Navigating the ESG Chill 

By Boris Couteaux, Principal, ESG Global Advisors

What are the implications of the recent developments in both European and U.S. sustainability regulatory landscapes for Canadian companies?

​The daily barrage of policy and market volatility is enough that many Corporates can be forgiven for deprioritizing efforts to navigate regulatory or market-imposed sustainability reporting requirements.  Nonetheless, recent developments in both European and U.S. regulatory landscapes have signaled important shifts in the area, with potential implications for Canadian companies.​

Summary of EU and US Recent Regulatory Changes 

On April 3^rd, 2025, the European Parliament voted to delay the implementation of certain sustainability reporting rules.^[1] This decision allows lawmakers time to renegotiate exemptions, particularly for smaller businesses. The move follows the European Commission’s February 2025 proposal, known as the “Omnibus,” aimed at easing regulatory pressures on small- and mid-sized companies, including under the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive CSDDD and EU Taxonomy reporting regulations. As a result, reporting requirements for firms with fewer than 500 employees and non-public interest larger companies are postponed until at least 2027, with first reports potentially due in 2028.

In the United States, the Securities and Exchange Commission (SEC) voted on March 27, 2025, to cease its defense of rules requiring disclosure of climate-related risks and greenhouse gas emissions.^[2] Acting Chairman Mark T. Uyeda stated that the decision aims to end the defense of what he described as “costly and unnecessarily intrusive climate change disclosure rules.” These rules, adopted on March 6, 2024, had faced legal challenges from various states and private parties. The SEC’s withdrawal from defending these rules indicates a significant shift in the U.S. approach to climate-related financial disclosures. 

Implications for Canadian Companies

These regulatory changes have several potential impacts on Canadian companies:​

• Fewer Affected Companies: The most direct impact of proposed and voted changes is simply that less Canadian companies are now captured by reporting requirements than was the case a few months ago. For example, in Europe the numbers go from an estimated 50,000 entities (including many foreign owned) to 10,000, whereas an estimated 200 Canadian companies would have been affected if the SEC rules had entered into force (largely cross-listed issuers).
• Compliance Uncertainty and Fragmentation: Canadian firms operating in or exporting to the EU and the U.S. are facing short-term uncertainty and fragmentation regarding compliance requirements, creating challenges for Boards and Executives, whereas the last 5 years were marked by a relatively steady march towards standardization. Despite this, there is still pragmatic, common ground to be leveraged across frameworks like CSRD and the IFRS’s International Sustainability Standards Board (ISSB) for example.
• Strategic Planning Challenges: Companies that have invested in aligning their operations with anticipated stringent ESG reporting standards may need to reassess their strategies. The shifting timelines and requirements could affect long-term planning and resource allocation.​
• Market Access Considerations: While regulations are being relaxed, market expectations for sustainability disclosures remain high. Canadian companies may need to balance regulatory compliance with investor and consumer demands for transparency and accountability in ESG matters.​

Keep Calm and Reassess

Canadians will head to the polls for a federal election on April 28^th, the outcome of which will of course mean different things for future Canadian policies. But for businesses who export or have entities in the EU or the US, a deeper analysis is needed to understand how your business might be affected by the changes regardless of the direction taken in Canada.

But if you’ve already invested in reporting systems, this may be a great time to consider proactive engagement with stakeholders to navigate the evolving ESG reporting landscape, as investor and value chain expectations remain high, and voluntary reporting frameworks like CSSB remain useful. One could use this window to strengthen data quality and governance, increase internal controls, identify gaps, and apply the same rigor to sustainability data as to financial data.

This is indeed a unique opportunity to reassess your long-term strategy and ensure it is not driven by compliance only but by what drives business success and ultimately valuation. The need to identify, manage and disclose ESG and climate-related risks continues to exist: the regulatory impetus might be unclear right now, but most believe this is temporary. In a world where these risks become increasingly uninsurable as mentioned recently by Allianz’ Gunther Thallinger^[3], companies with a robust, long-term risk management strategy will outperform.

Contact us to learn more about ESG Global Advisors, our team, and how we can help you with your approach to reporting under the CSRD. ESG Global offers a comprehensive range of ESG services for companies and investors. Visit Our Services to learn more.

Disclaimer: Please note that the content and material provided in this article is for general information purposes only. It is not to be taken or relied upon as legal advice and should not be used for professional or commercial purposes. This article is intended to communicate general information about relevant sustainably matters and reporting requirements as of the indicated date. The content is subject to change based on evolving regulatory reporting requirements.

^[1] “EU Parliament Votes to Freeze Sustainability Rules.” Reuters, April 3, 2025. https://www.reuters.com/sustainability/climate-energy/eu-parliament-votes-freeze-sustainability-rules-2025-04-03/?utm.

^[2] SEC. “SEC Votes to End Defense of Climate Disclosure Rules.” Press release, March 27, 2025. https://www.sec.gov/newsroom/press-releases/2025-58?utm.

^[3] “Climate Crisis on Track to Destroy Capitalism, Warns Allianz Insurer.” The Guardian, April 3, 2025. https://www.theguardian.com/environment/2025/apr/03/climate-crisis-on-track-to-destroy-capitalism-warns-allianz-insurer?utm.