Sustainability Reporting Becomes Mandatory for U.S. Corporations

For many years, sustainability reporting in the U.S. remained voluntary, guided by investor interest and industry best practices. Today, that is changing fast. Sustainability reporting is now becoming mandatory for U.S. corporations, driven by state regulations and international standards that are transforming how businesses operate, disclose, and compete in a global market.

California Takes the Lead with Mandatory Reporting

California is setting the national pace with the Climate Corporate Data Accountability Act (SB 253). This law mandates that companies earning more than $1 billion in annual revenues and operating within the state disclose their Scope 1, 2, and 3 emissions starting in 2026. In addition, companies must obtain third-party assurance for these disclosures, ensuring data accuracy and credibility.

This state-driven approach signals to U.S. corporations that emissions transparency is quickly becoming a non-negotiable aspect of doing business—not only in California but potentially nationwide.

International Pressure from the European Union

U.S. companies with a global footprint are also responding to stringent international regulations. The Corporate Sustainability Reporting Directive (CSRD), introduced by the European Union, requires companies to provide detailed sustainability reports aligned with the European Sustainability Reporting Standards (ESRS).

Additionally, the Corporate Sustainability Due Diligence Directive (CSDDD) will soon require companies to monitor and address human rights and environmental risks within their supply chains.

Why U.S. Corporations Need to Act Now

Investor and stakeholder expectations are rising sharply. As highlighted by PwC and Oracle, investors and stakeholders are increasingly demanding standardized, transparent, and verifiable ESG data to assess long-term risks and corporate sustainability performance. Without reliable data and integrated reporting systems, companies risk falling behind in capital markets and stakeholder trust.

Reputational risks are equally pressing. Failing to comply with emerging ESG standards can damage a company’s brand and stakeholder relationships, especially as global buyers and partners integrate sustainability criteria into procurement and partnerships.

Moreover, operational efficiencies often emerge from improved ESG data tracking. By integrating sustainability into enterprise processes, companies can reduce waste, optimize energy use, and mitigate supply chain risks.

Finally, aligning with global reporting standards such as the CSRD, GRI Standards, and ISSB frameworks ensures that U.S. companies remain competitive in global markets while preempting emerging compliance risks.

Navigating the Reporting Frameworks

Multiple global standards and frameworks provide the backbone for credible sustainability reporting:

• The Global Reporting Initiative (GRI) offers comprehensive guidelines for reporting on sustainability impacts.

• The Sustainability Accounting Standards Board (SASB) focuses on industry-specific ESG disclosure standards.

• The Task Force on Climate-related Financial Disclosures (TCFD) prioritizes governance, strategy, and climate risk disclosures.

• The International Sustainability Standards Board (ISSB) aims to establish a global baseline for sustainability reporting.

The importance of accurate ESG data is further highlighted in Deloitte’s Sustainable Business Insights, which underscores the growing scrutiny on sustainability data quality.

Data Integrity and Third-Party Assurance

Mandatory reporting raises the bar for data quality and integrity. Companies must adopt advanced tools to monitor emissions, resource usage, and social impacts. Third-party assurance is quickly becoming essential to validate ESG disclosures, ensuring that data meets both regulatory and stakeholder expectations.

For example, Principal Financial Group recently released its first Sustainable Financing Report, detailing the firm’s transparent approach to sustainable investments and fund allocations.

Strengthening Corporate Governance

Robust corporate governance is vital in this new era of sustainability reporting. Boards of directors must embed ESG considerations into enterprise risk management (ERM) and strategy development. Companies that integrate ESG into governance frameworks will not only comply with emerging regulations but also position themselves for long-term resilience and growth.

Practical Steps for U.S. Corporations

1. Conduct a materiality assessment to determine the most significant ESG issues for your business and stakeholders.

2. Establish an ESG governance team, comprising leaders from sustainability, finance, compliance, and legal departments.

3. Invest in ESG data management systems to ensure consistency and reliability across reporting cycles.

4. Seek third-party assurance providers to verify ESG data accuracy and enhance stakeholder trust.

5. Educate executives and managers on the latest sustainability standards and regulatory trends to ensure informed decision-making.

Build Your Expertise with CSE’s ESG Practitioner Program

To stay ahead in this rapidly evolving landscape, U.S. sustainability professionals can benefit from specialized training. The Certified Sustainability ESG Practitioner Program – USA Cohort 3 is tailored to equip corporate leaders with:

• In-depth knowledge of state and international reporting requirements like CSRD, SB 253, GRI, SASB, and ISSB.

• Practical tools for ESG strategy development and implementation.

• Case studies demonstrating best practices in ESG data management and reporting.

Final Thoughts

The shift towards sustainability reporting mandatory U.S. corporations is reshaping the business landscape. What was once a voluntary practice is now a strategic imperative driven by regulation, investor scrutiny, and global market demands. By investing in ESG training, data infrastructure, and governance, companies can ensure compliance while creating long-term value.