Navigating Global Fragmentation
Strategic Approaches and Collaborative Pathways for Sustainable Business
An issue brief from FP Analytics, with support from The Coca-Cola Company
January 2025
Eight years after the Paris Agreement set ambitious targets for limiting global temperature rise, the international community faces mounting pressure to transform commitments into concrete action. This urgency has catalyzed the rapid evolution of sustainability reporting requirements worldwide, reflecting growing recognition that achieving climate goals and sustainable development targets requires unprecedented transparency and accountability across sectors. Yet, as different regions develop varied approaches to sustainability disclosure — from comprehensive frameworks like the European Union’s Corporate Sustainability Reporting Directive (CSRD) to targeted climate risk requirements in the United States — questions emerge about how to effectively harmonize these efforts while maintaining their intended impact.
The stakes are significant. The latest UN progress report indicates that only 15 percent of Sustainable Development Goals (SDGs) are on track for 2030, while the IPCC warns that limiting warming to 1.5°C requires immediate, coordinated action across society. Enhanced sustainability reporting can help drive this progress by providing crucial data for tracking emissions, identifying effective interventions, and directing capital toward climate solutions. However, maximizing this potential requires carefully balancing the need for robust standards with practical implementation considerations.
This issue brief examines the evolving landscape of sustainability reporting requirements and the implications for advancing both climate action and sustainable development. It explores how these requirements intersect with the voluntary goals that organizations set, evaluating whether they reinforce or challenge these commitments. Drawing on examples from major markets and emerging economies, it analyzes how different approaches serve various stakeholder needs while identifying opportunities to strengthen their collective impact. With sustainability disclosure requirements set to affect organizations across sectors — from multinational corporations to small enterprises, investors, and civil society groups — understanding these developments is crucial for anyone working toward a more sustainable future.
The evolving global policy and regulatory landscape
As international efforts to address climate change intensify, distinct approaches to sustainability reporting have emerged across major economies. These varied frameworks reflect different visions of how to drive progress toward shared climate and development goals while accounting for regional priorities and market conditions.
Diverse approaches to sustainability reporting
The EU has taken a comprehensive approach through its CSRD, which took effect in January 2023. The directive requires over 50,000 companies operating in the EU to provide detailed disclosures on environmental and social impacts, from greenhouse gas emissions to human rights practices throughout their supply chains. This expanded scope reflects the EU’s integrated vision of sustainability, connecting corporate reporting requirements directly to the European Green Deal’s climate neutrality targets and broader sustainable development objectives.
By mandating disclosure of both company impacts on society and environment (inside-out perspective) and sustainability-related risks to the business (outside-in perspective), the CSRD represents an ambitious effort to standardize sustainability reporting while driving concrete progress. Companies are now obligated to report against detailed European Sustainability Reporting Standards, enabling more systematic assessment of progress toward climate and social goals.
Meanwhile, the US has taken a targeted approach focused primarily on climate-related financial risks. The Securities and Exchange Commission’s (SEC) March 2024 climate disclosure rules require public companies to report greenhouse gas emissions and climate risks to their operations and financial positions. Key requirements include reporting on direct (Scope 1) and indirect (Scope 2) greenhouse gas emissions, as well as climate-related financial risks and governance processes. Notably, the rule excludes mandatory disclosure of Scope 3 emissions, which pertain to a company’s value chain. While more limited in scope than the EU framework, these requirements reflect growing recognition that climate change poses material risks that investors and regulators need to understand. Additionally, individual states, such as California, are advancing their own regulations, like the recently proposed California Climate Accountability Package, which mandates more comprehensive climate disclosures. These state-level actions are increasingly likely to take effect and could play a critical role in shaping the US regulatory landscape, even as federal-level efforts face challenges.
Meanwhile, the International Sustainability Standards Board (ISSB) is working to establish globally applicable baseline standards that can help harmonize reporting practices across jurisdictions. Its framework emphasizes consistency and comparability while allowing flexibility in implementation. Early adopters like Brazil, Nigeria, and Turkey have already announced their decisions to integrate ISSB standards into national regulations, while others, including Canada, Japan, and Singapore, are in consultation stages. In the aggregate, these jurisdictions represent over half of the global economy by GDP. This growing adoption suggests potential for ISSB standards to help bridge differences between regional approaches.
Trends in carbon disclosure adoption rates globally
The adoption of carbon disclosure practices has seen a significant increase worldwide. However, according to the CDP’s 2023 disclosure data, only 37 percent of companies disclosed GHG emissions across all three scopes — Scope 1, Scope 2, and Scope 3.
DATA SOURCE: CDP CoRporate environment action tracker
These frameworks serve distinct but complementary roles in advancing sustainability goals. While differences in scope and enforcement mechanisms can create implementation challenges, they also reflect valuable experimentation in how to drive corporate climate action and sustainable development. These dynamics could significantly influence the voluntary actions that organizations might choose to take, as some may view robust regulatory frameworks as reducing the need for self-imposed commitments, while others might use them as a foundation to go beyond compliance. Understanding how these approaches interact — and identifying opportunities to enhance their collective impact — are crucial for strengthening global sustainability reporting and encouraging voluntary leadership in sustainability.
CASE STUDY
Early lessons from Europe’s comprehensive approach
The EU’s implementation of the CSRD offers important insights into both the challenges and opportunities of transitioning to comprehensive sustainability reporting. As the first major jurisdiction to require detailed environmental and social impact disclosures from a broad range of organizations, Europe’s experience provides valuable lessons for other regions considering similar measures.
The CSRD’s scope reflects an ambitious vision of corporate sustainability reporting. Organizations must now assess and disclose not only how sustainability issues affect their financial performance, but also how their operations impact society and the environment. This “double materiality” principle represents a significant evolution in corporate reporting, pushing organizations to develop a more comprehensive understanding of their role in advancing sustainability goals.
Initial implementation experiences highlight both the complexity and potential benefits of this comprehensive approach. Organizations are developing new capabilities for collecting and verifying sustainability data across global supply chains, while strengthening coordination among departments traditionally focused on separate aspects of environmental and social performance. While these efforts require significant investment, they often reveal opportunities to improve operational efficiency while reducing environmental impacts.
The directive’s effects extend well beyond European borders, influencing sustainability practices globally. International organizations operating in Europe are enhancing their reporting capabilities to meet CSRD requirements, often applying these improved practices across their global operations. This spillover effect is helping raise sustainability reporting standards worldwide while generating valuable implementation insights.
Financial markets are also responding to the enhanced transparency enabled by CSRD reporting. Investors report that more detailed sustainability disclosures help them better assess both risks and opportunities related to climate transition. This improved information flow could help direct more capital toward organizations and projects that effectively advance sustainability goals.
These early experiences suggest that while transitioning to comprehensive sustainability reporting presents real challenges, it can also catalyze important improvements in how organizations manage their environmental and social impacts. However, recent pushback from the German government to delay certain reporting requirements, along with discussions by the European Commission on reducing the reporting burden, highlight ongoing tensions in the implementation process. While some companies may view these developments as a welcome reduction in compliance pressures, others worry that they risk losing momentum and adding confusion to an already complex framework. As other regions consider similar measures, Europe’s experience — including these debates — offers insights for developing effective and balanced approaches to sustainability disclosure.
Growing momentum for harmonized reporting
The growth of sustainability reporting frameworks has catalyzed important efforts to develop more coherent global standards while maintaining the flexibility needed to address varied stakeholder needs. These developments suggest potential pathways for strengthening both the effectiveness and efficiency of sustainability disclosure requirements.
The ISSB’s work to establish baseline reporting standards represents a significant step toward greater harmonization. It does so by focusing primarily on financial materiality, emphasizing information that is pertinent to investors. By providing a common foundation that jurisdictions can build upon, these standards could help bridge differences between regional approaches while respecting local priorities. The growing adoption of ISSB frameworks — from Brazil’s integration into national regulations to ongoing consultations in Japan — demonstrates increasing recognition that some degree of standardization is essential for effective global climate action.
CASE STUDY
ISSB Standards in Brazil
Since Brazil’s adoption of the ISSB standards, the country has made significant progress in corporate sustainability reporting while grappling with implementation challenges.
In October 2023, the Brazilian Securities and Exchange Commission (CVM) issued Resolutions No. 217, 218, and 219, mandating that publicly held companies, investment funds, and securitization firms comply with the Brazilian Committee for Sustainability Pronouncements’ (CBPS) Technical Pronouncements No. 1 and No. 2. These align with the ISSB’s IFRS S1 and S2 standards, integrating international sustainability reporting frameworks into Brazil’s regulatory environment.
To enhance compliance and data quality, the CVM partnered with the Carbon Disclosure Project (CDP) in a first-of-its-kind initiative to provide ISSB-aligned climate data to the Brazilian capital market. This collaboration is designed to accelerate transparency and facilitate adherence to new reporting requirements.
Leading companies have embraced the ISSB standards as part of their sustainability strategies. For instance, Vale, a prominent mining corporation, voluntarily adopted the standards, highlighting the perceived benefit of conducting transparent and standardized reporting practices.
Brazil’s leadership has inspired other Latin American nations. Costa Rica and Bolivia, for example, are advancing climate accounting practices, signaling a regional trend toward standardized sustainability frameworks.
Despite these advancements, companies across the region face notable challenges. Collecting and managing comprehensive sustainability data remains complex for many businesses, particularly for those with extensive supply chains. These challenges are well-documented, and they highlight the difficulty of integrating sustainability standards into existing processes. Furthermore, implementing these standards requires significant investments in staff training, process upgrades, and technological infrastructure. These investments can be particularly daunting for SMEs, which often have limited resources to allocate toward compliance efforts.
This evolution toward more consistent standards brings several important benefits for advancing sustainability goals. Comparable reporting enables clearer assessment of progress toward climate targets and sustainable development objectives, while making it easier to identify effective interventions and direct resources accordingly. For example, the collaboration between the EU and ISSB to align climate-related disclosure requirements could help create more comprehensive data sets for tracking emissions reductions across global supply chains.
However, the path toward harmonization requires careful attention to diverse stakeholder needs. While large multinational corporations may benefit from standardized global frameworks, smaller organizations and those in developing economies may need different levels of support and flexibility. Some regions are addressing this through targeted assistance programs — such as the EU’s support for small and medium enterprises — which can help implement CSRD requirements and offer potential models for maintaining high standards while ensuring broad participation.
Comparison of sustainability reporting adoption across sectors
In October 2024, Climate Action 100+ published data showing that, while decarbonization is underway for many of the world’s largest corporate emitters, progress remains to be made. Among the criteria they assessed in their data is an evaluation of whether a given company (within its 168 “focus companies”) has published a complete and accurate disclosure of the climate policy positions.
DATA SOURCE: CLIMATE Action 100+
Challenges & opportunities across the landscape
The current transition toward enhanced sustainability reporting presents important challenges and opportunities for implementation, which require careful management to ensure effective progress toward climate, sustainability, and development goals. While these factors affect organizations differently based on their size, sector, and reach, understanding commonalities is useful for developing constructive solutions.
Considerations that come with reporting and implementation
Data quality and verification emerge as key concerns as reporting requirements become more comprehensive. More and more, organizations are expected to track and verify information across complex global supply chains, from greenhouse gas emissions to social impacts. The EU’s experience with CSRD implementation shows that even large companies with substantial resources may encounter difficulty in collecting consistent, verifiable data, particularly for Scope 3 emissions that occur throughout value chains. These challenges are often magnified for smaller enterprises and those in developing economies where technical capacity may be more limited.
The variety of reporting frameworks also creates coordination challenges for organizations operating across multiple jurisdictions. While frameworks like the CSRD and ISSB standards share common objectives, their different approaches to issues like materiality assessment and impact measurement require careful attention to ensure consistent, accurate reporting. Financial institutions in particular face complex tasks in aggregating sustainability data from diverse sources to inform investment decisions and risk assessments.
Resource constraints present another significant consideration, particularly for smaller organizations and those in emerging markets. These challenges include substantial investments in new technologies, staff training, and external expertise. The G20 Sustainable Finance Working Group highlights that SMEs, particularly those in emerging markets and developing economies, face difficulties in meeting the growing demand for sustainability reporting, often due to limited resources and technical capacity. Additionally, the International Chamber of Commerce (ICC) identifies several friction points to widespread adoption of sustainability reporting by micro, small, and medium-sized enterprises, emphasizing the benefits of proportionate reporting standards and leveraging digital technologies to reduce costs and enhance data value.
Reporting costs by type
Compliance costs for sustainability reporting vary significantly by the nature of what’s being reported, influenced by differing regulatory requirements and enforcement mechanisms. For instance, European companies face compliance expenses due to regulations like the CSRD.
DATA SOURCES: Environmental resources Management
However, viewing these challenges solely as obstacles risks missing their role in driving important innovations and improvements in sustainability practices. Organizations working to address data quality issues often discover opportunities to enhance operational efficiency and risk management. Similarly, efforts to coordinate reporting across frameworks can lead to stronger internal governance systems and more effective stakeholder engagement. Further, systematic tracking and reporting provides valuable information to investors, which can help unlock capital for organizations that are working to minimize and manage climate and other sustainability-related risks.
Advancing sustainability through enhanced reporting
As organizations work to strengthen their sustainability reporting practices, several promising developments suggest pathways for accelerating progress toward climate and development goals while building more resilient operations. These opportunities span technological innovation, cross-sector collaboration, and strategic adaptation.
Enhanced data capabilities are enabling more sophisticated approaches to sustainability measurement and management. Advanced analytics tools help organizations identify patterns in resource use and emissions that might otherwise go unnoticed, while blockchain technology is improving supply chain transparency. For instance, several major agricultural commodities traders have implemented blockchain-based systems that track products from source to consumer, providing verified sustainability data while streamlining reporting processes.
Cross-sector collaboration is proving particularly valuable for addressing common challenges in sustainability reporting. The World Business Council for Sustainable Development’s partnership programs demonstrate how organizations can share implementation expertise while developing more standardized approaches to complex issues like Scope 3 emissions measurement. These collaborative efforts often yield insights that benefit entire industries while reducing individual implementation costs.
The transition toward comprehensive sustainability reporting is also catalyzing important operational innovations. Organizations that are working to meet enhanced disclosure requirements frequently discover opportunities to improve resource efficiency, strengthen supply chain resilience, and more effectively align business practices with long-term sustainability goals. Financial institutions report that more detailed sustainability disclosures enable more comprehensive risk assessment and targeted capital allocation toward climate solutions.
Importantly, improved sustainability reporting capabilities can enhance organizations’ contributions to broader development objectives. More complete data on social and environmental impacts helps identify effective interventions and track progress toward SDG targets. This connection between reporting quality and impact measurement suggests that investments in sustainability disclosure systems can generate returns beyond regulatory compliance.
These developments indicate that while the current evolution in sustainability reporting presents implementation challenges, it also creates opportunities to strengthen both organizational performance and contributions to global sustainability goals. Organizations that approach these changes strategically often find that they can enhance their operations while supporting broader climate and development objectives.
Strategies for navigating the evolving landscape
Organizations working to enhance their sustainability reporting capabilities need approaches that can adapt to evolving requirements while maintaining focus on fundamental climate, development, and business objectives. Experience across sectors suggests several key considerations for developing robust, flexible reporting systems.
Integration with core operations
Effective sustainability reporting necessitates close alignment between disclosure practices and organizational strategy. Rather than treating reporting as a compliance exercise, leading organizations are integrating sustainability metrics into their core management systems. This approach enables them to track progress toward environmental and social goals while gathering the data needed for various disclosure requirements.
Financial institutions provide instructive examples of this integrated approach. Many have developed systems that simultaneously track climate-related risks for regulatory reporting while using that same data to inform investment decisions and portfolio management. This integration helps ensure that reporting efforts contribute directly to improved sustainability performance rather than existing solely for compliance purposes.
Adaptable framework development
Organizations that operate across multiple jurisdictions benefit from reporting frameworks that can accommodate different requirements while maintaining consistency and accuracy. The Global Reporting Initiative’s modular structure offers one model, allowing organizations to build core reporting capabilities while adding components to meet specific regional or sector requirements. This flexibility becomes particularly important as reporting standards continue to evolve.
Some organizations are finding success with centralized data management systems that can generate reports in multiple formats while ensuring consistency across frameworks. These systems help reduce duplication of effort while enabling more robust data verification and analysis. They also facilitate quick adaptation to new requirements without requiring fundamental changes to data collection processes.
Cross-functional coordination
Experience shows that effective sustainability reporting depends on strong coordination across organizational functions. Finance teams can unlock new advantages by working closely with operations, procurement, and other departments to gather comprehensive data on environmental and social impacts. This coordination helps ensure accuracy while identifying opportunities to improve both reporting processes and sustainability performance.
Leadership teams can support this coordination by establishing clear responsibilities for sustainability reporting and ensuring adequate resources for implementation. Regular review of reporting processes helps identify areas for improvement while keeping pace with evolving standards and stakeholder expectations.
Strengthening multi-stakeholder collaboration
The complexity of global sustainability challenges relies on coordinated action across sectors to develop effective reporting frameworks and drive meaningful progress toward climate and development goals. Structured collaboration between diverse stakeholders has already helped to address shared challenges while accelerating the adoption of effective practices.
Several existing initiatives demonstrate the potential of coordinated cross-sector action. The Tropical Forest Alliance illustrates how bringing together governments, businesses, and civil society organizations can generate practical solutions to complex sustainability challenges like deforestation in global supply chains. By facilitating dialogue between stakeholders with different perspectives and capabilities, such coalitions help develop more comprehensive approaches to sustainability reporting and implementation.
Industry-level collaboration is proving particularly valuable for developing standardized approaches to common challenges. For example, when the Consumer Goods Forum’s members work together on addressing deforestation risks, they can develop more consistent methods for measuring and reporting environmental impacts across complex supply chains. This standardization helps improve data quality while reducing implementation costs for individual organizations.
Public-private partnerships are also emerging as important vehicles for advancing sustainability reporting and implementation. The World Economic Forum’s work with the African Union through Grow Africa shows how combining public policy expertise with private-sector capabilities can help develop reporting frameworks that serve both business and development needs. These partnerships are particularly important in emerging markets, where organizations may need additional support to implement comprehensive sustainability reporting systems.
Advancing implementation through active engagement
Organizations that are working to enhance their sustainability practices are finding that early, active engagement with evolving reporting frameworks yields several advantages. Beyond ensuring compliance, this engagement helps organizations identify opportunities to strengthen their operations while contributing more effectively to sustainability goals.
Participation in international sustainability forums provides valuable opportunities to inform the development of reporting standards while gaining early insight into emerging requirements. Organizations that engage with initiatives like the UN Global Compact often discover practices that can strengthen their sustainability performance while simplifying reporting processes.
Supply chain engagement represents another crucial area for advancing sustainability reporting and implementation. Working closely with suppliers on sustainability reporting not only improves data quality but often reveals opportunities for operational improvements. Digital tools and blockchain technology are helping make this engagement more effective by enabling better tracking and verification of sustainability data throughout supply networks.
Recommendations
For corporate leaders
Corporate leaders are critical to navigating the complexities of sustainability reporting and aligning organizational strategies with global sustainability goals. By embracing innovative approaches and leveraging emerging technologies, businesses can move beyond compliance to create long-term value and resilience.
Embedding sustainability into core business strategies is key for adapting to evolving regulations and stakeholder expectations. It involves integrating environmental, social, and governance (ESG) priorities into strategic planning, fostering innovation, and mitigating risks. For instance, prioritizing sustainability within supply chains or product development can uncover operational efficiencies while meeting investor and consumer demands for transparency and accountability.
Technology offers transformative potential in streamlining sustainability efforts. Advanced analytics platforms, machine learning, and blockchain systems can enhance the accuracy and transparency of ESG reporting, enabling real-time monitoring and validation of key metrics such as carbon emissions and resource use. For instance, SAP offers advanced data analytics platforms that streamline the collection, analysis, and reporting of ESG data, ensuring compliance with diverse regulatory requirements. Artificial intelligence and machine learning algorithms, while still evolving, have potential to further automate data validation processes, reduce errors and enhance reports’ reliability. Blockchain technology, widely used in supply chain management, can also offer transparent and immutable records of supply chain activities, facilitating traceability and accountability.
These and other tools can help simplify reporting but also position companies to proactively respond to regulatory shifts. Forward-thinking leaders who integrate sustainability into their organizational ethos and embrace data-driven innovations will be better equipped to meet compliance demands while building trust among stakeholders and gaining a competitive edge.
For broader stakeholders
Policymakers, investors, and civil society have a shared responsibility to create a coherent regulatory environment that supports corporate sustainability efforts while advancing global development goals. Harmonizing frameworks such as the EU’s CSRD and the ISSB standards is a crucial step in reducing fragmentation and fostering transparency.
Advancing alignment across jurisdictions can simplify compliance and increase the availability of consistent, reliable data for decision-making. Advocacy from policymakers, industry leaders, and civil society is essential to drive the adoption of unified sustainability standards and encourage stronger corporate accountability. For example, policymakers can incentivize adoption of harmonized standards through targeted regulatory measures, while financial institutions align lending practices with ESG benchmarks, encouraging broader adherence to global frameworks.
Collaboration is key to overcoming systemic challenges in sustainability. Multi-stakeholder initiatives, such as the First Movers’ Coalition, demonstrate the value of public-private partnerships in tackling shared priorities like carbon reduction and supply chain transparency. Investors and civil society organizations can further amplify these efforts by advocating for responsible corporate behavior, highlighting risks of non-compliance, and pushing for stricter enforcement of sustainability commitments and broader adoption of best practices.
By working together to align standards, share resources, and promote best practices, these stakeholders can not only address the challenges of regulatory fragmentation but also accelerate progress toward global sustainability targets, creating a foundation for more equitable and resilient systems.
Looking ahead
As environmental challenges intensify, the need for proactive engagement and global collaboration on sustainability has never been more urgent. Stakeholders across sectors have a unique opportunity to align efforts, share resources, and develop scalable solutions to address the complex governance and operational issues posed by fragmented sustainability frameworks.
Sustainability reporting trends offer a pathway beyond compliance, enabling organizations to harness operational data for strategic decision-making, risk reduction, and value creation. By setting ambitious environmental goals, transparently tracking progress, and engaging stakeholders at every level, companies can turn sustainability into a competitive advantage. For instance, businesses that embed sustainable practices into their core operations often enhance their brand reputation, attract investment, and build resilience in a shifting market landscape.
Achieving global sustainability goals — from the UN SDGs to targets set by the Paris Agreement — requires coordinated cross-border efforts. International collaboration not only facilitates the sharing of best practices but also aligns policies to foster greater consistency and impact. Initiatives such as the United Nations Global Compact illustrate how businesses, governments, and civil society can work together to advance responsible policies and accelerate progress on critical issues like climate action, equity, and resource conservation.
All stakeholders have a pivotal role to play. By prioritizing proactive engagement and fostering international collaboration, businesses, policymakers, and civil society can co-create solutions that drive systemic change, build trust, and contribute to a more sustainable and equitable global economy.
Illustration by Sébastien Thibault for FP Analytics.
FP Analytics, the independent research division of The FP Group, produced this issue brief with support from The Coca-Cola Company. FP Analytics retained control of the research direction and findings of the issue brief. Foreign Policy’s editorial team was not involved in the creation of this content.