In 2026, the global Environmental, Social, and Governance (ESG) and sustainability landscape continues to shift and evolve. Similar to prior years, businesses can expect to navigate fragmented requirements across jurisdictions, as well as uncertainty surrounding scope and timing of regulatory obligations. The dichotomy between deregulatory efforts in some jurisdictions and intensified regulatory and enforcement efforts in others adds further complexity to businesses’ problem-solving strategies. This article highlights five of the key legal topics Clark Hill’s ESG & Sustainability team continues to track and anticipate in 2026 and beyond.

1. Climate-Related Disclosures

The shift from predominantly voluntary climate-related reporting to mandatory disclosures continues in various jurisdictions. This shift remains far from smooth sailing, however, with legal challenges and simplification measures continuing to feature prominently in the U.S. and European Union (EU). Larger multinationals, especially, face a patchwork of requirements and timelines, as they must navigate converging and diverging requirements in different jurisdictions, including state-specific requirements in the U.S.

Some prominent developments in this space include:

• California SB 200s: Despite delays and ongoing legal challenges, California’s Air Resources Board (CARB) continues to move ahead with rulemakings and certain deadlines under its landmark Climate Accountability Package (SB 253 and SB 261, as amended by SB 219, collectively known as “the SB 200s”), affecting large U.S. entities that “do business” in California. While a Ninth Circuit injunction has temporarily paused the enforcement of SB 261 in light of its Jan. 1st statutory deadline, the court did not pause enforcement of SB 253. In spite of the SB 261 injunction, CARB opened its public docket for businesses wishing to voluntarily report, and a number of voluntary SB 261 reports have been reviewed and released to the public, while many other business have chosen a wait-and-see approach. Additionally, CARB recently voted to approve the initial regulation to satisfy the requirements of the SB 200s, including a first-year deadline of August 10, 2026 for Scope 1 and Scope 2 emissions reporting under SB 253. That means businesses must evaluate whether any of their entities are in the scope of one or both of these bills and develop and implement a compliance strategy that is adaptable as important details emerge or shift.
• Other State-Level Legislation: As the federal administration shifts away from climate-related risk disclosure requirements for businesses, including the Securities and Exchange Commission’s (SEC) decision to end its defense the federal Climate Disclosure Rules, state-level legislation appears to be ramping up. In addition to the California SB 200s, other states have recently proposed their own climate-related disclosure laws, including New York (SB 9072A/AB 4282A), Colorado (HB 25-1119), New Jersey (SB 679), and Illinois (HB 3673). While some of the proposed bills failed to advance beyond committee stages, they may be reintroduced during future legislative sessions. This was the case with versions of New York’s Climate Corporate Data Accountability Act, which were introduced in 2022, 2024, and 2025 before SB 9072A was passed by the New York Senate on February 10, 2026. A companion bill (AB 4282A) has been introduced in the New York Assembly as the measure advances, with the potential to make New York the second state to enact emissions tracking and disclosure requirements, akin to California’s SB 253.
• EU Simplification “Omnibus”: For the EU sustainability legislative landscape, 2025 was arguably the “Year of the Omnibus”, with major legislative proposals introduced and advanced throughout the year to amend the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD or CS3D) and Carbon Border Adjustment Mechanism (CBAM). On Feb. 24th, almost exactly a year after first proposed, Directive (EU) 2026/470 was adopted, raising the applicability thresholds, extending timelines, and simplifying underlying requirements of CSRD and CSDDD. EU Member States will now work to transpose the directive into their national laws, and the regulated community will work to assess whether they meet the new thresholds and to develop and implement their compliance strategies.
• Broader International Requirements: Multinationals and businesses with global supply chains must also consider their strategies within the context of the patchwork of requirements that may apply to them. Climate-related reporting is expanding well beyond the U.S. and EU, with varying requirements and timelines, including in the Middle East (e.g., Kuwait, United Arab Emirates (UAE), and Qatar) and Asia-Pacific (e.g., Australia, Japan, and Singapore).

2. Green Marketing and Sustainability Claims

Closely related to the uncertainty surrounding climate-related disclosure requirements is the uncertainty surrounding green marketing and sustainability claims—not just related to packaging and advertising, but also related to corporate disclosures and investment funds. As requirements and standards shift and scrutiny of ESG and sustainability claims increase, many businesses are evaluating or reevaluating their strategies and procedures for how and when such claims are made in order to minimize the associated reputational, political, and financial risks.

Notably, in the U.S., 2025 saw a series of investigations by coalitions of state attorneys general (AGs), several presidential executive orders (EOs), and increased shareholder activism pushing back on corporate ESG and sustainability strategies. At the same time, against the backdrop of federal deregulatory initiatives, private litigation and state-level enforcement activity saw an uptick in 2025 related to greenwashing—i.e., where an ESG or sustainability claim is exaggerated, misleading, or false under relevant consumer protection, unfair and deceptive trade practice, or similar laws. Similarly, individual states continue to pursue legislative strategies to address greenwashing risks, and in some instances, creating requirements that diverge from federal standards or requirements of other states, such as California’s SB 343, known as the Truth in Labeling law, which has a compliance deadline of October 4, 2026 but now faces legal challenges. 

Similar developments occurred in the EU, the United Kingdom (UK), Canada, and beyond in 2025 and are expected to continue into 2026.

These dynamics translate into an expectation that green marketing and sustainability claims will remain a core issue in governance and risk management this year, challenging businesses to ensure they maintain clear metrics, verified data, and transparency regarding both progress and challenges.

3. Human Rights Due Diligence and Supply Chains

The “social” element of ESG will also continue to gain scrutiny and formalization into hard law in various jurisdictions, while facing investigations and deregulation efforts in others, requiring multinational businesses (or those with international supply chains) to develop adaptable compliance and risk management strategies. Even with an amended scope and timing, the EU’s CSDDD remains a landmark law, requiring large businesses to identify, prevent, and mitigate environmental and human rights abuses in their global value chains. This dovetails with other emerging EU requirements, such as the Forced Labor Regulation, which will prohibit the sale within the EU market of all products linked to forced labor as of December 2027. Meanwhile, in the U.S., enforcement under the regionally focused Uyghur Forced Labor Prevention Act (UFLPA) began in 2022 and has resulted in the denial of thousands of shipments, including goods presumed to be made with forced labor, totaling hundreds of millions in U.S. dollars.

The UFLPA has also contributed to businesses intensifying due diligence measures to ensure compliance with U.S. laws by tracing their supply chains for potential connections to forced labor. In 2026 and beyond, however, businesses around the world will face a fundamental shift in how supplier management and oversight are approached. They will need to set up the tools and due diligence measures necessary to meaningfully identify, assess, and address forced labor and other human rights risks in their supply chains with the same rigor as Foreign Corrupt Practices Act (FCPA) compliance, including the use of “flow-down” provisions to legally bind sub-tier suppliers and third-party audits to evaluate the compliance of higher-risk supply chains.

4. Circular Economy and Extended Producer Responsibility (EPR)

In 2026, “circular economy” principles and associated risk will take a new level of significance, driving many businesses to elevate associated compliance and strategic frameworks within their corporate governance structures. Perhaps most notable in this space will be the continued increase in the number of EPR laws in a range of jurisdictions and covering a range of products and producers.

EPR legislation focused on packaging materials, in particular, has been gaining steam in multiple states across the U.S., with seven states having enacted laws by the end of 2025 and more expected in 2026. Active implementation of Oregon’s program began in 2025, while the state law also faced legal challenges that will continue well into 2026. Businesses operating in or selling into states with new or expected packaging EPR laws will need to monitor these developments, including the Oregon litigation, which may have implications for other states’ programs. Similar EPR schemes are growing in popularity in Canada, the EU, and beyond, with varying degrees of industry pushback, and businesses are preparing for the gradual rollout of reusability, recyclability, and overall sustainability requirements for products placed on the market, including the EU’s Packaging and Packaging Waste Regulation (PPWR) and Batteries Regulation.

Closely tied to EPR are mandates for minimum recycled content that require specific percentages of recycled materials in packaging, particularly plastic packaging, by certain dates. Such mandates are on the rise, including in multiple U.S. states and under the EU’s PPWR, which will largely go into effect on August 12, 2026. Additionally, the EU’s Circular Economy Act, which is due for adoption in 2026, aims to establish a Single Market for secondary raw materials, increase the supply of high-quality recycled materials, and stimulate demand for these materials within the EU.

Circular economy developments such as these will continue to challenge businesses to go beyond basic compliance and shift towards critical strategy development to build operational resilience.

5. AI-Driven ESG Diligence and Governance Risks

The sheer volume of required ESG data management and analysis has outpaced manual processing and simple spreadsheets for many companies. In 2026, leading legal and sustainability teams are adopting or planning to adopt agentic AI systems to manage compliance and automate XBRL tagging for digital filings. This introduces new or expanded governance risks associated with AI that require board-level oversight, such as:

• Data Integrity: Ensuring that AI-calculated carbon footprints or supplier risk scores are accurate and can withstand a regulatory audit.
• Algorithmic Bias: Monitoring AI tools used in the “social” pillar (such as hiring or supplier selection) to ensure they do not replicate historical biases, which could trigger disparate impact claims.
• Substantiation: Using AI to identify and assess ESG and sustainability marketing claims and cross-reference them against applicable requirements and real-time supply chain data to prevent greenwashing allegations.

Ultimately, businesses also face a growing need to assess and demonstrate how their AI infrastructure and usage align with their ESG and sustainability commitments, including those related to climate and human rights. More generally, businesses will continue to be challenged to demonstrate strong AI governance through unified governance architectures.