ESG Compliance: From Voluntary Principles To Active Enforcement

For years, Environmental, Social and Governance (ESG) disclosures of companies (broadly referring to a company’s environmental impact, social practices and internal governance structure), were largely driven by reputational incentives and sustainable financing, showcasing a “green” or “responsible” corporate branding.

Today, they have transitioned from voluntary principles into a binding regulatory framework within the European Union. For companies operating within the EU market or with a reporting presence in the EU, ESG is no longer a policy or reputational consideration, but an active legal and compliance obligation affecting reporting, transactions and internal policies.

In 2026, the EU’s core sustainability reporting regime, the Corporate Sustainability Reporting Directive (Directive (EU) 2022/2464) (CSRD) is already being applied to the first wave of companies, with reporting already taking place and expanding in scope every year.