evidence can tell us
Use customer, workforce and investor evidence in the context of the decision being made. A survey can identify questions to investigate, but it does not establish demand for a particular product or the financial return from a proposed programme.
In PwC’s 2024 survey of more than 20,000 consumers across 31 countries and territories, respondents stated an average willingness to pay 9.7% more for sustainably produced or sourced goods. PwC cautioned that this might not translate into spending. Separately, Deloitte’s 2024 survey found that 44% of Gen Z respondents and 40% of millennials had rejected an employer on personal ethics or beliefs, a broader category than an ESG stance.
Sustainability-related investment performance depends on the index, benchmark, period and risk exposures. An observed index return is not evidence that every ESG-aligned company outperforms or that sustainability capability caused the return.
Compare the choices
We recommend making the resource decision explicit for each proposed response:
Reduce or resequence: identify the work to pause, the saving expected, the records and controls to retain, and the event that would trigger a restart.
Maintain or expand: identify the decision or stakeholder need served, the accountable owner, the cost and the evidence that would justify continued investment.
Test an opportunity: identify a buyer or user, the relevant scheme and claim requirements, the expected economics and the conditions for stopping the pilot.
What to do next
Agree the next decision and the evidence needed to make it:
Identify where the company proposes to reduce, maintain, expand or test work, and state why.
Assign an owner and define the information, controls and resources each decision requires.
Test any proposed commercial opportunity against buyer demand, scheme rules and realistic costs.
Set a review date and the changes that would prompt an earlier review.
We suggest keeping these choices in a short decision record that links the business purpose, legal requirements, evidence and accountable owner.