Climate regulation is only going to get tighter in 2026

As such, 2026 will bring further rules for companies to engage with covering sustainability reporting, mandatory transition plans and Environmental, Social and Governance (ESG) ratings.

Increased due diligence on environmental and human rights impacts in the supply chain are making these issues critical for larger businesses to prioritise and strategise in 2026 and beyond.

While there has been a degree of geopolitical pushback in relation to climate regulation policies, this is neither globally uniform nor as substantial as some coverage may indicate. Instead, the political environment has become more fractured around the issue, with greater divergence between countries in their implementation of climate policy – most notably by the current US administration.

There is no significant evidence of a uniform roll back of climate regulation and policy. In fact, a recent global climate policy monitor survey hosted by Oxford University, found there had been an overall increase in regulation and policy, with increasing regulation in many jurisdictions, and increasing judicial scrutiny to implement climate policy.

At the Brazil COP30 climate summit, the achievements were more muted than some hoped for without any agreement on fossil fuel phase out, although some notable progress was made – including to scale up finance for climate adaptation.

There was a consensus that the Paris Agreement’s goal to hold global temperatures to 1.5C above pre-industrial levels would be overshot in the short-to-medium term, but this remains the primary goal which all governments and businesses should work towards at pace.

In the UK, while the roadmap to net zero by 2050 remains legally binding, recent court rulings have exposed gaps in delivery plans, forcing revisions. Political divisions, legal scrutiny and economic constraints have complicated progress even as public opinion still broadly supports climate action.

The Reform party has rejected net zero and is positioning itself as the populist voice against sustainability policy, stating they’d reverse some climate and sustainability laws.

Navigating the reputational and policy challenges the shifting political and cultural views on climate change will be a challenge. This means maintaining a comprehensive understanding of how climate change and environmental standards rules will impact businesses and organisations from a regulatory, commercial and a physical perspective.

Boards will be looking out for climate-related legal risks – including litigation which is increasing significantly – to stay informed of relevant developments and any operational changes which should be considered to reduce the risks and capture commercial opportunities.

Suppliers need to understand their sustainability obligations and how to implement an effective operating model to comply with contractual and regulatory obligations, while purchasers will need to be across the significant shifts in regulation which could increase exposure to risk within the supply chain.

Whilst policy and political uncertainty has grown, the scientific consensus on climate change and its causes remains robust This in part explains that whilst they may speak about it less, businesses and governments remain focused on taking action to address its impacts – and capture the commercial advantages that arise by so doing.

Michael Watson, Partner, Head of Climate & Sustainability Advisory at Pinsent Masons