Navigating the New Climate: EcoVadis’ 2025 Lookback on Regulation, Risk and Resilience

The promise of 2025 was “simplification,” the reality was anything but. As the year draws to a close, the regulatory landscape has fractured rather than converged, leaving businesses to navigate a maze of stalled negotiations and policy rollbacks.

The “Omnibus” efforts to streamline EU reporting rules stretched into a year-long legislative marathon, creating a “will they, won’t they” scenario that persists in the final weeks of 2025. Meanwhile, the US market saw a disconnect: federal climate disclosure rules were paused, only for California’s state-level mandates to split.

Geopolitical shifts have brought new complexity to trade dynamics. Ongoing tariff and trade barrier discussions, positioned as protections for domestic interests, introduced additional risks to global supply chains and sometimes conflicted with climate and sustainability priorities.

Yet, against this complex backdrop, companies sustained momentum in global supply chains and continued to drive tangible action. While lawmakers debated, the business network emphasized resilience and performance, proving that in a volatile world, performance speaks louder than policy.

The Omnibus Endgame

Since the European Commission proposed the Omnibus in February, efforts to finalize new due diligence and reporting rules in the EU dragged on all year, reaching a definitive conclusion only in the final weeks of 2025.

Under the banner of “boosting competitiveness,” EU lawmakers struck a provisional deal to deliver a major reduction in the scope of compliance of the Corporate Sustainability Reporting Directive (CSRD) and Corporate Due Diligence Directive (CSDDD), effectively redrawing the boundaries for who and when must report and act. 

• CSRD Scope Reduced: The reporting rules will now apply only to EU companies with more than 1,000 employees and a net annual turnover exceeding €450 million. This significantly raises the bar from previous proposals, effectively exempting thousands of mid-sized firms and listed SMEs from mandatory reporting.
• CSDDD Limited to Large Players: The new due diligence rules will cover only the largest businesses — those with over 5,000 employees and €1.5 billion in turnover. The deal also delays the directive’s transposition to July 2028, pushing compliance requirements to 2029.
• Streamlined Obligations: In a move to cut “red tape,” negotiators agreed to remove the CSDDD obligation for companies to prepare climate transition plans, and limit due diligence obligations to direct business partners.

While this “simplification” provides immediate regulatory relief for thousands of businesses, it creates a new strategic reality. The regulatory floor has been lowered, meaning that for the vast majority of companies, sustainability performance will no longer be driven by Brussels, but by market pressure, investor expectations, and customer demand.

Divergence, Not Convergence

Regulatory fragmentation is not limited to the EU; political polarization continued to influence ESG disclosures in the US market. As debates intensify at both federal and state levels, organizations are forced to navigate a shifting landscape where compliance rules are frequently challenged and redefined.

In early 2025, the US Securities and Exchange Commission (SEC) ended its defense of the federal climate disclosure rule, effectively leaving the regulation in limbo. The decision was driven by persistent legal challenges arguing the Commission lacked the statutory authority to mandate such broad climate-related risk and emissions reporting. With the SEC stepping back, the rule — which had been voluntarily stayed shortly after its adoption — remains unenforceable unless a court affirmatively rules otherwise.

This federal retreat left a vacuum that California was expected to fill. However, late 2025 brought a new wave of uncertainty: Golden State’s Senate Bill 261, which requires thousands of US companies to disclose climate-related financial risks, is now blocked by a district court and faces an appeal, just weeks before the initial mandated reporting.

Crucially, however, the court declined to enjoin Senate Bill 253, leaving the requirement for thousands of companies to report their full Scope 1, 2, and 3 greenhouse gas emissions firmly in place. This split in regulatory status between SB 253 and SB 261 increases the pressure on companies to respond to conflicting rules.

US Views on Risk

Despite the policy fog, US executives haven’t abandoned their sustainability commitments; they remain focused on continuous improvement, demonstrating that market demand and risk mitigation now outweigh political uncertainty.

EcoVadis 2025 US Business Sustainability Landscape Outlook reveals that, despite the political noise, 87% of companies surveyed maintained or increased their sustainability investments since the beginning of 2025. However, while political polarization may not have changed how leaders act, it has changed how they talk — approximately 31% of executives are investing more but promoting less, choosing to let their performance speak for itself rather than risk a public backlash.

But even if fewer companies are promoting their sustainability work, the strategic importance of these efforts hasn’t faded: the broader consensus is that eliminating or rolling back ESG regulations would have serious consequences. Nearly half (47%) of the C-suite leaders warn that ESG rollbacks would disrupt supply chains. Tariff-driven ESG compromises could amplify supplier risks, leading to more frequent and prolonged disruptions.

Tariffs and trade wars were the most significant external supply chain risk in 2025, flagged by 72% of respondents, says part two of the report. In response, companies are bracing for widespread sourcing disruption if current US tariff policies hold. Over half of leaders (54%) expect that 26–50% of their supply chain will require new sourcing arrangements, while 32% anticipate up to 25% of their suppliers will be disrupted, and 14% predict more than half of their sourcing will be affected.

These pressures are adding to the strain of broader supply chain disruptions. Nearly half (44%) of companies experienced 4 to 10 disruptions tied to third-party failures, trade disputes, labor issues, or environmental events in the past year, while 22% faced 11 or more.

Explore the full findings of part two here.

Flipping the Narrative: From Risk to ROI

The first half of 2025 was the costliest on record for major disasters in the US, driven by huge wildfires in Los Angeles and storms that battered much of the rest of the country. In the first six months of this year, weather-related disasters that hit the US caused at least $1 billion in damage.

Despite repeated wildfires and hurricanes, 21% of companies have taken no steps to address climate-related supply chain risks, even as liabilities from unmanaged Scope 3 emissions alone could reach $500 billion annually by 2030, according to the Carbon Action Report, developed jointly by EcoVadis and BCG. 

Despite this massive exposure, 90% of corporates assessed still have no upstream Scope 3 reduction targets, and only 36% engage suppliers on climate action. Upstream supply chain emissions are, on average, 21 times higher than a company’s direct emissions. BCG analysis shows that driving down 50% of supplier footprint could be achieved on a cost-neutral basis (at or below $76 per metric ton CO₂e, in line with the EU ETS benchmark), and one-third of emissions can be reduced at less than $12 per metric ton, delivering returns of up to 6x on investment.

For corporates, this reframes supply chain emissions as a material driver of financial performance and an opportunity to unlock returns. As the Carbon Action Report outlines, the path forward relies on five immediate priorities, starting with establishing a baseline for supplier emissions and launching a holistic engagement program.

Download the 2025 Carbon Action Report to see the full 5-step roadmap

Resilience As an Investment, Not a Cost

While the 2025 promise of “simplification” gave way to a fractured regulatory landscape and geopolitical friction, leading organizations proved that they do not need a government mandate to recognize a business imperative.

The data is clear: whether facing the physical financial risks of climate change or the operational shocks of trade wars, the companies that “stay the course” are the ones building long-term value. They are moving beyond compliance to resilience, treating supply chain visibility as a defensive shield against disruption and a driver of ROI.