Since the late 2024, the sustainability landscape globally have seen two major events – the start of Trump’s second presidency and the development of EU Omnibus Proposal.
Is it a hard time now for sustainability? Our answer: regulations might change, but movements will remain.
The on-going progress from them imposed a dilemma: to have a long-term effects as complicated legislative procedures and to have immediate impact in the markets. It creates much confusion for experts in the field, not to mention businesses and industry practitioners.
“I’m immediately withdrawing from the unfair, one-sided Paris climate accord rip-off,” Trump said as he signed the executive order to withdraw the United States from the Paris climate deal at the beginning of 2025.
It is clear what it means for global climate action when the second time the US, the world’s second-largest greenhouse gas emitter behind only China, withdraws from the deal. These opposite views to sustainability, following with various executive orders, might completely change the expected agenda and lead to serious setbacks from business landscape.
Meanwhile, in the EU, after re-elected European Commission President von der Leyen pledged to prioritise economic competitiveness during her second term with the Omnibus, its leadership in sustainable finance and corporate accountability is at risk.
Sustainability, or the narrower realm of combating climate change, is never about a single country or region’s efforts. The interconnectedness between decarbonization and economic activities makes those big players in global trade have the “higher voices”.
To remind you, the EU and the US are the two biggest trade partners to the rest of the world. Inherently, any weakening or delaying signals from them causes uncalculated risks to the sustainable development agenda.
For businesses, whether being in these regions or engaging in their value chains, question where are they heading to with these shifts in regulations. Or, foremost, question what are indeed the changes, as the complexities in nature and the limited resources to dive into.
Knowing that, Green Transition tries to create a recap, aiming to give you a big picture, and also a break-down explanation on how these things mean to you.
So, let’s start with the fact that…
We are now losing the momentum
Over the last decade, we have witnessed several significant milestones and achievements for sustainability, at the global scale. Namely, for example, the Paris Agreement which was signed by nearly 200 countries in 2015, the development of reporting standards (including enhancing comparability across them and introducing the Double Materiality concept), and relative facts of sustainability being more common with investors and customers.
Some facts to strengthen this argument:
- Global ESG assets predicted to hit $40 trillion by 2030, forecasted Bloomberg Intelligence in 2024.
- According to KPMG (2024), sustainability has become part of business as usual for almost all of the world’s largest 250 companies: Report on Sustainability (96%), Publish a carbon target (95%), and Have a sustainability leader (56%).
- As per the Global Sustainable Investment Alliance (GSIA), the total value of sustainable assets under management (AUM) crossed over $30 trillion in 2022, although with a minor decrease from $35 trillion in 2020.
- Ninety-two percent of CFOs say they will invest more in sustainability, with more than half saying they will significantly increase their investments, says a Kearney survey in 2024.
This is a very small and rough view of the whole thing, but you can basically get that all kinds of stakeholders are choosing to push the agenda forward, in general. It surpasses the areas of regulators finalizing the legislation systems, businesses integrating sustainability into business strategies, NGOs making standards and frameworks more comprehensive or integrated, financial institutions developing tools to evaluate non-financial performance, and customers paying more attention to eco-friendly products or more corporate responsible organizations.
Understand how Trump 2.0 dismantles Climate Action
During Trump’s first term, his administration rolled back more than 125 environmental rules and policies. When former-President Joe Biden took office, he led the U.S. forward on climate action. And now, the Trump Administration stands to dismantle much of the momentum has been created, reversing the progress once more time.
Here are some major actions regarding sustainability made by Trump administration just after a few weeks of inauguration:
- Jan. 20, Issued an Executive Order directing the Ambassador to the United Nations to immediately withdraw the United States from the Paris Agreement.
- Jan. 20, Ending DEI programs, which includes all environmental justice offices, positions, programs, and activities.
- Jan. 24, Called for an assessment of the effectiveness and proposed getting rid of the Federal Emergency Management Agency (FEMA), the nation’s main arm for disaster recovery, especially extreme weather events.
- Jan. 30, the Federal Insurance Office Withdraws from the Network of Central Banks and Supervisors for Greening the Financial System.
- Feb. 6, Reviewing the implementation of the National Electric Vehicle Infrastructure (NEVI) Formula Program.
- Proposed sweeping cuts to many federal agencies, including the Environmental Protection Agency (EPA), which could impact the organization’s speed and ability to respond to crises – like tackling environmental health risks or implementing regulations.
- Feb. 14, Signed an executive order to create a new “National Energy Dominance Council,” aimed at increasing the country’s oil and gas production.
- Feb. 10, Ending the use of paper straws by the federal government, calling them “nonfunctional” and urging to “issue a national strategy to end the use of paper straws”.
- Feb. 11, The Office of the Comptroller of the Currency (OCC) announced that it has withdrawn from the Network of Central Banks and Supervisors for Greening the Financial System.
- Feb. 25, Issued an interim final rule to remove all regulations implementing the National Environmental Policy Act (NEPA).
… and many more, of which you can consult from the Columbia University’s Sabin Center for Climate Change Law’s “Climate Backtracker,” logging more than 45 efforts to scale back or eliminate federal climate mitigation and adaptation measures since the administration took office at the end of January.
Setbacks rose, either by compliance or discouragement
These massive and consecutive directions led to some visible organizational setbacks in action. As you can see, the steps mentioned above cover from reserving the agenda replacing fossil fuels and plastic, to discouraging sustainable finance market, to weakening international climate negotiations. The effects are far-reaching.
For example, the attack on DEI has somewhat divided the business world, with some firms complying with Trump’s directives and others sticking with their existing goals.
Google’s online and mobile calendars are no longer including references to Black History Month, Women’s History Month and LGBTQ+ holidays, among other events.
Big federal contractors, including KPMG, Deloitte, and Accenture, alongside other giants like Google, Amazon, Walmart, and many other large US organizations have decided to scale back their DEI policies. Meanwhile, McKinsey, Costco, JPMorgan Chase, and Goldman Sachs are a few other companies standing by theirs.
Criticism asides, refusing to follow the game are fairly risky to businesses having contracts with the US government. There is clearly a lot at stake considering the dynamic and volatile political atmosphere in the US.
The review of NEVI, as another instance, froze roughly $3 billion dollars in funding that was allocated to expand the network of electric vehicle charging stations across the country, according to Atlas Public Policy.
It does not only slow down the progress to have a complete EV infrastructure but also threat pioneering firms in green tech of EV brands, chargers, and others within the ecosystem.
From the side of finance world, Bank of America, Citi, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo announced their retreat from the Net Zero Banking Alliance, a coalition formed by the UN in 2021 to reduce carbon emissions, before Trump inauguration.
As if the exodus of American banks was not enough, five Canadian neighbors joined them: BMO, CIBC, National Bank of Canada, Scotia Bank, and TD Bank. Meanwhile, the world’s largest asset manager, BlackRock, abandoned a sister initiative, the Alliance for Net Zero, which brought together firms that collectively hold $130 trillion of assets under management, according to Global Finance Magazine.
However, the Net Zero Banking Alliance still boasts more than 130 member institutions ready to offer services.
The question now is, should businesses, under the jurisdictions of these pressures or not but engaging in the chain – still stay reactive to the regulatory shifts – or paving a new way?
The Omnibus: What is it exactly about? – And what is going on?
According to EU, the EU Omnibus Package is part of an effort to simplify regulations to improve business competitiveness while maintaining sustainability standards. On 26 Feb, 2025, the Omnibus proposal is officially out.
In the past few days, the on-going discussions and debates are happening around a critical question whether Omnibus truly means simplifying or not.
A brief of what the EU Commission proposed
Three main areas are the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and EU Taxonomy.
CSRD sees a much narrower scope:
- Apply only to companies with > 1,000 employees, instead of the current threshold of 250, and a turnover of more than €450mn (equivelant to 80% of companies removed)
- Double Materiality remains
- Two-year delay for many companies that haven’t yet reported
- Sector-specific standards terminated
- ESRS under review for streamlining
CSDDD requirements are loosened:
- Apply only to direct suppliers with > 500 employees.
- No due diligence for financial institutions
- Climate transition plans are not mandatory for companies.
- Assessment frequency cut – Required every 5 years instead of annually
- Penalties softened – No references to fines related to global turnover
- Civil liability removed
EU Taxonomy is almost made voluntary. Briefly:
- Only “very large” companies must report (>1,000 employees)
- 80% of companies exempted from Taxonomy alignment
- Partial alignment reporting introduced
Reactions from practitioners and experts to the proposed simplification strategies were somehow not positive. It is challenged whether they are really for simplification or deregulation.
Some experts insist that these reductions in scoping and modification in details really help streamline the EU sustainability regulations, ensuring companies can navigate to adopt the changes effectively. Others criticize the “gravity” of the Omnibus is now too heavy to balance sustainability and competitiveness, putting EU’s broader sustainability goals and the EU Green Deal at risk.
Critical questions to be considered, including but not limited to:
(1) Who will deal with the confusion of the separate outlooks for companies in countries that have already transposed CSRD into national laws and those that have not?
(2) Will this reduction in scoping that makes it even narrower than the NFRD era (back in 2014) be adequate and how will it affect the comparabilities of reporting standards across the globe?
(3) How will the economic competitiveness can be assured when decision-making are harder for investing (by weakened Taxonomy and removed climate transition plans) and transacting (by weakened CSDDD and CSRD)?
Businesses must monitor changes and stay preserve
If you are part of the EU’s global value chain, it is now the time to get back to the core of sustainability. Compliance is normally a strong pushing force – an effective change driver, but should never be the end goal and the determining factor.
Firstly, this is just the very first proposal from the European Commission. There will still the legislative procedure with the European Parliament and the Council of the EU. The final regulations might take years to arrive.
It means, during that time, existing obligations remain effective. And also, the information presented above are not fixed, and potentially negotiated to have something in between.
Suggestions from KPMG to businesses during this time are:
- Continue implementation efforts and closely monitor CSRD 1.1 (current applicable procedure)
- Identify “no regret” moves, e.g., double materiality assessment
- Review and assess the value chain/ subsidiaries
Secondly, companies should be determined to true sustainability, shifting away from viewing it purely legal compliance.
Aleksandra Palinska, Executive Director at Eurosif & Former Member of EFRAG’s Sustainability Reporting Board, suggest starting to see CSRD, CSDD, and the Taxonomy as useful tools to help investors to make decisions as well as to build a sustainable economy. And also for the company itself to recognize and manage its sustainability risks.
Another example, with the adoption of the CSRD, many companies that once relied on the Global Reporting Initiative (GRI) for sustainability reporting are now poised to transition to the European Sustainability Reporting Standards (ESRS). A key difference is to employ a double materiality approach. It means that the company considers both the impact of global sustainability issues on the company (financial materiality) and the impact of the company on society and the environment (impact materiality).
“Conducting double materiality assessment helps companies, especially the leadership team, to have a clearer and more comprehensive view on the company. Applying this doesn’t just mean complying but also having better operation strategies and building more competitive edges”, says Bao Nguyen, Founder – Managing Partner at Green Transition & Former GRI Head in Vietnam.
The movement continues
Based on the above analyses, it cannot be denied that we are amidst a time of uncertainty, complexity, and difficulty. These issues are common across sectors and regions. However, bear in mind that regulatory shifts are just one piece of the whole picture, and compliance simply represents a stage in our transition journey, which remains inevitable.
In Vietnam, since the amended Law on Environmental Protection was introduced in 2020 and the government committed to Net Zero by 2050 at COP26 (2021), the national regulatory framework for sustainable development has become increasingly robust. For example, Decree 06/2022/ND-CP on GHG emission reduction and GHG inventory reporting, followed by Decision 13/2024/QD-TTg, which mandates 2,166 entities to conduct GHG accounting and inventory, has created a new wave of regulatory changes in the landscape.
At the same time, these regulatory developments provide businesses and markets with the opportunity to kickstart the sustainable transition – if not voluntarily, then by necessity. However, businesses must also consider the long-term benefits and integrate sustainability into their core business strategies and day-to-day operations.
Ultimately, it all comes down to the long-term vision of company leadership and organizational capacity building to stay competitive and resilient. Any business can become a change agent, repositioning sustainability where it truly belongs.
If you are feeling overwhelmed by the complexities of regulatory developments, Green Transition, alongside our Green Transition: Hub Technical Partners and Policy Advisory Partner (@ESG Matters & @IPE), will support you in navigating these regulations. With our deep expertise gained from world-leading organizations, we help clients overcome challenges and seamlessly integrate sustainability into their operations, unlocking new business opportunities while fostering sustainability awareness.
If you are feeling overwhelmed by the complexities of regulatory developments, Green Transition, alongside our Green Transition: Hub Technical Partners and Policy Advisory Partner (@ESG Matters & @IPE), will support you in navigating these regulations. With our deep expertise gained from world-leading organizations, we help clients overcome challenges and seamlessly integrate sustainability into their operations, unlocking new business opportunities while fostering sustainability awareness.
At the end of March, Green Transition: Hub webinar, co-hosted by Green Transition, ESG Matters, and representatives from both authorities and businesses, will hold an open discussion on the evolving EU regulations impacting the EU-Vietnam value chain. Whether your business operates as an EU buyer, a local supplier exporting to the EU, or a supplier sourced by large EU firms, stay tuned to join us as we explore how compliance pressure can also be leveraged as an opportunity to gain a competitive edge.
