The shift away from federal environmental stewardship in the United States has accelerated sharply. Withdrawal from the Paris Agreement was only the opening move; the U.S. Environmental Protection Agency has since announced what it calls the "biggest deregulatory action in U.S. history". Proposed green energy funding cuts worth $13 billion further reinforce the direction of travel.
Yet despite these moves, calls from markets and international trade partners alike for greater environmental accountability show no sign of abating: the Net Zero Tracker confirms that 9% more businesses in the Forbes Global 2000 made net-zero pledges in 2025 than in 2024. That momentum reflects something more durable than regulatory compliance; it signals that investors, customers, and trading partners are independently demanding emissions accountability regardless of where federal policy sits. The result is not deregulation so much as fragmentation, and an increasingly complex patchwork of compliance obligations that organizations must navigate simultaneously.
EU regulations: A non-negotiable framework for global trade
Any business trading with the EU needs to clear a substantial and growing series of compliance hurdles: the EU Corporate Sustainability Reporting Directive (CSRD) and the EU Corporate Sustainability Due Diligence Directive (CSDDD) require detailed ESG reporting and due diligence across value chains. While the European Commission's 2025 Omnibus proposal has narrowed the scope of both directives and adjusted certain timelines, the underlying direction of mandatory disclosure remains intact and companies that treated the revision as permission to stand down will face a difficult catch-up when enforcement resumes. The EU Regulation on Deforestation-free Products (EUDR) adds commodity-specific traceability demands that sit outside the Omnibus revision entirely.
Particularly significant for supply chain managers is the EU Carbon Border Adjustment Mechanism (CBAM), which concluded its transitional reporting phase at the end of 2025, with full financial obligations now in effect from 2026. CBAM puts a carbon price on imports of iron and steel, aluminum, cement, fertilizers, electricity, and hydrogen, targeting emissions embodied in the production process itself. For companies sourcing or exporting these materials, CBAM makes accurate upstream emissions data a direct financial obligation, not a reporting aspiration.
State-level momentum: A U.S. regulatory patchwork
Companies operating purely within the United States are not off the hook either. In fact, with federal action retreating from environmental stewardship, some states have stepped into the breach. In California, U.S. entities with revenues exceeding $1 billion must publicly disclose Scope 1 and 2 emissions starting in 2026 (with the first deadline set at Aug. 10), and Scope 3 emissions from 2027.
New York reintroduced Senate Bill S3456 (Climate Corporate Accountability Act) in January 2025, modelled closely on California's framework. It would require Scope 1 and 2 disclosure from 2027 and Scope 3 from 2028. In a significant development, the New York Senate passed a version of this bill in February 2026, though it faces further legislative steps before enactment.
Colorado introduced House Bill 25-1119 in January 2025, which would require Scope 1 and 2 disclosure from entities with revenues above $1 billion starting in 2028, with a phased Scope 3 rollout beginning in 2029. New Jersey introduced its own Climate Corporate Data Accountability Act (S4117) in 2025.
The resource crunch in sustainability
Despite the growing complexity, sustainability teams remain small and overstretched. In many organizations, only a handful of employees manage ESG reporting, supplier engagement, emissions accounting, and regulatory monitoring simultaneously. Reporting demands consume the majority of both time and budget, leaving limited capacity for strategic decarbonization work.
The Scope 3 data problem
One of the most stubborn barriers to demonstrable sustainability is visibility, particularly into Tier 2 and 3 suppliers and Scope 3 emissions. Scope 3 emissions are the indirect greenhouse gases generated throughout a company's value chain, covering both upstream and downstream activities, and typically represent the largest share of a company's total carbon footprint.
Sphera's 2025 Scope 3 Report reveals that momentum is building, but data quality remains a critical point of weakness. Of companies reporting on GHG emissions, 79% now disclose across all three scopes, up from just 52% in 2024, a sharp year-on-year increase that reflects regulatory pressure as much as voluntary momentum. Yet 62% of those reporting on Scope 3 cite internal data quality as a major barrier, and 79% say obtaining supplier data remains a top challenge.
Without defensible, auditable data, organizations face regulatory exposure and greenwashing accusations. The gap between disclosure volume and data quality is where legal and reputational risk lives, and where the right technology makes the most immediate difference.
How AI and technology are closing the gap
Technology now offers a genuine path through this complexity, but the difference AI makes is not simply speed or dashboards. It is the ability to shift from reactive data assembly to proactive risk detection across a supply base of hundreds or thousands of entities simultaneously. Two examples show what that looks like in practice for procurement and sustainability teams.
The first is Scope 3 Category 1 data collection, i.e. purchased goods and services, which typically represents the single largest source of Scope 3 emissions for manufacturers and retailers. Gathering this data traditionally meant issuing manual surveys across hundreds of suppliers, reconciling inconsistent formats over weeks, and questioning the reliability of what came back. AI can change the collection and validation loop: standardized emissions data requests are pushed to suppliers automatically at the point of onboarding and at defined reporting intervals. AI models can cross-reference submissions against industry benchmarks and flag statistically anomalous responses (a supplier reporting emissions implausibly low for their sector, for instance) for human review before the data enters the reporting chain. The result is not just faster collection: it is a defensible, continuously validated emissions record that can be pulled for regulatory submission, customer due diligence, or internal strategy without a quarterly scramble to assemble it.
The second is supplier certification monitoring, directly relevant to companies subject to CSDDD, CBAM, and state-level due diligence requirements. Under these frameworks, a lapsed environmental or human rights certification at a tier-one supplier can create direct legal exposure for the buying company. Previously, identifying that risk meant periodic manual checks, by which point a lapse might already constitute a compliance breach. An AI-powered platform can monitor certification status continuously across the supply base, flagging an impending expiry weeks in advance and automatically triggering a renewal workflow with the supplier. What was once discovered during an audit becomes something corrected before it appears in one. For companies subject to CBAM, the same continuous monitoring logic applies to embodied emissions data: accurate baseline measurements and supplier emissions factors are maintained in real time rather than reconstructed at reporting deadlines.
From reactive reporting to proactive governance
Taken together, these capabilities transform governance from a periodic reporting exercise into a continuous intelligence function. Sustainability criteria are embedded into sourcing decisions from day one through automated onboarding and customizable scorecards, so emissions performance is visible alongside price and quality, not assembled retrospectively. Seamless integrations with existing ERP and procurement systems mean this intelligence surfaces where decisions are actually made, reducing the manual burden on stretched teams while improving the quality and defensibility of disclosures.
What the current environment makes clear is that environmental policymaking is cyclical and increasingly global. Sustainability must remain a board-level priority and a central concern for supply chain managers not because the regulatory picture is static, but precisely because it is not. The organizations that treat today's fragmentation as a reason to pause will find their data foundations are not in place when the next tightening cycle arrives, and their competitive position has quietly eroded in the meantime.
Ultimately, without genuine transparency across the supply chain, organizations will struggle to meet growing stakeholder expectations for credible reporting and climate action. Investors, customers, and regulators are scrutinizing ESG claims with increasing sophistication, and the Net Zero Tracker data suggests that market-driven accountability is outpacing regulatory pressure as the primary driver of disclosure. The organizations that invest in supply chain visibility and AI-powered emissions management today will not only satisfy compliance requirements across an increasingly fragmented regulatory landscape; they will build the operational foundation needed to shift from reactive reporting to proactive decarbonization, turning sustainability from a cost center into a competitive differentiator.
