Following President Trump’s inauguration in January 2025, the United States has announced – once again – that it will be withdrawing from the Paris Agreement, the global climate accord established under the United Nations Framework Convention on Climate Change (UNFCCC). Concurrently, Members of the European Parliament (MEPs) voted to dilute the corporate thresholds and reporting requirements associated with the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), and the European Sustainability Reporting Standards (ESRS), citing in particular the need to maintain the competitiveness of the European Union’s small and medium enterprises (SMEs). Other countries appear set to stay the course, however, with the UK’s Financial Conduct Authority, for example, currently consulting on the mandatory application of the UK’s new Sustainability Reporting Standards for commercial companies and others.
Despite fragmentation, the corporate sustainability transition continues
Amid these headwinds and about-turns, the trajectory toward low- or no-carbon business models continues, albeit veiled by “greenhushing”, the term coined last year to describe organizations communicating their sustainability efforts in more muted tones to investors and other stakeholders. Throughout all this change, sustainability professionals remain focused on the job at hand of managing some of the most pressing challenges of our age, including climate change, biodiversity loss, human rights, and labor standards.
A number of countries are leading with a “climate first” approach as they adopt the sustainability disclosure standards – IFRS S1 and IFRS S2 – issued by the International Sustainability Standards Board (ISSB), allowing a grace period during the initial application of IFRS S2 before IFRS S1 is required for reporting on all other sustainability-related risks and opportunities that may affect an organization’s performance and prospects. The primary audience for these two standards is investors, who will receive material information on how effectively an organization is managing the risks and opportunities associated with the key sustainability issues to which their business model may be exposed. Global momentum is only likely to gather pace for international adoption of IFRS S1 and S2, despite so-called ESG investing having peaked around mid-2022 and the subsequent outpouring of funds under the watchful eyes of market regulators, especially in the UK, EU, and US. Indeed, as of January 2026, nearly forty countries have publicly endorsed or committed to the ISSB standards which, combined with their interoperability with the EU’s framework, represent nearly 60% of global GDP according to the ISSB.
Beyond climate disclosures: nature and human capital
The ISSB has also announced that it will proceed with standard-setting activities for nature-related sustainability disclosures, referred to as “BEES” in the rather prosaic parlance of the Board – an acronym which stands for biodiversity, ecosystems, and ecosystem services. These nature-related disclosure requirements will be issued as an exposure draft in time for the 2026 UN Biodiversity Conference (CBD COP17), which will take place in Yerevan, Armenia, from 19-30 October. Standard-setting activity on human capital is likely to follow.
In parallel, EU member states will transpose the revised CSRD into their national laws following last December’s vote to amend the CSRD and simplify the ESRS under the Omnibus proposals from February 2025. The higher corporate reporting thresholds introduced by the revised CSRD place the EU in the unusual position of potentially having fewer companies reporting under the CSRD than under its precursor, the 2014 Non-Financial Reporting Directive (NFRD). ?Financial Reporting Directive (NFRD).
Sustainability reporting standards are, nonetheless, likely to be far more predictable across most jurisdictions in 2026 and beyond, except for the US, where ongoing court cases test and challenge both the constitutional relationship between the states and the federal government and the technical intricacies of Scope 1, 2, and 3 carbon reporting.
What this means for finance and accounting professionals
The relevance of this emergent sustainability disclosure landscape to the finance and accounting profession is severalfold.
- Firstly, finance and accounting professionals will be tasked with preparing information about sustainability-related risks and opportunities for management and external reporting, ensuring that appropriate controls are in place to provide users of this information with confidence in its accuracy.
- Secondly, finance and accounting professionals will be involved as external assurance providers over this information, and we are likely to see an increasing number of listed companies seeking a combined financial audit and sustainability assurance process. The UK’s proposal for a voluntary registration regime for assurance service providers may evolve over time into a mandatory regime with regulatory oversight of service quality, which would provide the first definitive evidence of the quality of such services from both audit firms and independent assurance service providers. In the EU, the revised CSRD requires the adoption of a limited assurance standard no later than 1 July 2027, with professionals undertaking such services needing to demonstrate appropriate levels of competence.
- Thirdly, finance and accounting professionals will need to become more adept at identifying meaningful connections between financial performance and prospects and an organization’s management of its sustainability-related risks and opportunities – whether working in business and industry, or as an external service provider for audit, assurance, and advisory services. The challenge of making such connections should not be underestimated, and it is a task best managed by those with a professional understanding of both financial reporting and sustainability disclosures.
Whilst politicians may ebb and flow in their support for net zero – often driven more by electoral calculation than personal conviction – it seems clear that finance and accounting professionals will bring additional value to their roles and their organizations through their support for this evolving ecosystem of sustainability information.
The good news? A world in transition creates significant opportunities for finance and accounting professionals to act as trusted advisors to their organizations and clients.
Disclaimer: Dr. Jeremy Osborn serves on the UK Sustainability Disclosure Technical Advisory Committee (TAC). The views expressed in this article are his and do not necessarily reflect the views of other TAC members.