ESG reporting has become a fundamental aspect of responsible business practices in the modern era. It refers to the disclosure of how businesses manage risks and opportunities related to environmental sustainability, social responsibility, and corporate governance. Companies that engage in ESG reporting provide data on their environmental impact, social initiatives, and governance structures. In fact, over three-quarters of investors (76%) say they place more trust in sustainability information reported by the companies they invest in, especially when it has been independently assured. This growing demand for transparency underscores the critical role of ESG reporting in fostering trust and long-term success.

Is ESG reporting mandatory in the U.S.?

As of 2025, ESG reporting in the United States remains largely voluntary. While the SEC has introduced climate disclosure rules for public companies, their implementation is facing significant hurdles. On March 27, 2025, the SEC voted to withdraw its defense of the 2024 climate-related disclosure rules, signaling a major shift. Although federal enforcement is currently on hold, many large U.S. companies are still adhering to climate reporting requirements due to California’s stringent climate laws.

Importance of ESG reporting

As concerns about climate change, human rights, and corporate transparency rise, ESG reporting is becoming an essential tool for companies to demonstrate their commitment to sustainability and ethical practices. It not only helps attract socially-conscious investors but also enhances corporate reputation, fosters consumer trust, and improves long-term profitability.

A study by First Insight found that 72% of Gen Z consumers are willing to spend more on sustainable products, and 62% of them prefer to buy from brands that are environmentally and socially responsible. This highlights the growing importance of sustainability in consumer decision-making, especially among the younger generation. Thus, ESG reporting serves not just as a regulatory tool but also as a strategic advantage for businesses seeking to align with evolving consumer expectations.

According to PwC’s Global Investor Survey 2024, one investor stated, “If a company is building a strong organisation and is reporting and monitoring in a good manner, then from an investor’s point of view, I can positively evaluate such activities as a part of a company’s main corporate strategy.” This underlines the critical role of accurate and transparent ESG reporting in securing investor confidence.

Regulatory landscape overview

In the U.S., the regulatory framework for ESG (Environmental, Social, and Governance) reporting is still evolving, with a mix of voluntary and mandatory reporting guidelines. Here’s an overview of the key regulatory frameworks that currently influence ESG reporting:

Mandatory ESG reporting for U.S. companies

Several states and international jurisdictions have implemented mandatory ESG reporting requirements that impact U.S. businesses, either directly or indirectly. As ESG regulations continue to change, the obligation to report on ESG matters is becoming more widespread, particularly for public and private companies across various regions.

State-level regulations

California’s ESG reporting requirements

California has implemented some of the most stringent ESG reporting laws in the U.S. Companies operating in the state, particularly large corporations, must comply with several key regulations:

1. SB-253: Climate Corporate Data Accountability Act: mandates that companies with revenues over $1 billion disclose their greenhouse gas emissions across Scope 1, 2, and 3 categories, with Scope 1 and 2 starting in 2026 and Scope 3 in 2027. The goal is to enhance transparency around corporate carbon footprints and encourage companies to reduce their emissions.

2. SB-261: Climate-Related Financial Risk: requires companies with revenues over $500 million to report climate-related financial risks to the California Air Resources Board (CARB) starting in 2026. The reports must cover how climate change could affect business models and financial plans, helping companies and stakeholders understand and address climate risks.

3. AB-1305: Voluntary Carbon Market Disclosures: applies to companies that use carbon offsets or make emissions reduction claims. It requires them to disclose specific details about their carbon offset projects and emissions claims, ensuring transparency and preventing greenwashing.

Together, these laws aim to improve corporate transparency, help address climate-related risks, and ensure the credibility of sustainability claims made by businesses in California.

Other states’ push for ESG disclosures

Several other states, such as New York and Colorado, are also considering implementing stricter ESG regulations. In New York, the Climate Leadership and Community Protection Act (CLCPA) mandates ambitious climate goals, including reducing emissions by 85% by 2050. While direct ESG reporting requirements are still limited, state agencies are increasingly integrating ESG metrics and climate risk disclosures into procurement, energy, and financial oversight. This is laying the groundwork for future mandates, and companies are often required to demonstrate their sustainability performance as part of procurement and compliance standards.

In Colorado, the state has made significant strides toward enhancing corporate environmental responsibility through the Colorado Greenhouse Gas Pollution Reduction Roadmap. This framework sets emission reduction targets and encourages companies to align with these goals, especially in high-emission sectors. Colorado has also taken steps to integrate ESG considerations into state contracts and procurement processes, further emphasizing the importance of sustainability in business operations.

Although these regulations may not be as comprehensive as California’s, they signal a growing state-level push for greater ESG transparency. Companies doing business in these states should stay aware of evolving regulations and prepare for potential new reporting obligations in the coming years.

European Union’s Corporate Sustainability Reporting Directive (CSRD)

The Corporate Sustainability Reporting Directive (CSRD), effective in 2024, requires U.S. companies with EU subsidiaries generating over €40 million in net turnover or U.S.-based multinationals listed on EU-regulated markets to disclose detailed ESG information. Companies must follow the European Sustainability Reporting Standards (ESRS), incorporating double materiality (impact and risk) across a broad range of ESG factors. Compliance involves establishing cross-functional teams, conducting materiality assessments, and aligning with established ESG frameworks.

Voluntary ESG reporting frameworks

Despite the growing trend toward mandatory ESG disclosures, many U.S. companies continue to rely on voluntary frameworks for their ESG reporting. These frameworks provide flexibility and allow companies to tailor their disclosures to specific stakeholder needs, industry standards, and organisational goals. Popular voluntary frameworks include:

1. The Global Reporting Initiative (GRI): Used for comprehensive sustainability reporting, covering environmental, social, and governance factors. GRI helps companies report on a broad range of ESG issues, making it suitable for stakeholders seeking detailed transparency on sustainability practices.

2. Sustainability Accounting Standards Board (SASB): Focuses on industry-specific ESG disclosures, primarily aimed at investors. SASB provides standards that help companies disclose financially material ESG information, enabling investors to make informed decisions based on relevant sustainability data.

3. Task Force on Climate-related Financial Disclosures (TCFD): Aimed at reporting on climate-related financial risks. TCFD provides guidelines for companies to disclose how climate change could impact their operations and financial performance, focusing on governance, strategy, risk management, and metrics.

4. International Sustainability Standards Board (ISSB): A global initiative by the IFRS Foundation to establish a comprehensive set of sustainability-related reporting standards. It aims to provide consistent, comparable, and reliable ESG data, focusing on financial materiality for investors and stakeholders.

5. CDP – Carbon Disclosure Project: Primarily used to disclose environmental impacts, including carbon emissions, water usage, and deforestation. CDP helps companies track and report on their environmental performance, aiming to reduce their ecological footprint and improve sustainability practices.

These frameworks help companies meet stakeholder demands for transparency, with a focus on specific ESG factors and investor relevance.

Current status of ESG reporting mandates in the U.S.

ESG reporting in the U.S. currently combines voluntary guidelines with emerging mandatory regulations. While a comprehensive federal mandate is still under development, state-level regulations are increasingly shaping the reporting landscape. Driven by growing investor demand for transparency, companies are expected to incorporate ESG factors into their operations. As businesses prepare for stricter future regulations, the focus is on aligning with existing frameworks, improving sustainability practices, and positioning for federal requirements.

We observe that while ESG reporting is not yet fully mandatory in the U.S., companies must proactively align with ESG frameworks. They are called to integrate sustainability and governance into their operations to stay ahead of evolving regulations, meet investor expectations, and build long-term trust.

Is your organisation prepared for evolving ESG reporting regulations? At EnableGreen, we specialise in recruiting ESG professionals who can help your business navigate the complexities of sustainability reporting and compliance. From ESG reporting managers, climate risk managers, to sustainability analysts, we connect you with the talent needed to drive your ESG strategy forward. Reach out today to find the experts who will help you stay ahead of regulatory changes and build a future-proof business.