Key highlights:

• • • The governance-implementation gap is alarming — While nearly half of companies have AI strategies and 71% include ethical principles, a massive disconnect in execution persists.

    • AI governance is now a material investor risk — AI disclosure among S&P 500 companies jumped to 72% in 2025 from 12% in 2023, and investors are treating AI governance as a critical factor in overall corporate governance.

    • Regional disparities signal competitive risks — European, Middle Eastern, and African companies are leading in AI governance (driven by regulatory pressure), while only 38% of US companies have published AI policies despite being innovation leaders.

of 1,000 companies indicates a between the speed at which businesses are embracing AI and their preparedness to govern it effectively. These findings from , which offers a panoramic view across 13 sectors, are a wake-up call for every CEO, board member, and investor.

Indeed, nearly half (48%) of the companies sampled disclosed that they had AI strategies or guidelines in place, yet significant transparency gaps related to the environmental, social and governance (ESG) impacts of AI adoption remain.

When “ethical” principles lack substance

It is encouraging to see that 71% of companies with an AI strategy include principles around AI that include concepts such as ethical, safe, or trustworthy because this signals an awareness of the critical conversations happening around responsible AI. However, the AICDI data reveals a significant gap between stated principles and actual practice, more specifically:

• • • Environmental blind spots — A staggering 97% of companies failed to consider the environmental impact of their AI systems, such as energy consumption and carbon footprint, when making deployment decisions. As AI models grow in complexity and scale, their energy demands will only increase. In addition, investors are likely to adopt green AI as a non-negotiable concept in the future.

• • • Narrow social lens could open up reputational issues — More than two-thirds (68%) of companies with AI strategies did not adequately assess the broader societal implications of their AI technologies. Failure to understand and mitigate potential negative impacts on communities, vulnerable populations, or democratic processes is a recipe for reputational damage and legal challenges on the full spectrum of the human side of AI. Indeed, investors are growing more sophisticated in their understanding of these systemic risks.
    • Governance on paper and not in practice��— While 76% of companies with an AI strategy reported management-level oversight, only 41% made their AI policies accessible to employees or required their acknowledgement. That means these policies are just words on paper if they are not understood, embraced, and actively practiced by those on the front lines of AI development and deployment. This gap in governance can lead to inconsistencies, unforeseen risks, and a fundamental breakdown in trust, both internally and externally.

Gaps in AI governance exist across regions and sectors

The AICDI data reveals fascinating regional and sectoral differences as well. For instance, companies in Europe, the Middle East, and Africa are generally ahead in publishing AI policies and establishing dedicated AI governance teams — action that is likely driven by the European Union’s looming AI Act. This highlights the proactive stance some regions are taking and offers a glimpse into what might become a global standard.

Despite the United States being a hub for AI innovation, only 38% of companies in the Americas published an AI policy. This discrepancy suggests a potential future competitive disadvantage for those lagging in governance.

Not surprisingly, sectors also varied in corporate oversight of AI initiatives. Financial, communication services, and information technology firms were more likely to have responsible AI teams than companies in energy and materials. This makes sense given their direct engagement with data and often consumer-facing AI applications, but it again points to a broader need for cross-sectoral AI governance best practices.

How companies can meet investor expectations

AI has rapidly become a mainstream enterprise risk. Fully 72% of S&P 500 companies disclosed at least one material AI risk in 2025, up from just 12% in 2023, according to the Harvard Law School Forum on Corporate Governance.

To attract and retain investor confidence, companies need to take concrete steps, including:

1. 1. 1. Conducting a comprehensive AI audit — Companies need a thorough understanding of where AI is currently deployed across their products, operations, and services. The AICDI offers a to help with this, which allows companies to evaluate current AI governance maturity and benchmark themselves against peers.
      2. Establishing robust, transparent, and accessible AI governance frameworks — Companies need to move beyond vague principles by developing clear, actionable policies that address environmental impact, societal implications, data privacy, fairness, and accountability. Critically, these policies must be accessible to��all��employees, and their acknowledgement should be a requirement. Training and continuous education are paramount in order to embed these principles into daily operations.
      3. Proactively disclosing AI governance practices —��Companies should seek to anticipate investors’ concerns by incorporating specific disclosures on AI oversight mechanisms, transparency measures (including environmental and risk assessments), and how they’re preparing for evolving regulatory landscapes. Companies that showcase their commitment to responsible A as a strategic advantage will gain stakeholder trust.
      4. Embracing industry standards and collaboration —��By using global frameworks, such as the (which grounds the AICDI’s work), companies can strengthen standardization efforts. They should also participate in collaborative efforts and industry forums to share best practices and collectively raise the bar for responsible AI.
      5. Comparing your performance with peers —Companies can benchmark their responses against sector and regional peers. Also, they need to identify leaders and laggards to understand where a company stands and where it needs to improve. AI is an evolving field, and therefore, corporate AI governance frameworks must evolve as well — and the key ingredient for this is responsible innovation.

By any measure, AI is transforming our world; however, its benefits will only be fully realized if companies prioritize their responsible governance. For investors, AI governance is fast becoming a material risk and opportunity. And for companies, it’s no longer an option but rather a strategic imperative that can go a long way toward building trust, mitigating risks, and securing a sustainable future.

You can learn more about the , the corporate foundation of ��������, here

Key insights:

• • • ESG is becoming more operationalized — ESG is being conducted with a lower public profile while also playing an increasingly strategic role in supplier governance frameworks.

    • Data collection remains widespreadand robust — Companies continue to collect comprehensive ESG data from their suppliers.

    • Technology usage in ESG is increasing — Greater investment in automation demonstrates continuing commitment to effectively managing ESG.

Environmental, social and governance (ESG) issues have played an increasing role in global trade operations in recent years. As the United States government sharply pulled back its role in encouraging ESG in global trade in 2025, concerns were raised over whether that would impact ESG efforts globally.

However, ESG-related efforts in global trade have not diminished, although they are evolving in form and positioning, according to the Thomson Reuters Institute’s recent 2026 Global Trade Report. In fact, the report’s survey respondents said that ESG data collection from suppliers is now largely structurally embedded in trade operations, although at the same time, it is being carried out with a lower public profile than in previous years.

ESG management remains a core trade function

Managing ESG remains one of the most widespread responsibilities among trade professionals. Almost two-thirds (62%) of those surveyed said their role includes ensuring ESG compliance throughout the supply chain. That represents a higher percentage than for other responsibilities, such as procurement and sourcing, supplier management, trade systems management, risk management, customs clearance, and regulatory compliance. The only more widespread role being done by those global trade professionals surveyed is business strategy for global trade and supply chain.

More importantly, ESG remains integral and nearly universal when it comes to the supplier selection process. All respondents in the Asia-Pacific region (APAC), Latin American and the European Union-United Kingdom, as well as 99% of US respondents, report that ESG considerations remain moderately important, important, or very important in influencing their decisions around using a supplier. And overwhelming 78% say it is an important or very important consideration.

Clearly, as the report demonstrates, ESG remains a core component of the trade function for most businesses.

ESG moves toward structural governance frameworks

Only a very small proportion of respondents — 3% in the US and 4% globally — said they stopped ESG-related data collection entirely in 2025. Meanwhile, ESG data collection has increased across several major metrics.

As companies move to embed ESG expectations directly into their supplier governance frameworks, they are shifting these efforts from being a publicly declarative initiative to becoming operationalized as a permanent compliance and sourcing discipline alongside other operational considerations.

Businesses are focusing on supplier information in areas that have direct operational relevance. For example, companies collecting data on Free Trade Agreement (FTA) eligibility status for ESG purposes can also leverage the data to reduce costs, ensure supply chain security through Customs Trade Partnership Against Terrorism (CTPAT) participation, and better maintain compliance with country-of-origin requirements. Similarly, Country of Origin (COO) and Authorized Economic Operator (AEO) status are both classified under ESG but are also highly trade operations specific. These metrics merge the lines, representing areas in which ethical considerations intersect with practical trade strategy.

Supplier data collection is shifting to operational relevance as well. Indeed, the scope of supplier data being gathered remains broad and reflects a holistic view of the supply chain. The most common areas for ESG data collection in 2025 were: i) environmental metrics, such as water usage, waste management, energy management, and carbon emissions, including Scope 3 emissions; ii) social metrics, such as health and safety, labor standards, human rights including modern slavery or indentured service, and diversity in employees; and iii) governance and compliance, including data privacy, business ethics, and anti-corruption.

Data collection from suppliers

Meanwhile, ESG data collection has been scaled back in areas such as trade evaluation, AEO/CTPAT status in some jurisdictions, diversity in ownership, and anti-corruption assessments. The most cited reason for the pullbacks was insufficient cost-benefit return for collecting data in areas in which customer scrutiny was minimal. This trade-off reflects a rational reprioritization: companies are focusing their ESG diligence in areas in which regulatory risk is more material rather than reputational.

Integrating ESG into broader trade workflows

The report also shows that businesses are leveraging ESG to make it more operationally effective, drive greater efficiency, reduce costs, and add greater value for the organization. ESG is becoming less of a marketing and brand building exercise, and more of a compliance and sourcing discipline that factors into strategic decision-making — it is subject to the same analytical rigor as financial or operational risks.

To this end, organizations are less prone to make a string of bold public goals and commitments, or issue standalone ESG reports, updates, or scorecards that tout their progress. Instead, ESG data is being seamlessly embedded into supplier evaluation and selection alongside non-ESG business metrics and other considerations. As such, organizations are using ESG to quietly build the structural frameworks, data infrastructure, and management approaches they’ll need for more strategic planning.

ESG is shifting to strategically supporting business growth and away from reputational focus

Helping this shift along, the report shows, is that the use of technology to manage ESG has accelerated significantly in 2025. One-third of respondents said their organizations use automated ESG solutions, a major increase from only 20% in 2024. This provides a clear indication that more organizations are not only continuing but strengthening their commitment to effectively managing ESG.

And this provides a boost, because greater automation can improve the efficiency and ability of trade professionals to manage ESG efforts, further enhancing the integration of ESG data into other operational workflows as organizations incorporate ESG data to drive greater value.

What lies ahead for ESG

ESG practices and organizations’ embrace of them remain near-universal across trade operations. This continuation presents a clear indication that there is no widespread retreat from ESG management. For trade professionals, ESG is here to stay and is evolving into an operational discipline to help grow their business.

For organizations to have continued success in this evolving ESG environment, they should take several steps that require strategic thinking, including:

• • • Identify which metrics truly matter — Connect ESG metrics that affect trade operations, particularly those that impact supply chain cost, efficiency, and reliability.
    • Invest in the technology infrastructure — Improve efficiency in tracking and analyzing key ESG metrics.
    • Articulate ESG value — Develop the ability to demonstrate the value of ESG to the trade function and communicate it in business terms to senior management.

The shift of ESG towards operational trade management may represent a more sustainable long-term path forward than the earlier wave of ESG enthusiasm — embedding ethical considerations into core business processes rather than treating them as separate compliance exercises. By focusing on metrics that genuinely matter to business operations, companies are building practices that will persist regardless of any political winds or public relations trends.

Those corporate trade departments that can skillfully navigate this evolving environment will be positioned to more effectively leverage ESG considerations as a strategic asset and competitive differentiator. And in an increasingly complex and volatile global trading landscape, they will find themselves playing a more central role in their organizations’ success.

You can download a copy of the Thomson Reuters Institute’s 2026 Global Trade Report here

Key highlights:

• • • Corporate governance has become more critical but for different reasons — The importance of corporate governance has increased significantly in 2025, driven by unexpected factors like AI adoption uncertainty, geopolitical complexity, and tariff impacts rather than just traditional ESG concerns.

    • ESG integration into core business strategy remains limited — The prediction that most companies would fully integrate ESG into their core business strategies proved overly optimistic, with only 21% of CFOs now saying their companies are working toward full integration.

    • Relying solely on non-profits and research institutions to solve the climate change problem is unrealistic — The fragmented and localized regulatory landscape necessitates increased resources from private capital and innovative business models. Large-scale impact requires building business models that can sustain and expand on these solutions.

The Thomson Reuters Institute made several predictions in early 2025 around sustainability. And while the corporate landscape in this space continues to evolve, significant adaptations in the way companies approach environmental, social, and governance (ESG) initiatives in 2025 were initially anticipated. Early outlooks suggested an increasing importance of corporate governance and that companies were narrowing the scope of their ESG activities and giving more prioritization to embedding sustainability into their corporate business strategies.

Yet, by mid-2025, certain forecasts have altered. While companies are still moving forward with their sustainability strategies, few are taking advantage of the opportunity to use sustainability as a strategic lens for competitive advantage. In addition, many are narrowing their material impacts, risks, and opportunities to only those that are core to their business strategy and operations. In other words, they are maximizing material opportunities and mitigating material risks even as their traditional governance responsibilities are unlikely to change.

What we got right

Prediction: Material risks, opportunities & impact endure while the term “ESG” fades

The acronym ESG was always a framework to identify corporate risks and opportunities; but unfortunately, the backlash to the term has forced companies to change the language used around their sustainability strategies. This was already underway at the beginning of 2025 and is still true now.

For example, many speakers at the recent , sponsored by Reuters Events, highlighted their success in moving sustainability strategies forward by focusing on the material issues that can be a way to future-proof financial success. Other key takeaways included spotlighting corporate actions that are now being taken and aligning these actions with the company’s purpose.

Prediction: Corporate governance more critical in 2025

This prediction about corporate governance increasing in importance remains factual, but the reasons are different than anticipated. Uncertainty around AI adoption, additional geopolitical complexity, and the impact of tariffs are the key factors driving the importance of corporate governance in mid-2025.

That said, however, other drivers are keeping corporate governance, in particular for corporate boards, elevated in importance as well. As Helle Bank Jorgensen, CEO of Competent Boards, : “As climate shocks intensify, artificial intelligence reshapes industries, regulations shift and stakeholder expectations evolve, directors face a new reality — that traditional oversight models are no longer sufficient.”

In addition, Jorgensen points out it’s expected by regulators, investors, and stakeholders that boards of directors will demonstrate fluency in climate and sustainability issues as they act as fiduciary stewards of companies’ strategies. She also cites more than 50 jurisdictions that have introduced requirements or expectations for directors to possess climate-related competence. This profound shift requires boards to take a much more aggressive, forward-looking orientation — one in which every operating assumption is questioned.

Prediction: Reverse of federal ESG-related regulations & rules accelerates

Six months into the year, the federal government’s efforts to roll back environmental tax credits as part of the Inflation Reduction Act from 2022 became a reality in the enactment of the One Big Beautiful Bill Act. Meanwhile, the U.S. Securities and Exchange Commission voted to in court in late March.

These actions show, as we predicted, that federal agencies are pulling back on ESG-related rules, especially around climate change. To fill this gap, pro-sustainability regulations and rules at the state and local levels may be needed. , a��former White House climate advisor, told attendees of the recent RB USA conference that the real momentum and focus on climate needs to be on states, local governments, and communities as these local efforts are crucial and deserve international attention and investment.

Prediction: Growth in greenwashing litigation and industry collaboration continues

Our prediction about the growth in greenwashing litigation continuing into 2025 turned out to be accurate. Looking at greenwashing trends in 2025, we can see that the risk of greenwashing has never been higher because of increased complexity and the expansion of groups to include non-governmental organizations, employees, consumer class actions, and investors. Key areas under scrutiny include allegations of contaminants in consumer products, net zero statements, and forced labor in supply chains.

What we got wrong

Prediction: ESG integration into core business strategy would go mainstream

The prediction that the majority of companies would be fully integrating ESG into their core business strategy was a little aggressive, in retrospect. Indeed, omnibus proposals to simplify the European Union’s Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive took shape in early 2025 and derailed the accuracy of this prediction. In fact, only 21% of CFOs now say their companies are working to , according to a��survey��conducted by accounting and advisory firm BDO. However, in that survey, ESG risk was cited among the top three concerns in financial planning with 45% of CFOs ranking it among their most pressing business risks.

In mid-2025, most companies may not be embracing ESG as a strategic lens to fundamentally transform the way they operate, despite our prediction. However, companies are developing the ability to anticipate and adapt their operational strategies to uncertain futures in response to AI and geopolitical and economic instability, and for many, climate change remains a major area of risk exposure.

To underscore that point, , CEO and co-founder of Voyacy Ventures, a blue-tech company that’s tackling the urgent global problem of coral reef ecosystem collapse and its severe consequences, told attendees of the recent RB USA conference: “It is unfair for us to expect that non-profits and research institutions can solve this problem [by themselves]. We need to develop a business model to develop this solution on a large scale.”

Cousteau’s comments ring true across the board on climate risk and other areas of sustainability risk. Private capital and large-scale corporate initiatives are necessary components for funding these solutions.

You can find more about��the challenges around Sustainability here

Both of these moves reinforce the perception that there are signs of a global rollback in human rights, underscored by the European Union moving to reduce corporate accountability in human rights due diligence.

“Corruption is an enabler of human rights violations, [and] the rollbacks reduce accountability for bribery,” according to human rights experts and of FTI Consulting. Indeed, a reduction in accountability could embolden companies and potentially increase human rights abuses, they explain.

Risks of relaxing FCPA compliance

Over the years, many multinational companies have invested significantly in developing robust internal compliance programs to adhere to FCPA requirements. Weakening these frameworks could lead companies to divert resources away from maintaining compliance, which could allow bad actors to exploit the reduced scrutiny and result in increased fraud, misconduct, and human rights abuses.

Join us for a free online Webinar: World Day Against Trafficking in Persons to learn more about the complexities of human trafficking, the impact on victims, and effective strategies for prevention and intervention

“While these rollbacks in the US may indicate a temporary decrease in regulatory pressure within, it is essential for companies to recognize that global regulatory trends are moving towards greater corporate accountability,” not less, says Wong and Cobb. US companies operating internationally must adhere to these emerging standards, and the pause on domestic FCPA enforcement does not eliminate companies’ legal and reputational risks.

Wong and Cobb point out that FCPA enforcement has historically been cyclical, and companies reducing compliance efforts now might find themselves unprepared when enforcement resumes. Indeed, the statute of limitations for FCPA violations is five years for anti-bribery offenses and six years for accounting violations.

Recommendations for companies to navigate uncertainty

As businesses face a shifting regulatory landscape, navigating the path forward requires both immediate action and strategic foresight. The following guidance from Wong and Cobb offer a framework for maintaining ethical business practices and stakeholder confidence while adapting to evolving global standards.

In the short term, for instance, companies must adopt proactive strategies to prepare for the shifting landscape created by these rollbacks, including:

• • • Monitoring global regulatory trends — Companies should actively track global regulatory developments to stay ahead of compliance requirements, even if these do not originate from the United States.
    • Engaging with stakeholders — It is crucial to maintain open communication with investors and stakeholders regarding ongoing anti-corruption and human rights commitments. This engagement ensures transparency and reinforces the company’s dedication to ethical practices.

In addition, companies should that the company maintains a zero-tolerance policy for bribery and corruption. In addition, companies should keep open anonymous hotlines to report potential ethics violations in order to prevent the erosion of a culture of ethics, which often takes years of effort to build. Likewise, companies need to continue monitoring their third-party vendors, consultants, or suppliers because over the past decade, about 90% of FCPA enforcement resolutions have involved third-party representatives or consultants engaged in corruption.

Meanwhile, Cobb and Wong also suggest that companies focus on aligning with international standards and best practices. Adhering to well-recognized international frameworks is crucial to remain competitive. For example, the UN’s Guiding Principles offers a flexible approach to keeping ethics practices around human rights, according to Wong. Likewise, Cobb suggests that companies voluntarily embrace the EU’s Corporate Sustainability Due Diligence and its Corporate Sustainability Reporting Directive, once the amendments are finalized, as robust options for compliance reporting.

Regardless of whether these rollbacks had occurred, the overarching recommendation is for companies to maintain robust corporate compliance and human rights risk management programs. This proactive approach not only prepares companies for potential regulatory changes but also positions them as leaders in ethical business practices on the global stage.

By continuing to prioritize compliance and human rights, companies can navigate the evolving regulatory landscape effectively, ensuring long-term business success and sustainability.

You can find more information on how organizations are managing their regulatory obligations here

Since then, children accounted for 38% of victims detected globally, and since 2019 there has been an increase of approximately 38% in recorded child victims, according to a .

Join us for a free online Webinar: World Day Against Trafficking in Persons to learn more about the complexities of human trafficking, the impact on victims, and effective strategies for prevention and intervention

To combat this growing issue, the , which is part of the Horizon 2020 Research and Innovation program funded by the European Commission, collaborated on a cross-jurisdictional initiative aimed at addressing human trafficking and child sexual abuse, including that which occurs online.

According to , an anti-trafficking expert at the (ICMPD), the project brings together comprised of 24 partners in 17 countries, international organizations, civil society groups, research institutes, and educational institutions. ICMPD’s work is focused on research and prevention strategies developed with partner organizations in Spain, the United Kingdom, Bangladesh, and Colombia. These four countries were selected to provide varied perspectives and approaches to tackling these issues.

Study reveals common factors

The HEROES Project identified several across the countries studied that place children at risk of online sexual exploitation and abuse. Some of these factors include:

Environments with emotional neglect — Children lacking emotional support from dysfunctional family backgrounds consistently appear most susceptible to exploitation, according to Hainzl. In particular, adolescents and teenagers represent a particularly vulnerable demographic due to their developmental stage and increasing online presence. While girls are targeted more frequently, boys are not exempt from these dangers. Similarly, children with psychological or emotional challenges, including those experiencing isolation or loneliness, also faced heightened risk as they may seek connection online, according to the project’s findings.

Perpetrators using similar tactics to exploit victims online — Research on child sexual abuse reveals important distinctions between online and offline exploitation patterns. In many cases, child abuse and child sexual abuse is often perpetrated or initiated by individuals close to the child, including family members or acquaintances, and may correlate with socioeconomic factors. By contrast, online harassment often involves strangers contacting numerous potential victims simultaneously and pursuing those who respond. This distinction highlights the different mechanisms of exploitation that protection frameworks must address.

Economic vulnerability — Financially disadvantaged households also had higher levels of exploitation across the studied countries. Poverty and economic inequality create conditions in which children and families become vulnerable to various forms of abuse and exploitation.

Gaps in implementation of legal frameworks — While legal frameworks often exist on paper, inadequate implementation remains a critical issue, with authorities frequently lacking resources or training to enforce existing laws. Underdeveloped protection and migration services further compound these problems by failing to identify potential victims or provide adequate support.

Legal and judicial challenges

The rapid evolution of online technologies and reliance on digital tools by a growing number of people across the globe have brought about a new wave of child exploitation challenges for law enforcement agencies and judicial systems worldwide. As the internet knows no borders, the complexities of investigating and prosecuting online crimes that involve multiple jurisdictions, varying legal frameworks, and ever-changing digital landscapes have created significant obstacles for authorities.

Also, one of the most pressing issues is the inconsistency in the terminology and legal definitions related to child sexual abuse among countries. “There is a problem that is noticed in the terminology being different, especially when it comes to cross-border cases,” says Hainzl adding that this creates confusion in prosecution efforts. And while many countries have legislation addressing human trafficking and child sexual abuse, these laws often lack provisions specifically tailored to online aspects of these crimes.

Further, law enforcement agencies face numerous technical obstacles when investigating online exploitation. Encrypted communications, rapidly changing online behaviors, and difficulties in obtaining and preserving digital evidence all impede successful investigations. “Law enforcement should be able to respond to this very quick and very often, but it is not possible because of a lack of knowledge on current and changing tactics and tools, technology, and equipment,” explains Hainzl.

The global fight continues

The global fight against online child sexual abuse requires coordinated international action across multiple fronts. One fundamental starting point would be the development of a common international definition for online child sexual abuse, similar to how the UN Palermo Protocol established a unified understanding of human trafficking, Hainzl says.

In addition, comprehensive training programs for law enforcement and all responsible professionals are essential along with efforts to raise public awareness about online risks. Educational initiatives must target children directly, teaching them to recognize potential dangers in online interactions.

The corporate sector bears significant responsibility in this fight because their platforms often facilitate exploitation. Already, proactive identification systems using algorithms to detect potential cases represent a shift from purely reactive approaches to prevention-focused strategies. And developing regulatory frameworks similar to their own corporate sustainability due diligence requirements could hold companies accountable for monitoring and preventing exploitation on their platforms, says Hainzl.

You can find more on this topic in the Thomson Reuters Institute’s��Human��Rights Crimes Resource Center

Likewise, research has shown that the announcement of an omnibus is part of a broader policy shift aimed at making the EU more industry-friendly by deregulating — an idea that’s heavily influenced by the report on EU competitiveness released by former Italian Prime Minister Mario Draghi.

Proponents of the omnibus package came from some businesses in Germany and France, but the decision was also met with disappointment from environmental and human rights advocates, several EU governments, and some investors. In addition, the goals of the EU’s sustainability due diligence and company reporting rules.

What the omnibus proposal says about reporting & due diligence requirements

The proposed simplification of EU sustainability regulations in the omnibus scales back previously approved obligations on companies to address human rights and environmental concerns as part of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), and the EU Taxonomy.

Indeed, some of that may impact the CSDDDD include:

Extending the deadline — The first companies required to report will now have an additional year to comply, with the deadline moving to mid-2028, from mid-2027.

Weakened supply chain requirements — Companies will only be required to apply the rules to their direct suppliers, rather than to all subcontractors and suppliers throughout their entire supply chain. There is an exception for cases in which there is a beyond Tier One suppliers. However, this is a departure from the risk-based approach, according to the recent response to the omnibus proposal by the .

Reduced monitoring frequency — Companies will only be required to monitor the effectiveness of the measures taken every five years.

Guidance for companies while omnibus negotiations are underway

Human rights advocates are concerned that the omnibus proposal may convey to businesses that addressing human rights and environmental issues on a global scale are no longer a pressing concern.

While the simplification package is negotiated, it can be tricky for companies to know how to navigate this time of uncertainty. , co-founder of , works with companies on the practical implementation of human rights due diligence. According to Quiachon and her team, as businesses face an uncertain legal landscape with the evolving omnibus proposal, a key question often arises: Should we continue investing in human rights due diligence or wait for clearer guidelines?

The answer, based on practical observations, is clear — those businesses that have already invested significant resources in due diligence processes around human rights should continue those efforts — because stopping now would undermine these investments and destabilize supplier relationships.

In addition, companies that focus solely on compliance — adhering to the minimum legal requirements — risk missing the bigger picture. A risk-based approach allows for a more comprehensive understanding of supply chain vulnerabilities that can help ensure that businesses can better manage potential human rights risks deeper in the supply chain, where violations are often hidden.

Therefore, CORE’s key recommendations for the short term include:

• • • Recognizing human rights due diligence as a core business responsibility and path to long-term resilience: Human rights due diligence is not an optional component of a sustainable business strategy; rather, it is a fundamental requirement for responsible corporate governance. No company should wait for economic reasons to address issues like forced or child labor. Indeed, businesses that engage with these challenges early will be better positioned for long-term stability and societal expectations.
    • Leveraging human rights due diligence as a strategic advantage: Companies should treat their due diligence efforts around human rights as more than a regulatory requirement. In fact, company leaders should view it as a long-term strategy that offers a competitive edge. Businesses already practicing human rights are better prepared for both current and future regulatory requirements across multiple markets. They should continue refining processes, as new empirical data and learning-based guidelines will make implementation more efficient. A purely compliance-driven mindset can leave blind spots, whereas a proactive, risk-based approach ensures more informed and effective decision-making.
    • Ensuring continuity despite limited resources: Many companies face resource constraints and as a result, sustainability activities may be de-prioritized — however, conducting due diligence around human rights is still a requirement for many businesses. While federal laws in the US may not be as extensive as those in Europe, several key regulations and trends are pushing US companies to adopt human rights due diligence practices, including the Uyghur Forced Labor Prevention Act and Section 1502 of the Dodd-Frank Act on conflict minerals. Now is the time for companies to stay the course on human rights risk management, even if only gradual progress is possible. In fact, they need to maintain relationships with suppliers and continue educating internal teams on human rights risks.

The EC’s omnibus proposal to relax corporate sustainability regulations for European businesses has sparked a significant debate, with some businesses supporting the proposed changes while some investors, companies, and human rights advocates express concern about diminished accountability.

To deal with this regulatory uncertainty, companies should continue investing in human rights due diligence as a strategic advantage rather than merely a compliance requirement. They also should recognize it as essential for long-term business resilience and a critical way to meet societal expectations regardless of changing legal frameworks.

You can find more on this topic in the Thomson Reuters Institute’s��Human Rights Crimes Resource Center

In addition to acts like UFLPA, laws in other countries and states requiring companies to conduct more due diligence of their suppliers also are still being enforced. Supply chain due diligence laws in California and Germany as well as and the United Kingdom have put a spotlight on companies’ ability to trace origin materials, such as cotton and conflict minerals, to their geographic area of origin to better ensure companies are not purchasing source materials from high-risk areas or banned regions.

Isotopic analysis, a sophisticated scientific technique used to determine the unique atomic composition of natural materials, has emerged as a favored methodology, according to , a supply chain and trade compliance expert. This unique atomic composition acts as a distinctive fingerprint that is influenced by the local environment in which the material originated.

Fast fashion companies in many cases outsource production of their clothes to factories in Pakistan and Bangladesh, . And in 2023, that were denied entry to the United States under the UFLPA, according to U.S. Customs and Border Protection (CBP) enforcement statistics.

Verifying with the isotopic method

In the case of cotton, which is a raw material on the ULFPA’s restricted goods list, the isotopic signature is determined by the air, water, soil, and wind the plant experiences during its growth. These conditions shape the atomic structure of the cotton fiber, creating its unique isotopic profile. By comparing this isotopic fingerprint to a database of similar materials from various geographical regions, scientists can verify whether the composition of the raw material aligns with its claimed place of origin. In this way, the isotopic method provides a reliable way to authenticate the geographical source of natural materials.

In November 2024, the U.S. CBP added more credibility to the use of isotopic analysis by announcing that it is enhancing its own testing capabilities at three of its laboratories. In addition, CBP encouraged the inclusion of private-sector testing in importer due diligence programs to help identify and manage risk because the department does not have the resources to test all US-bound imports.

New Zealand-based lab Oritain, a global product origin verification company, is one of the providers of isotopic testing of cotton and many other source materials for private sector use — it also fulfills the . Oritain has the largest cotton references lab in the world, according to Hinojosa, and it maintains a robust chain of custody throughout the origin-verification process. The company’s comprehensive sample management system ensures that the whereabouts and integrity of a sample are always known; and because of its capability to track the sample — from collection to the lab where the cotton is tested on through its deposit in secure storage facilities — Oritain has gained trust in the marketplace.

Building supply chain resilience with isotopic testing

To strengthen supply chain integrity, companies should consider employing isotopic testing as a method to ensure that cotton does not originate from a prohibited region, explains Hinojosa. By integrating isotopic testing into their supply chain management, companies can accurately verify the source of their cotton, ensure compliance with UFLPA, and avoid the reputational and legal risks associated with using materials linked to forced labor, she adds.

At the same time, implementing this method requires multiple steps for effective compliance and supply chain risk mitigation, says Hinojosa, noting that these steps include:

Examine customs publications for compliance — The first step for companies to deploy isotopic testing is for sourcing and supply chain professionals to review the informed compliance publications issued by CBP, such as those outlining reasonable care and record-keeping. These documents provide guidance on the types of records and documentation required to demonstrate compliance with regulations.

Establish a partnership with a provider that actually meets CBP guidelines — To effectively incorporate isotopic techniques, companies should first ensure they are partnering with a provider that has a comprehensive reference library of isotopic fingerprints from, for example, cotton-producing regions worldwide. Start with those that meet the guidelines from CBP.

Develop and integrate testing frameworks across production phases — Companies also should work closely with their supply chain partners to establish testing protocols at various stages of production, from raw fiber to finished goods. This not only helps in maintaining transparency and accountability but also allows for timely identification and correction of any supply chain discrepancies.

Make isotopic techniques part of comprehensive due diligence protocols — Finally, companies should integrate isotopic testing into a broader due diligence strategy. This involves maintaining detailed records of purchase orders, contracts, and transportation documents to establish a clear chain of custody for materials used in production.

Today, the implementation of isotopic testing emerges as a critical strategy for companies to verify the geographical origin of materials like cotton to comply with the UFLPA and similar trade restrictions. By integrating this scientific methodology into their broader due diligence strategy, businesses can effectively mitigate supply chain risks, maintain regulatory compliance, and uphold ethical standards in their global operations.

You can find more information about how organizations are fighting forced labor in their supply chains here

If DeepSeek’s claims of efficiency wind up being true, it is unlikely that the overall demand for energy will subside any time soon. In fact by the end of 2025, the convergence of AI and sustainability is expected to reach a critical tipping point, according to , Chief Sustainability Officer at NetApp. As AI technologies continue to advance and proliferate across industries, Acutt says their substantial computational requirements will shine a spotlight on the inefficiencies lurking within current corporate sustainability and data practices.

This collision of AI’s voracious appetite for resources and the imperative for environmental stewardship will force companies to harmonize their AI strategies with their sustainability objectives or face significant regulatory and reputational consequences. Acutt predicts that forward-thinking organizations will proactively integrate intelligent, energy-efficient practices into their AI and data infrastructure — including everything from data centers to storage solutions — and will emerge as trailblazers in this new landscape.

The energy, GenAI, and sustainability nexus

The energy-GenAI-sustainability nexus signifies a pivotal shift in which the growing energy demands of AI have significant implications for corporate sustainability goals. The surge in energy demand stems from AI’s reliance on vast data centers and computationally intensive processes, even in the wake of . As AI adoption expands across various sectors, the strain on existing energy infrastructures will become evident, showing that it is ill-equipped for the digital age and highlighting the necessity for modernization at the federal level.

Indeed, the immense energy consumption of AI necessitates a more intricate understanding of data’s embodied energy costs, which is often an overlooked factor, according to Acutt, adding that at the corporate level, another underemphasized trend that is part of the overall inefficiencies is the “embodied energy” price of data management and storage. “The reality is that so much of the AI challenge is a data challenge,” Acutt says. “We’ve got this extraordinary explosion of data, yet without the requisite innovation in managing that data real estate.”

The energy-GenAI-sustainability nexus signifies a pivotal shift in which the growing energy demands of AI have significant implications for corporate sustainability goals.

This is why modernizing data infrastructure is crucial to support the growth of AI. The current infrastructure is outdated, inefficient, and leads to significant data waste, with nearly 70% of created data only being used once, according to an . This inefficiency results in unnecessary energy consumption and costs. To address this, strategies like using data minimization, intelligent data-tiering, or data lakehouses will become paramount, as will leveraging tools to analyze a data estate’s energy footprint and using efficient storage solutions. By doing so, businesses can reduce their environmental impact, lower costs, and improve their competitiveness.

Essentially, the energy-GenAI-sustainability nexus is pointing us towards a future in which corporate energy and data strategies are intertwined. However, companies need to step up efforts and invest in a cohesive strategy that encompasses both successful AI integration and efficient data management.

Guidance for chief sustainability officers

To address the multifaceted challenges at the intersection of AI, sustainability, energy, and data, Acutt recommends corporate chief sustainability officers (CSOs) take several actions, including:

Build relationships between the company’s sustainability functions and its IT teams — We’ve previous discussed the growing role of chief information officers in sustainability and the need for data infrastructure modernization, which itself is another reason for fostering collaboration. In fact, pushing a company’s sustainability function and IT departments to align goals and integrate sustainable practices into the company’s overall IT infrastructure is an essential ingredient in this collaborative process. To do this effectively, CSOs�� need to conduct regular cross-departmental meetings to share business priorities and identify joint projects that focus on outcomes that benefit both functions.

Support using business cases to upgrade data infrastructure — Easy wins in this include highlighting reductions in the company’s energy consumption and carbon footprint that result from implementation of energy-efficient data centers, data storage, and cloud solutions.

Prioritize resiliency and future-proofing — All capital investment proposals need to demonstrate how they add to enterprise value. CSOs should develop strategies that enhance resilience amid environmental changes, which can help future-proof operations. This process should include investing in renewable energy sources, adopting AI solutions that support predictive maintenance, and ensuring business continuity in the face of climate-related disruptions.

Simplify internal processes and systems — CSOs should streamline processes to make sustainability reporting more efficient and accurate. By using digital tools and platforms to automate data collection and reporting, CSOs can ensure compliance with regulations and transparency in sustainability efforts.

Those companies that make themselves early adopters of these actions will not only mitigate their environmental impact but will also set new benchmarks for innovation. These actions will demonstrate that cutting-edge AI capabilities and robust sustainability initiatives can coexist and even enhance one another.

As this paradigm shift unfolds, it will become increasingly clear that the future belongs to those organizations which can masterfully balance the transformative power of AI with responsible environmental stewardship.

You can find out more about how companies are grappling with sustainability issues here

At the same time, however, as GenAI begins to move rapidly from hypothetical to reality, its introduction creates a host of related issues — perhaps none greater than the energy that the operation of GenAI consumes. AI data centers’ annual power consumption is expected to reach 90 terawatt-hours by 2026, a roughly a 10-fold increase from 2022 levels and representing one-seventh of all data center energy consumption, according to a from late-2024. Further, that figure will only increase in the coming years as GenAI becomes more prevalent within professional settings.

As a result, many companies may find it more difficult to meet their energy transition goals to lower overall emissions as they increasingly embrace AI. In fact, the recent , produced by Reuters Events in cooperation with Siemens, found that nearly half (46%) of all respondents said they believe their organization is at risk of missing interim energy transition targets.

Clearly, AI does not occur in a vacuum. As GenAI implementation continues apace, the next necessary step is to incorporate its use into energy targets — a natural fit for the type of advice typically given by professional services organizations. Indeed, legal, tax, and risk & fraud professionals can help design their clients’ architect for a future in which AI usage can even be a positive step towards their energy goals.

“Sustainability is interconnected with all other business objectives, simultaneously influencing and being influenced by them,” said Pina Schlombs, Sustainability Lead for DACH (the region comprising Germany, Austria, and Switzerland) for Siemens Digital Industries Software, within the report. “These relationships can either compete with or reinforce progress, meaning businesses must develop a thorough understanding of the cause-and-effect chains. This is a complex feat, but mastering it allows organizations to leverage the right strategies and technology stack at the right time and maturity, to scale progress fast.”

Simplifying the complex

One of the primary goals of AI systems is to simplify complex actions, breaking them down into more repeatable, automatable components. Consider the research component of any sort of legal case or tax problem — by leveraging data to anticipate questions and more quickly identify the type of information needed, the time required for the research process can be drastically reduced.

Industrial AI can take these concepts and apply them on a large scale for the goal of reducing emissions. The report gives an example of a digital twin for an entire factory, which allows adjustments to be modeled and tested before implementation. Through AI-powered trial and error, companies can find ways to reduce industrial complexity, process and analyze data quickly, and streamline tasks to remove unnecessary use of energy.

James Cole, Chief Innovation Officer at the Cambridge Institute for Sustainability Leadership (CISL), points to the start-up Monumo, which has developed AI to run through 10 million motor design simulations in one day, 200-times faster than the industry standard. Even traditional industries such as construction have found uses: Titan Cement, for example, reduced its energy consumption by 5% to 10% through AI modeling of its manufacturing operations.

“We’ve never had such powerful tools to solve the challenges we face in sustainability,” said Cole within the report. “Artificial intelligence systems have the potential to help us understand the world in all its complexity and optimize industrial processes not only for strong business outcomes, but also for holistic social and environmental outcomes.”

The result is that as these systems progress, industrial AI is set to dramatically transform industry energy transition in the near future. Only 14% of survey respondents said they believe industrial AI has a high impact on accelerating industry transitions today; but at the same time, 50% said they believe industrial AI will do so within the next three years. This quick adoption will require buy-in and coordination from all levels of the organization.

Overcoming adoption challenges

So, what does all this mean for professional services? As noted above, no AI occurs in a vacuum, and similarly, no business runs without legal, tax, or risk & fraud input. Thus, as professional services organizations are increasingly looked upon as strategic partners and business generators rather than simply cost centers, there is an opportunity to counsel clients on the energy opportunities afforded by AI.

As noted previously, AI adoption can be sorted into three main categories: financial, partnerships, and internal capabilities and skills. By focusing on overcoming all three types of barriers, professional leaders can influence clients to not only adopt AI, but to do so in a way that encourages energy-neutral use.

“AI is not optional, it’s out of the bag, it’s going to happen, and it has the potential to transform business models,” CISL’s Cole said. “So, companies that are assuming everything is broadly going to stay the same except for their investment in AI risk missing the point.”

Legal, tax, and risk and professionals — both within corporate functions and at outside firms — should make sure they are a part of the AI ecosystem and have their thoughts heard.

First, by encouraging greater measurement and data collection, professionals can help their clients determine exactly the financial impact and risk they could face associated with AI adoption. Just 20% of professional services organizations actively measure return-on-investment from GenAI tools, according to our internal research, which also showed that data collection around these tools is poor across the board — and that includes their impact on ESG.

Second, legal, tax, and risk and professionals — both within corporate functions and at outside firms — should make sure they are a part of the AI ecosystem and have their thoughts heard, keeping in mind ESG as an element of the overall impact. If a company is using industrial AI to transform factory operations, for instance, those changes will require a financial and risk assessment. Legal leaders should be integrating ESG into those assessments, aiming for energy-neutral processes wherever possible.

Finally, to provide proper advice, professionals will need to learn how AI not only impacts their own work, but how it impacts the business at large. For example, our research also shows that less than one-third of professionals have received training specifically focused on GenAI. However, to be able to be proper partners on AI projects, professionals will need to at least learn the basics of how AI can be used to streamline projects, rather than simply consuming energy.

In the near future, these actions will become central to energy goals rather than simply helpful additions. According to the Reuters Events/Siemens report, 70% of respondents agreed that future innovation in sustainability will be driven by industrial AI applications and solutions. Thus, planning across all parts of an organization must begin now to better design AI usage in a way that aligns with achieving future sustainability goals.

“The meta challenge of businesses is how to balance productivity and commercial outcomes with the imperatives of social and environmental outcomes,” added Cole. “Via big data and AI, there’s the opportunity to not just optimize operations but drive symbiosis across entire industries where there’s historically been a disconnect, to align increasingly digital systems and make sense of a broader ‘system of systems’.”

You can find more about how organizations are handling the challenge of sustainability here

This new policy direction comes at a time when EVs has surged in consumer popularity and as the American automaker and component supply chain invests heavily in a shift away from gas-powered vehicles.

Growth of the US EV market

EVs experienced a of 52% in 2023 and despite a slowed pace in 2024, those totals were still above 2023’s numbers. The gap in sales over the last year was filled by plug-in hybrid electric vehicles (PHEVs).

The State of California holds tremendous influence over the automobile industry due to its market size and is currently the — with one-third of all EV units nationally being sold in the state. California has held special authority from the Environmental Protection Agency to adopt stricter emission regulations than the federal government since the 1970s. The state received approval from the federal government toward the end of the Biden Administration to starting in 2035. California Governor Gavin Newsom has pledged to revive its own should the federal tax credits disappear.

Indeed, transmission capacity is truly a bipartisan issue — traditionally left-leaning states are seeking increased transmission to support clean energy goals while traditionally right-leaning states are seeing data-center growth.

EV-maker Tesla (of whom the largest shareholder is Trump advisor Elon Musk) currently holds reign as the and generates more profit per vehicle than its rivals. (However, the brand has had a bumpy ride over the past several weeks — despite a filmed endorsement by President Trump — because of the link between the Telsa and Musk.) Further, the removal of a federal tax credit subsidy would impact rival brands like Ford and GM more greatly than Tesla. While for federal tax credits, for their long-range variant batteries.

Market deterrents and charging needs

One of the for Americans in considering an EV purchase is range anxiety — the concern about the distance an EV can cover from one charge. Less than 5% of car trips in the United States are longer than 30 miles and only 0.1% of car trips exceed 500 miles, but the anxiety persists. EVs require consecutive coverage of charging infrastructure accessibility between cities (a minimum number of fast chargers spaced fewer than 50 miles apart).

Charging options vary widely in the wattage they deliver and speed of charging. For example, a Level 2 EV charger (such as one might have in their home) can recharge a vehicle in four to six hours, whereas DC Fast Chargers offer a much faster charge by wattage. As the industry leader, Tesla deployed its own network of fast chargers across the United States in the early 2020s and has since by modifying their chargers to be adaptable to more EV brands. Currently, only Nevada and California meet state-level fast coverage metrics, with consecutive coverage areas being highest in New England, the West Coast, and Florida for state-level minimum coverage.

Many state legislatures have changed their own utility rules to allow for private businesses to own and operate EV and PHEVs charging stations, effectively offering retail sale of electricity to the public as a non-utility. and were the final two of all 50 states to adopt these legislative changes, which were both passed early in 2024.

Interestingly, the US automobile industry and component supply chain has gone all in on EVs. Traditional automakers face substantial competition from Chinese automakers in the EV market globally, and the newly increased 20% tariff on Chinese imports also looms over auto manufacturers’ heads, which adds pressure to have a . While US-based EV battery factories numbered only two in 2019, more than 30 are planned, under construction, or operational this year.

Many state legislatures have changed their own utility rules to allow for private businesses to own and operate EV and PHEVs charging stations, effectively offering retail sale of electricity to the public as a non-utility.

States including Ohio, Georgia, Kentucky, Tennessee, Mississippi, and South Carolina have as new industry clusters. For example, represents 6% of all automobile industry employees in the US, and the $5.8 billion BlueOval SK Battery Park (serving Ford and other automobile manufacturers) located in Glendale, Kentucky, will produce domestically-made EV batteries. Toyota, Ford, Honda, BMW, Daimler, , and Hyundai all currently or will soon assembly EVs within the US.

Energy emergency and utility grid investment

President Trump has declared a — the first ever presidentially-declared national energy emergency. In his , President Trump encouraged increased domestic production of oil and gas and continued coal production — a noted de-emphasis on renewable energy sources. The US currently is a net exporter of fossil fuels and produces more oil and gas than any other country in the world and more than any point in American history. Where Trump’s call for energy investment holds is in the need to update and expand transmission capacity and the resiliency of American utility grid infrastructure.

The U.S. Department of Energy reports that the nation has a pressing need for . And while forecasted numbers for energy demand show it over the next 5 to 10 years, there is agreement that transmission capacity must be a high-priority for domestic utilities. This increased demand is also accompanied by more frequent severe and extreme weather which drives the need for grid modernization.

Indeed, transmission capacity is truly a bipartisan issue — traditionally left-leaning states are seeking increased transmission to support clean energy goals while traditionally right-leaning states are seeing data-center growth. Public utilities have at times blocked transmission buildout to protect the viability of gas and coal sources, but President Trump has promised to streamline permitting procedures for power grid enhancements. To meet projected demand, over the next decade, and that power would likely need to be sourced from a blend of renewable and non-renewable resources.

As the rapidly expanding EV market collides with shifting federal and state energy policies and as fossil fuel is prioritized by the Trump Administration, the automobile and supply chain markets continue to forge onward. Policymakers face urgent decisions to invest in their utility infrastructure and transmission investment, as well as energy source diversification to sustain future power demands.

You can find more about how companies are managing their supply chains here