Introduction
This guide provides:
- an overview of environmental, social and governance (ESG), and how it applies to an organisation;
- a summary of key ESG legislation in jurisdictions including the EU, UK and USA; and
- practical information about the purpose of ESG and its relevance in the commercial world.
The guide covers:
- What is ESG and why is it important?
- The origins of ESG
- Key purpose of ESG
- ESG legislation, rules and standards
- Why it is important that an organisation considers ESG
- Future trends and developments in ESG
It is aimed at global in-house lawyers, private-practice lawyers, and compliance professionals in organisations of all sizes and sectors and can be read in conjunction with How-to guides: What general counsel (GC) need to know about ESG and How to consider and navigate the consequences of ESG risks.
Section 1 – What is ESG and why is it important?
ESG is an overarching term used to refer to environmental, social and governance aspects of an activity. It is closely aligned with the earlier concept of corporate social responsibility (CSR), which reflects a business’s commitment to manage the social, environmental and economic effects of its operations responsibly and in line with public expectations. It involves assessing an organisation’s due diligence practices to manage environmental, social, and related governance factors.
Around the globe, the importance of ESG is consistent across organisations of all sizes and in all sectors. Customers, employees and investors often evaluate businesses based on whether and how an organisation complies with ESG standards on environmental protection, social responsibility, and corporate governance, and whether its directors conduct themselves ethically. This remains the case, notwithstanding the backlash in the USA against ESG (eg, see Forbes: What The ESG Backlash Reveals—and What Comes Next).
ESG has become an important consideration for investors. ESG factors help to identify and quantify risks that are overlooked by traditional analytical techniques. These risks include, for example, an organisation’s impact on the environment; use of child labour; failure to ensure employee diversity; failure to meet gender equal executive pay, and how these factors affect a company’s performance, accounting, and tax policies.
An organisation’s ESG performance can be assessed using an ESG score. This is a numerical measure of how an organisation is perceived to be performing across ESG issues. The element of measuring perception has resulted in ESG data systems being largely subjective. To help address this, independent rating agencies such as MSCI, Sustainalytics, Bloomberg and the Dow Jones Sustainability Index analyse disclosures, corporate interviews, and proprietary data, to assign scores. These scores are then used by investors, asset managers, pension funds and other stakeholders to evaluate a company’s exposure to non-financial risks, such as carbon emissions, labour practices and board diversity. They also serve as a benchmark for comparing performance with peers, inform investment decisions, support access to ESG-linked financing and promote transparency and long-term improvement. To help eliminate subjectivity, scores can be further indexed against universally accepted benchmarks, such as the Sustainability Accounting Standards Board standard taxonomy, which offers a comprehensive reporting framework for ESG issues by sector.
1.1 Environmental factors
Environmental factors concern the impact of an organisation on the environment; for example, with regard to climate change, greenhouse gas emissions, waste management and energy efficiency.
1.2 Social factors
Social factors include human rights and labour practices across an organisation’s supply chain. Eliminating child labour and ensuring adherence to workplace health and safety can reduce an organisation’s negative social impacts.
The COVID-19 pandemic, while no longer at the forefront of business management, highlighted how unprepared many companies were to safeguard employee welfare and exposed weaknesses in health and safety and fair labour practices.
Example
Investigations by The Sunday Times, reported in 2020 and 2022, and by BBC Panorama in 2023, found that some UK-based suppliers of Boohoo Group plc, were paying garment workers as little as £3.50 an hour and failing to provide adequate PPE during the height of the pandemic. In the years since, investor confidence in the brand has been severely impacted. A £100 million lawsuit was launched in 2023 by investors alleging modern slavery breaches, and in May 2024, a further lawsuit was brought by 49 institutional investors claiming significant losses linked to the company’s ESG failures.
Investor and regulatory expectations around these social compliance issues have strengthened. A social score increases if a company is well integrated with its local community and therefore has a ‘social licence’ to operate with its consent.
1.3 Governance factors
Governance factors refer to the principles defining rights, responsibilities and expectations between stakeholders in the governance of corporations. These can be used to balance stakeholder interests and support the organisation’s long-term objectives.
Examples of ESG factors are listed in the table below:
| ESG section | Factor |
| Environmental | Climate change Carbon emission reduction Air pollution Resource depletion Waste Water pollution and water scarcity Deforestation Biodiversity Soil degradation and land use change Sustainable sourcing and raw materials |
| Social | Working conditions, including use of child labour Human rights including modern slavery and forced labour Customer success Local community relations Conflict Health and safety Mental health Employee relations and diversity Gender and diversity inclusion Living wages Digital rights and data privacy |
| Governance | Logistics and a defined process for managing an organisation Hiring and onboarding best practices Executives’ pay and compensation guidelines Corruption Political affiliations and contributions Structure of board of directors and its diversity Venture partner compensation Tax strategy ESG disclosure integrity and greenwashing Audit practices and internal controls |
Section 2 – The origins of ESG
The ESG narrative began in January 2004 when former UN Secretary General Kofi Annan invited over 50 CEOs of major financial institutions to participate in a joint initiative coordinated by the UN Global Compact with the support of the International Finance Corporation and the Swiss government. The intention was to find ways to integrate ESG into capital markets. The UN Global Compact is the world’s largest voluntary-based corporate sustainability initiative, which supports companies to both conduct business responsibly and advance broader societal goals.
The term ‘ESG’ was first coined at the Who Cares Wins conference in 2005. The subsequent conference report set out a series of recommendations addressing the integration of ESG value drivers into financial market research, analysis and investment. Further, it warned that companies and investors would be increasingly confronted with ESG challenges as connections between finance, trade, investment, people and societies deepen.
The term ESG is now a preferred term. It was initially adopted by investors and has in turn been passed on to businesses. It is worth noting that the driving force behind the increased interest from investors and commercial organisations in ESG is still often as a result of its current positive influence on public image and investment opportunities, rather than because it is the right thing to do.
Section 3 – Key purpose of ESG
The key purpose of implementing an ESG strategy for a company is to provide potential investors with a methodology to rank their ESG score alongside other companies to avoid investing in lower-scored companies that might, as a result, pose a greater financial risk. A low score equates to a company’s low performance in ESG issues and expected lower returns. A high score reflects a company that is a safer investment because it has taken advantage of ESG opportunities and embraces their increasing importance.
More broadly, ESG principles promote sustainable and responsible business practices. This includes making a meaningful environmental impact, strengthening internal governance frameworks, and fostering greater employee engagement and loyalty. A 2023 McKinsey study revealed that companies in the top quartile for gender and ethnic diversity on executive teams were 39 % more likely to outperform their peers on profitability. Further, in 2025 the World Economic Forum reported that businesses in the top quartile for gender diversity deliver a 47% higher return on equity, while those in that position were 27% more likely to exceed their national industry average on profitability. In addition, research from eLearning Industry found that companies with greater gender diversity in top management tend to be 25% more profitable. Companies with robust ESG strategies are more likely to attract and retain talent, enhance stakeholder trust, and create long-term value through improved risk management, ethical leadership, and transparent decision-making.
It is also appropriate to consider the role that ESG has in helping to address compliance. While the two functions (ESG and compliance) have largely remained separate, they are closely aligned and in some instances are the responsibility of the same team within an organisation. This is driven by the growing body of ESG-related regulations and reporting requirements. As governments and regulatory bodies introduce stricter rules on sustainability, human rights and corporate governance, organisations must ensure their ESG initiatives comply with these legal frameworks. While there is no right or wrong way to go about combining the two, it is anticipated that the alignment of ESG and compliance will increase.
For more information on ESG strategies see: How-to guide: How to approach and implement an ESG strategy.
Section 4 – ESG legislation, rules and standards
ESG is covered by national and international laws, voluntary standards, guidance and rules that are in place in respect of environmental, social and governance issues in general.
In many jurisdictions, companies meeting specified thresholds are required to disclose information on their human rights due diligence and environmental impacts. Alongside these legal obligations, voluntary frameworks and market-based initiatives also play a significant role in shaping corporate ESG practices. Key legislative instruments, standards, and guidance, in Europe, the USA, and Canada are outlined in the table below.
| The European Union | ||
| Legislation | Scope/Key notes | Recent updates |
| Sustainable Finance Disclosure Regulation (2019/2088) (SFDR) | Requires organisations to disclose, among other things, the way in which sustainability risks are integrated into their investment decision and the potential impacts of sustainable risks on returns. There is a lack of guidance as to the full scope of the obligations set out in the SFDR. There is also further regulatory uncertainty due to some of the obligations requiring elaboration in the regulatory technical standards (RTS) that are linked to the regulation and have not yet been finalised. The areas for clarification include the application of the 500-employee threshold for principal adverse impact reporting on parent undertakings of a large group, the meaning of ‘promotion’ in the context of products promoting environmental or social characteristics and the application of Article 9 of the sustainability-related disclosures in the financial sector. A draft RTS was issued in February 2021 by the Joint Committee of European Supervisory Authorities. The final report on the draft RTS was published in October 2021. The implementation date was postponed from 1 January 2022 to 1 July 2022. | Between 2023 and early 2025, updates to the SFDR Regulatory Technical Standards (RTS) via Delegated Regulations (2022/1288 and 2023/363) came into effect. These include revised templates and new disclosure obligations for investments in gas and nuclear activities under the EU Taxonomy. On 2 May 2025, the European Commission launched a Call for Evidence to assess and simplify SFDR. The review focuses on improving legal clarity, addressing inconsistencies with other frameworks (such as the CSRD and EU Taxonomy), and resolving implementation challenges. Public proposals are expected in Q4 2025. On 4 August 2025, the European Supervisory Authorities (ESAs) published updated Q&A guidance clarifying technical aspects of SFDR disclosures, including principal adverse impact (PAI) indicators and asset allocation reporting. |
| Taxonomy Regulation (2020/852) | This Regulation establishes an EU-wide framework, designed to implement a standard vocabulary for both businesses and investors to identify the extent to which economic activities may be deemed sustainable. It amended Regulation (EU) 2019/2088 (Taxonomy Regulation). | In November 2024, the EU Commission published an FAQ to provide technical clarifications on Acts implementing the Taxonomy Regulation. In February 2025, the European Commission proposed Omnibus legislation aimed at streamlining sustainability reporting, including a review of the Taxonomy Regulation’s usability, implementation timelines, and technical screening criteria. For information about the Omnibus proposal, see ESG: EU Omnibus tracker. |
| Corporate Sustainability Due Diligence Directive (CSDDD) | The CSDDD was published in the EU Official Journal on 5 July 2024 and came into force on 25 July 2024. Depending on their size and turnover, companies must gradually begin applying the standard from 26 July 2027. The aim of the CSDDD is:
| In February 2025, the European Commission adopted an Omnibus proposal that significantly narrowed the scope of the CSDDD and adjusted its implementation to ease compliance burdens for companies. In April 2025, the EU adopted the Stop-the-Clock Directive, which formally delays the application of due diligence obligations under the CSDDD. The directive pushes back the enforcement timeline, giving companies and Member States more time to prepare for implementation. For more information on the CSDDD see: Quick view series: Understanding the Corporate Sustainability Due Diligence Directive (CSDDD) – 2. Compliance timelines and scope (EU) and ESG: EU Omnibus tracker. |
| Corporate Sustainability Reporting Directive (CSRD) | The CSRD was published in the EU Official Journal on 16 December 2022 and came into force on 5 January 2023. The reporting rules under the CSRD began applying from 1 January 2024 for companies that previously fell within the scope of the EU Non-Financial Reporting Directive, and will be phased in for other in-scope companies from 1 January 2025. The specific information required in sustainability reports under the CSRD includes:
| In February 2025, the European Commission introduced an Omnibus package that delayed sector-specific standards and simplified certain CSRD requirements, particularly for SMEs and non-EU companies. In April 2025, the EU adopted the Stop-the-Clock Directive, postponing the application of certain sector-specific European Sustainability Reporting Standards (ESRS) under the CSRD. The directive also defers reporting obligations for non-EU companies and provides transitional relief for listed SMEs until 2028. For information about the Omnibus proposal, see ESG: EU Omnibus tracker. |
| The United Kingdom | ||
| Legislation | Scope/Key notes | Recent updates |
| Modern Slavery Act 2015 (MSA) | Obliges commercial organisations producing goods or supplying services with a global turnover of more than £36 million to publish an annual statement setting out the steps they have taken to mitigate and prevent the risks of modern slavery in their businesses and supply chains. | In March 2025, the UK Home Office published its updated Transparency in Supply Chains: Statutory Guidance, which provides updated and detailed recommendations to help organisations comply with the MSA. |
| Companies Act 2006 | Companies falling within scope of the Companies Act 2006 are expected to ensure their modern slavery disclosures are aligned with the strategic report requirements, particularly in relation to non-financial and human rights-related reporting under the Strategic Report and Directors’ Report Regulations 2013. | The Economic Crime and Corporate Transparency Act 2023 amended aspects of the Companies Act 2006, including provisions related to corporate transparency, beneficial ownership, and enhanced powers for Companies House. In 2024, the UK Government consulted on reforms to non-financial reporting under the Companies Act, proposing simplification and streamlining of ESG-related disclosures — outcomes pending as of mid-2025. |
| Task Force on Climate-Related Financial Disclosures (TCFD) | The TCFD has fulfilled its remit and has now disbanded. Its framework, however, continues to apply to all UK companies that are required to produce a non-financial information statement (which contains climate-related disclosures), including those with more than 500 employees that are traded companies, banking companies or insurance companies. | The IFRS Foundation has taken over the monitoring of the progress of organisations’ climate-related disclosures. |
| Green Claims Code | The Green Claims Code is designed to help businesses comply with the law. It obliges businesses to justify the environmental claims they make about products, services, brands and activities. Under the Green Claims Code, if businesses make untrue claims, then the Competition and Markets Authority can use different aspects of consumer protection law to deal with infringements. This includes taking civil action and criminal enforcement. The Green Claims Code will render ‘greenwashed’ brands and products both a reputational and financial risk. | The Green Claims Code itself has not been amended. However, the Digital Markets, Competition and Consumers Act 2024 significantly strengthened the CMA’s enforcement powers. Updated guidance and rules on greenwashing enforcement were published in May 2025. |
| Sustainability Disclosure Requirements (SDR) | Targets UK asset managers and introduces a sustainability labelling regime. The Financial Conduct Authority is also undertaking consultation on supporting guidance to update its anti-greenwashing rule to make it clear that the rule applies to all communications by authorised firms to their clients, not just financial promotions. | Large UK asset managers are expected to make new entity-level disclosures beginning in December 2025 with the possibility of an extension to UK firms providing portfolio management services. |
For more information on ESG legislative instruments, regulations and standards in the UK see the following How-to guides and Checklists: How-to guide: How to understand and avoid the risks of greenwashing How-to guide: Overview of climate legislation and regulation in the UK and Europe How-to guide: How to implement sustainable corporate governance (UK) Checklist: Mainstreaming sustainability into a corporate governance framework (UK) | ||
| Canada | ||
| Legislation | Scope/Key notes | Recent updates |
| Fighting Against Forced Labour and Child Labour in Supply Chains Act (Bill S-211) | Came into force on 1 January 2024. Requires certain government institutions and private-sector entities engaged in producing, selling, or distributing goods in Canada or elsewhere (or importing goods into Canada) to report annually on measures taken to prevent and reduce the risk of forced labour or child labour in their supply chains. Reports must be submitted to the Minister of Public Safety and posted publicly. The Act applies to Canadian entities and certain foreign entities listed on a Canadian stock exchange or with significant operations in Canada that meet size and asset thresholds. | First reporting deadline was 31 May 2024. Public Safety Canada has issued detailed reporting guidance to assist organisations in complying with the Act. No legislative amendments have been made to date. |
| Competition Act | Various amendments to the Act came into force on 20 June 2024. The changes included provisions to tackle greenwashing, requiring that:(i) claims about the environmental benefits of a product be supported by adequate and proper testing and (ii) claims about the environmental benefits of a business or business activity be based on adequate and proper substantiation in accordance with an internationally recognized methodology. | |
| Norway | ||
| Legislation | Scope/Key notes | Recent updates |
| Transparency Act (Åpenhetsloven) | In force since 1 July 2022. Applies to larger enterprises registered in Norway and certain foreign enterprises selling goods and services in Norway. Requires companies to conduct human rights due diligence in accordance with the OECD Guidelines for Multinational Enterprises, publish an annual statement, and respond to information requests from the public about how they address human rights and decent working conditions in their operations and supply chains. | The Norwegian Consumer Authority (Forbrukertilsynet) has increased enforcement activity, issuing guidelines and guidance on expectations for due diligence and public statements. No legislative amendments have been made to date. |
| Germany | ||
| Legislation | Scope/Key notes | Recent updates |
| Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz – LkSG) | In force since 1 January 2023, the LkSG requires companies with more than 3,000 employees (extended to 1,000+ employees from January 2024) to implement due diligence processes to identify, prevent, and address human rights and environmental risks in their supply chains. Obligations include risk analysis, preventive measures, remedial actions, complaints procedures, and annual reporting. Applies to both German companies and certain foreign companies with significant operations in Germany. | The coalition government has announced its intention to repeal the LkSG and replace it with a streamlined regime aligned to the CSDDD. No formal legislative repeal has taken place yet; the Act remains in force. EU Omnibus proposals and adjustments to CSDDD timelines may influence the eventual repeal and replacement process. |
| USA | ||
| Legislation | Scope/Key notes | Recent updates |
| Uyghur Forced Labor Prevention Act (UFLPA) | Came into effect on 21 June 2022. Establishes a rebuttable presumption that goods mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of China, or by certain listed entities, are made with forced labour and therefore barred from entry into the United States under Section 307 of the Tariff Act of 1930. Importers must provide clear and convincing evidence to rebut this presumption to secure release of detained goods. | The US Customs and Border Protection (CBP) continues to update and expand the UFLPA Entity List, most recently in July 2024, adding companies linked to forced labour in Xinjiang. Updated enforcement guidance issued by CBP in August 2024 clarifies evidence requirements for rebutting the presumption. No legislative amendments have been made to date. |
| California Transparency in Supply Chains Act (CTSCA) | Came into effect on 1 January 2012. Requires large retailers and manufacturers doing business in California, with annual worldwide gross receipts over US$ 100 million, to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains for tangible goods offered for sale. Disclosures must be posted prominently on the company’s website. | In September 2023, the California Attorney General issued updated compliance reminders and guidance under the California Transparency in Supply Chains Act emphasising the need for clear, conspicuous, and easily accessible disclosures. Enforcement actions remain rare, but there has been increased public scrutiny of non-compliant companies by NGOs and media outlets. No legislative amendments to date. |
For more information on ESG legislative instruments, regulations, and standards in the United States see: Quick view: Environmental, Social, and Governance (ESG) regulation in the USA Quick view: US state anti- and pro-ESG investment laws Quick view: ESG legislation and litigation risk (USA) Quick view: Laws and regulations promoting green energy through incentives and disincentives (USA) How-to guide: Business and legal developments related to climate change (USA) How-to guide: How to develop a sustainable supply chain (USA) How-to guide: Understanding and navigating the Inflation Reduction Act (USA) | ||
| Switzerland | ||
| Legislation | Scope/Key notes | Recent updates |
| Swiss Code of Obligations 1912 | The rules require companies whose registered office, central administration or principal place of business is in Switzerland, alongside the domestic and foreign branches of such companies, that have had 500 full-time employees over two consecutive business years, and assets of at least 20 million Swiss francs or a minimum turnover of 40 million Swiss francs, to report annually on non-financial issues including the environment, social, and human rights and corruption. | No amendments to Articles 964a–964c CO since 2022. However, consultations on climate-related reporting and proposed ordinance changes remain ongoing, with potential future expansion of audit and approval requirements. |
| France | ||
| Legislation | Scope/ Key notes | Recent updates |
| Duty of Vigilance Law 2017 | Places a due diligence duty on French companies to publish an annual ‘vigilance plan’. Companies within the scope are companies whose head office is located in French territory, and have done the following:
| No official legislative amendments or guidance issued to date. |
| Australia | ||
| Legislation | Scope/Key notes | Recent updates |
| Modern Slavery Act 2018 | The Modern Slavery Act came into effect in 2019. It requires entities that carry on business in Australia with a minimum annual consolidated revenue of AU$100 million, to produce an annual modern slavery statement. Foreign entities will be ‘carrying on business in Australia’ if they have a place of business in Australia, use a share transfer or registration office in Australia, or deal with property in Australia. | On 7 November 2024, the Modern Slavery Amendment (Anti-Slavery Commissioner) Act 2024 came into effect, establishing the appointment of a Commonwealth Anti-Slavery Commissioner as an independent statutory office holder. The Commissioner’s role includes:
In December 2024, the Australian Government responded to an independent statutory review of the Commonwealth Act, which was published in May 2023. The government’s response includes commitments to:
In a letter, on 17 July 2025 to law firms, industry associations and professional services, the Anti-Slavery Commissioner put reporting entities on notice that non-compliance with the reporting obligations under the Act will no longer go unchecked. The Australian Attorney General’s Department is working to enhance its data matching capabilities to check whether entities are failing to report. |
Section 5 – Why it is important that an organisation considers ESG
One of the key drivers behind the increased focus on ESG is public concern for the environment and an equitable society and therefore ongoing pressure on organisations to invest ethically.
Management consultancy firm McKinsey has identified five ways in which an effective ESG strategy can create value: top-line growth, by attracting more customers; cost reductions; regulatory and legal interventions, such as government support; stronger productivity thanks to a motivated workforce; and better returns through investments in sustainable assets. In KPMG’s 2025 report, Reframing Sustainability, it found that 92% of business leaders say that investing in sustainability will positively impact their commercial performance in the short term (one-three years) and 98% believe in this positive impact in the longer term (five-ten+ years).
Section 6 – Future trends and developments in ESG
In 2025, the discussion on ESG trends has shifted from voluntary ambition to measurable practice. Reports from organisations such as Anthesis Group and Novisto highlight that ESG is becoming embedded into investment and corporate strategy rather than treated as an adjunct to compliance. In private equity, for example, Anthesis Group notes that firms are now expected to integrate ESG throughout the investment lifecycle, from due diligence through to exit, with particular emphasis on decarbonisation strategies, responsible supply chains and structured engagement programmes across portfolio companies. This approach demonstrates the extent to which ESG has moved beyond a box-ticking exercise to become a driver of value creation and a determinant of exit outcomes.
Novisto’s 2025 report similarly captures how the regulatory environment is intensifying across jurisdictions, largely in response to growing concerns about ‘greenwashing’. Regulators are moving to ensure that sustainability claims are not misleading and are backed by verifiable evidence. As defined by Investopedia, greenwashing is ‘the process of conveying a false impression or providing misleading information about how a company’s products are more environmentally sound’. Against this backdrop, investors and regulators now expect companies to back up their environmentally friendly claims, to ensure that they are not just capitalising on the demand for sustainable products and services.
The European Union’s Corporate Sustainability Reporting Directive requires far more detailed disclosures regarding green claims, while the United Kingdom has strengthened its approach through the Digital Markets, Competition and Consumers Act, which empowers regulators to impose penalties of up to 10% of global turnover for misleading environmental claims. Canada has also amended its Competition Act to tackle deceptive sustainability statements. These developments show that greenwashing has become a central concern for both regulators and investors.
The ongoing litigation against Boohoo Group plc, referred to in Section 1.2 above, where investors have launched claims alleging that failures to address labour exploitation and misleading ESG commitments caused significant financial loss, illustrates this risk of not properly engaging with ESG concerns.
Alongside these regulatory shifts, the social dimension of ESG is receiving greater attention. Novisto’s 2025 report points out that 74% of the world’s largest companies now report on social risks, a notable increase from 49% in 2022. This evolution has been accompanied by the launch of the Taskforce on Inequality and Social-related Financial Disclosures in 2024, reflecting an international push to standardise social impact reporting in the same way that climate disclosure has been advanced by the Taskforce on Climate-related Financial Disclosures (which has now disbanded after fulfilling its remit) and the Taskforce on Nature-related Financial Disclosures.
Companies are increasingly expected not only to prevent harm in their operations but also to show that they make positive contributions to diversity, equity and workforce welfare. Litigation trends reflect this focus. In 2024, former directors of the Polish energy company Enea were sued for failing to exercise due diligence over a coal power plant investment. The case, which was the first ESG-related litigation in Europe to include insurers as defendants, illustrates how courts and stakeholders are holding companies to account when they are seen as perpetuating environmental or social harm rather than contributing to a just transition.
Technology is also influencing the ESG landscape. As disclosure demands become more complex, companies are investing heavily in ESG data systems. Novisto reports that over 80% of firms intend to increase spending on ESG reporting tools, with many prioritising digital software solutions that improve data governance, auditability and reliability. Artificial intelligence and blockchain are already being deployed to track supply chains in real time, enhance risk assessment and support the production of more consistent ESG metrics. These developments reflect a growing recognition that robust data underpins credible ESG disclosures.
Globally the uptake of ESG initiatives and regulation remains uncertain. While the European Union and the United Kingdom continue to set ambitious regulatory and reporting standards, some jurisdictions, including the United States, are experiencing political pushback. In these markets, companies are increasingly cautious in their public communications, a practice described as ‘greenhushing’, whereby firms continue to embed ESG policies and practices internally but reduce external disclosure for fear of reputational or political backlash. Conversely, other organisations are reframing ESG as an exercise in resilience, emphasising preparedness for climate shocks, regulatory risks and social pressures.
Together, these developments illustrate how ESG has evolved into an integrated framework influencing corporate governance, investment strategies and financial performance. What began as a voluntary initiative has become a strategic imperative, with regulatory scrutiny, investor expectations, litigation risks and societal demands ensuring that ESG is central to how organisations build long-term value and secure their social licence to operate.
This how-to guide was produced in partnership with Ardea International.
Additional resources
Related Lexology Pro content
How-to guides:
What general counsel (GC) need to know about ESG
How to assess suppliers for modern slavery risk (UK)
How to create a supplier code of conduct (UK)
How to develop a sustainable supply chain (USA)
How to understand and implement the ‘S’ in environmental, social and governance (ESG)
How to understand and implement the ‘E’ in environmental, social and governance (ESG)
How to understand and implement the ‘G’ in environmental, social and governance (ESG)
How to understand and avoid the risks of greenwashing
An introduction to sustainable finance
How to promote diversity and inclusion within an organisation
Business and legal developments related to climate change (USA)
Overview of climate legislation and regulation in the UK and Europe
How to approach and implement an ESG strategy
How to navigate the regulatory and litigation risks associated with greenwashing in the UK and EU
How to implement sustainable corporate governance (UK)
Checklists:
UK Modern Slavery Act reporting requirements Section 54 (UK)
Modern slavery in supply chains (USA)
Conducting Environmental, Social and Governance (ESG) due diligence in supply chains (UK)
Greenwashing risk assessment (UK)
Mainstreaming sustainability into a corporate governance framework (UK)
Quick views:
Understanding the Corporate Sustainability Due Diligence Directive (CSDDD) – 1. Introduction to the CSDDD (EU)
Understanding the Corporate Sustainability Due Diligence Directive (CSDDD) – 2. Compliance timelines and scope
Understanding the Corporate Sustainability Due Diligence Directive (CSDDD) – 3. Complex terminology and key principles
Understanding the Corporate Sustainability Due Diligence Directive (CSDDD) – 4. Implementation challenges and practical tips
An overview of current ESG pressure points
Other:
ESG: EU Omnibus tracker
Global Research Hub - ESG
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