It appears that the age of vague environmental promises is ending. Not because companies have grown a conscience – it won’t ever happen – but because regulators, courts, and investors collectively decided that the evidence must match the words.

A fresh wave of global disclosure standards, led by the International Sustainability Standards Board (ISSB) and flanked by Europe’s Corporate Sustainability Reporting Directive (CSRD), is forcing corporations to swap green rhetoric for tangible, auditable data.

In this report, we chart the journey from ESG’s greenwashing era to an accountability shift, one where a €40 million fine for “sustainable collections” and a €25 million penalty for overstated investment credentials are the new cost of getting it wrong.

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The Greenwashing Era: A Brief, Expensive History

For over two decades, ESG – Environmental, Social, and Governance – served, for the most part, as a branding exercise. Companies competed to outdo each other with lush sustainability reports, vague carbon pledges, and labels like “eco-friendly”, “green”, and “responsible”, none of which required a shred of independent verification or the substance to back them up.

This was greenwashing at its most brazen: making misleading claims of strong environmental credentials to gain a competitive advantage, attract investors, or appease regulators.

As a concept, “greenwashing” covers a wide spectrum of fraudulent behaviour, from unfair competition and security law infringements to unethical advertising and inaccurate corporate disclosures. For instance, it could mean a fast-fashion brand claiming “eco-friendly collections” on a business model built on mass waste. This behaviour is exactly what regulators have now started to fine.

The Scale of the Problem

According to KPMG, over 60% of consumers cannot distinguish real environmental claims from exaggerated ones. Make no mistake – that confusion is not accidental. Marketing departments have systematically deployed this smokescreen for years.

The number of ESG-related legal actions filed globally has more than doubled since 2020, reaching over 2,700 cases by early 2025. Courts in the US, UK, Australia, the Netherlands, and Germany are now hearing lawsuits covering climate liability and greenwashing claims, supply chain human rights violations, as well as false ESG reports.

To bring the issue into focus, the discrepancy between pledges and performance became most visible in the net-zero arena. Of the 702 companies in the Forbes 2000 with carbon-neutral targets, two-thirds had not clarified how they plan to make it happen, as reported by the Net Zero Tracker. At the same time, many have set no interim emissions goals before 2050, a gap scientists describe as urgent if the world is to halve pollution by 2030.

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The ISSB: The New Architecture of Accountability

The single most consequential development in ESG transparency is the creation of the International Sustainability Standards Board (ISSB), established in 2021 during COP26 by the IFRS Foundation. Its mandate: to build a global baseline for sustainability-related economic disclosures so that investors, lenders, and creditors worldwide can compare corporate claims with consistency and rigour.

Critical to understand is that the ISSB is not a tool for measuring a company’s impact on the planet but for assessing the planet’s risks to its financial performance.

In June 2023, the ISSB issued its first two standards – IFRS S1 and IFRS S2 – both effective for annual reporting periods beginning on 1 January 2024. These standards are modelled on the four-pillar framework of the Task Force on Climate-related Financial Disclosures (TCFD): governance, strategy, risk management, and metrics and targets.

IFRS S1 requires companies to disclose information regarding sustainability-relevant risks and opportunities that could affect their cash flows, access to finance, or cost of capital over the short, medium, and long term.

IFRS S2 narrows the focus to climate, demanding reports of both physical dangers, such as flooding or extreme heat, and transition threats, including policy changes or shifts in market preferences. Crucially, it mandates disclosure of greenhouse gas emissions, which in most cases include Scope 3 supply chain carbon footprints.

Global Adoption Accelerates

As of January 2026, 21 jurisdictions have adopted the norms on a voluntary or mandatory basis, with rules becoming effective in Chile, Qatar, and Mexico.

In December 2025, the ISSB published amendments to its climatic standards and announced a new project drawing on the work of the Taskforce on Nature-related Financial Disclosures (TNFD). This means that more than 620 organisations from over 50 jurisdictions stand committed to reporting aligned with TNFD’s recommendations.

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The European Experiment: CSRD

While the ISSB operates at a global level with a financial-materiality lens, the European Union has taken a more ambitious and contested path with its Corporate Sustainability Reporting Directive (CSRD).

The key differentiator is “double materiality”. Under the CSRD, companies must assess not only how sustainability risks affect their enterprise value (financial materiality) but also how the company’s activities shape people and the environment (impact materiality). This makes the CSRD’s scope broader than the ISSB’s.

The first wave of CSRD coverage began in January 2025 for large organisations subject to the Non-Financial Reporting Directive (NFRD) – big listed corporations, banks, and insurance firms with over 500 employees. Reports must align with European Sustainability Reporting Standards (ESRS), and limited assurance from a third party is mandatory.

The CSRD vs. ISSB Comparison

Dimension	ISSB (IFRS S1/S2)	EU CSRD (ESRS)
Materiality	Single (financial) — impact on enterprise value	Double — financial + impact on people and planet
Scope	Global; voluntary, jurisdictions must mandate	EU + non-EU with €450M+ EU turnover (post-Omnibus)
Key Users	Investors, lenders, creditors	Investors, regulators, civil society, consumers
Assurance	Not mandated at ISSB level; jurisdictions may require	Mandatory limited assurance; reasonable assurance targeted for 2028
Effective Date	Jan 1, 2024	Wave 1 from FY2024 (reported 2025)
Scope 3 Emissions	Required (with relief options)	Required under ESRS E1
Nature/Biodiversity	Under development (TNFD-based)	ESRS E4 (biodiversity, ecosystems)

The Omnibus Retreat

In early 2025, the CSRD’s ambitious scope collided with political reality. The European Commission launched its Omnibus Sustainability proposal on 26 February, narrowing the CSRD’s coverage. Under the revised framework – which the European Parliament adopted in December – only large undertakings with more than 1,000 employees and a net annual turnover exceeding €450 million are required to report. Listed SMEs now enjoy complete exemption. Thus, what was designed to pull 50,000 companies into mandatory ESG accountability today covers a far smaller pool.

Such a rollback attracted fierce criticism, with Amnesty International describing the deal as one that “undermines vital climate and human rights safeguards, betraying both people and the planet”.

The amended rules will not apply until 26 July 2029, with due diligence obligations pushed back further to 2030.

The EU’s Green Claims Directive Suffered a Parallel Fate

Citing concerns from SMEs about administrative burden and mandatory third-party verification requirements, the European Commission withdrew the Green Claims Directive in June 2025. The regulation, which would have required scientific substantiation for environmental claims like “climate neutral” or “sustainably produced”, is now unlikely to become law.

In its place, the Empowering Consumers for the Green Transition Directive (EmpCo) – a lighter-touch consumer protection rule – will apply from September 2026, with fines of up to 4% of annual turnover for non-compliant sustainability allegations.

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Record Fines and the New Cost of Spin

Enforcement is no longer theoretical. Between January 2025 and March 2026, European regulators, advertising authorities, and courts imposed over €65 million in combined fines and settlements for misleading environmental promises.

Shein (France, July 2025)

As published by Euronews, France’s consumer watchdog DGCCRF levied a €40 million fine on Shein, the largest greenwashing penalty issued by a European regulator to date. The reason? Environmental claims, including “sustainable materials” and “eco-friendly collections”. In this instance, regulators found those assertions incompatible with the company’s ultra-high product rotation business model. A further €1 million penalty followed in Italy.

DWS (Germany, 2025)

In another case reported by Reuters, German prosecutors imposed a €27 million sanction on asset manager DWS for overstating its ESG credentials, as it claimed to be a leader in sustainable investment despite investigators finding these assertions inconsistent with actual operations.

TotalEnergies (France, 2025)

As per Greenwashing Checker, TotalEnergies was fined €7.5 million for advertising campaigns stating that its natural gas products contributed to the “energy transition” without disclosing their absolute cost to the planet.

Active Super (Australia, 2025)

Australia’s Federal Court punished the superannuation fund Active Super with A$10.5 million for claiming to exclude fossil fuel and controversial weapons investments while continuing to hold them.

On the other side of the pond, in the United States, a class action filed against Apple in February 2025 alleges that Apple Watch models marketed as “carbon neutral” rely on carbon offset projects that “fail to provide genuine, additional carbon reductions” without independent verification.

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The US Reversal – A Political Complication

Politics has ensnared America’s trajectory. The SEC adopted sweeping climate disclosure rules on 6 March 2024 – one of the most significant regulatory moments in US corporate control history. It’d compelled large companies to show Scope 1 and Scope 2 GHG emissions, governance, risk management, climate-related financial impacts, and material environmental targets.

But in March 2025, the SEC under Acting Chairman Mark T. Uyeda voted to end its defence of those rules, describing them as “costly and unnecessarily intrusive”. The rules, pending litigation in the Eighth Circuit, now face an uncertain future at the federal level.

But the vacuum has not gone unfilled. California’s Senate Bill 253 (SB 253) – signed in 2023 – requires companies with over $1 billion in revenue to disclose Scope 1, 2, and 3 emissions starting with the first reports due in August 2026. This law applies regardless of where a company is headquartered, provided it does business in California. Litigation has delayed the enforcement of early reporting deadlines, but the trajectory is unmistakably toward mandatory hard data.

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ESG Data Technology – AI, Blockchain, and the Digital Backbone

Artificial Intelligence is key to sustainability reporting, capable of pulling complex data from texts, videos, emails, social media, and PDFs through Natural Language Processing (NLP) and consolidating it into a central repository. Machine learning algorithms can detect anomalies, identify missing data points, and flag potential greenwashing risks by analysing ESG performance across companies and their supply chains.

Research from HEC Lausanne shows that using AI to extract information from corporate annual reports accurately evaluates 36 ESG criteria around 80% of the time, allowing for quick and affordable analysis of firms that usually don’t share ESG documents.

Moreover, blockchain’s involvement facilitates tamper-proof logistics and auditable emissions tracking.

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From Greenwashing to Greenhushing

Tightening regulations have yielded a striking irony. Several companies opted to replace saying too much with saying too little. Welcome to “Greenhushing”.

“Greenhushing” describes the deliberate underreporting or avoidance of sustainability progress out of fear that public targets will invite scrutiny, litigation, or political blowback.

A GlobeScan analysis found that in 2025, 36% of consumers reported seeing at least “some” sustainability messaging from brands – down from 49% in 2023. Based on an MIT Sloan Management Review report, 39% of American businesses surveyed had reduced or stopped publicly promoting their sustainability investments in the same year, even while continuing to invest in ESG factors. On its flank, South Pole surveys reveal that 25–58% of firms across sectors are under-communicating their climate strategies, despite having them in place.

The drivers are evident: regulatory fear, political polarisation, and measurement challenges. BP, Jaguar Land Rover, and HSBC are among those that reduced high-profile eco-initiatives while continuing to work towards decarbonisation behind closed doors. A PwC-CDP analysis of roughly 4,000 firms discovered that a measly 16% have dialled back their climate goals, with nearly half holding steady.

Greenhushing is no more virtuous than greenwashing. It delays accountability, erodes trust, and doesn’t protect companies from regulatory risk.

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The Anti-ESG Political Movement

In the United States, a coordinated anti-ESG political movement has emerged with real corporate governance consequences. Anti-ESG groups submitted 20% of all shareholder proposals in the early 2025 proxy season – a five-percentage-point increase from the year before.

Ten state legislatures passed 11 anti-ESG bills in 2025, targeting financial institutions’ ability to consider climate risk. Yet the bark is louder than the bite, as most proposed laws contain escape clauses that diminish their practical impact, and several face legal challenges.

The Conference Board found that 80% of surveyed sustainability executives are adjusting their ESG strategies in response to the Trump administration’s policy shifts, with 52% reworking their sustainability messaging. And the shift includes moving away from the term “ESG” itself. Ninety per cent believe the backlash will persist or intensify over the coming years.

The underlying irony noted by researchers and executives alike: abandoning “ESG” does not drop the material risks of climate change, resource scarcity, or workforce instability.

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What Companies Must Now Do — A Practical Framework

Meeting the new norms requires a structural shift in how sustainability data is generated, governed, and communicated. The journey from greenwashing to measurable impact involves, at minimum:

The ISSB Flexibility Mechanism

As an important nuance, the ISSB allows companies to omit quantitative disclosures on anticipated financial effects if:

• Those effects are not separately identifiable
• If measurement uncertainty is prohibitively high
• Or if the company lacks the skills, capabilities, or resources to estimate them.

The aim is to strike a practical balance between informative value for investors and feasibility for companies. However, this is not a permanent exemption. It is a phased implementation path as reporting mechanisms mature.

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The Proof is Now the Product

ESG 2.0 is not a story about corporate virtue but one centred on infrastructure. For two decades, sustainability functioned primarily as a narrative industry. Companies wrote the stories they wanted to tell because the standards were loose enough to permit almost anything.

What is happening now is the construction of an accountability system with global rules that define what must be disclosed, assurance frameworks that verify those claims, enforcement mechanisms that punish those who mislead, and technology platforms that make the data manageable at scale.

The momentum is real, even if the politics are messy. The SEC’s retreat from climate disclosure at the federal level has not stopped California, which affects thousands of large companies globally. The CSRD’s Omnibus rollback has narrowed the EU’s ambition, but the companies still in scope face genuine, legally enforceable obligations. And the ISSB, with 21 jurisdictions already adopting its standards and 16 more planning to, is quietly constructing the global baseline that regulators everywhere can eventually reference.

Companies that spent the past decade composing the most elegant sustainability narratives may emerge weaker from this transition. But the ones building the data systems, governance structures, and assurance processes definitely will.