Navigating ESG in 2026: Regulation, Data and Business Value
Navigating ESG in 2026: Regulation, Data and Business Value
The ESG landscape heading into 2026 is shaped by growing opportunities and expectations, along with ongoing regulatory change. Transparency and credible data are increasingly important as regulators, investors, and customers continue to raise the bar on what responsible practices look like. At the same time, many organisations are embedding ESG into core decision-making to manage risk, reduce costs and strengthen competitiveness.
Below, we highlight what businesses should be preparing for in 2026, with a particular focus on the practical implications for SMEs.
ESG reporting reforms & the push for global consistency
In 2025, political pushback in the US and delayed progress towards mandatory reporting in the EU caused a stir. The EU delayed reporting deadlines under the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), increased size and turnover thresholds for reporting, and simplified the requirements (Johnson, 2025). At the same time, more countries adopted the International Sustainability Standards Board (ISSB) framework, part of a longer-term move towards more standardised ESG reporting. This will continue this year, with the UK planning to publish final UK Sustainability Reporting Standards (UK SRS) early in 2026, in line with ISSB standards, for voluntary use (Department for Business and Trade, 2026). This will impact large and UK-listed companies in the first instance, but trickle-down to SMEs is inevitable.
Stakeholder pressure is driving ESG transparency & data-backed claims
Even as some reporting requirements are deferred or diluted, investors, consumers and supply chain partners continue to push for transparency (KPMG, 2025). Amid greenwashing concerns, credible, data-backed ESG information is becoming critical for building trust with stakeholders, and many businesses are choosing to move ahead with ESG reporting even where it is not yet legally required (PwC, 2025). For SMEs, this does not mean producing overly complex reports, but it does mean being clear and accurate in ESG communications. Investing in reliable data collection now can help smaller businesses respond confidently to questions from stakeholders, while reducing the risk of unintentional greenwashing.
Explore more: Request the materials from our ESG Communications & Reporting webinar here.
Sustainability & ESG data are delivering value across the business
Beyond compliance, ESG is increasingly being embedded throughout organisations, with ESG data being used to inform areas such as business strategy, supply chain management, workforce planning, marketing, and risk management (Capgemini Research Institute, 2025; Deloitte, 2025; PwC, 2025). A recent survey by Deloitte (2025) showed that 81% of business leaders are transforming their business model or embedding sustainability throughout their organisations and 65% are seeing returns on their actions. For SMEs, this reinforces an important message for 2026: reporting ESG is a practical business tool and collecting data early on can help you reduce costs and stay competitive.
AI & digital tools: making ESG data more accessible & actionable
To keep up with regulatory expectations and harness the business benefits of ESG, many organisations are taking a fresh look at how they gather and manage sustainability data. Companies are increasingly investing in ESG-focused software and AI tools to centralise data, improve efficiency, get clearer insights, and reduce the manual burden associated with reporting (McKinsey & Co, 2025; KPMG, 2024; ICAEW Insights, 2024). Frequent applications include practical tasks like drafting and summarising disclosures, identifying ESG risks and opportunities, and collecting and validating data from multiple systems. However, while the use of AI for sustainability reporting almost tripled over the past year, most companies are still in early stages of adoption (PwC, 2025; McKinsey & Co, 2025).
Managing the ESG risks of AI
Alongside these opportunities, AI brings new environmental, social and governance risks. Less than half of companies have robust governance frameworks in place to manage AI-related risks, and many do not consider factors such as energy use, carbon footprint or wider societal impacts when deploying AI systems (AICDI, 2025). The key message for 2026 is to adopt AI thoughtfully. Used well, AI can make aspects of business more efficient. However, businesses will need to balance innovation with clear governance and oversight to build trust and ensure responsible use.
Workplace wellbeing: offering meaningful, accessible support for employees
Workplace wellbeing is a core part of the social dimension of ESG and organisations which make it a priority are better positioned to retain staff, improve productivity and build long-term resilience (World Economic Forum, 2025). However, while more companies are developing workplace wellbeing strategies, various recent studies indicate that staff engagement is on the decline, particularly among managers, and that stress and mental health related illness has increased in recent years (CIPD, 2025; Gallup, 2025; Great Place To Work®, 2025).
For companies wanting to build a thriving workforce, understanding and addressing the stressors impacting their teams as well as reviewing the accessibility and impact of their wellbeing initiatives and staff benefits will be crucial as employees navigate stress in their personal and professional lives.
Explore more: ESGmark® Wellbeing blogs
Supply chain sustainability under the spotlight
Supply chain risks continue to rise up the ESG agenda, driven by climate impacts, geopolitical uncertainty, and growing expectations around labour standards and environmental performance. Larger organisations are increasingly asking suppliers for sustainability data, meaning SMEs often face ESG requirements indirectly through their customers, even if they themselves are not directly in scope of supply chain regulations. Therefore, being able to provide basic, credible sustainability information is becoming a necessity and those that proactively collect and manage ESG data are better positioned to respond to supplier questionnaires, tender requirements and customer expectations, while identifying risks and opportunities within their own supply chains.
Explore more:
· Read: Why building resilient, responsible supply chains is ESG best practice for SMEs
· Download: Auditing Your Supply Chain: ESGmark® Guide
· Watch: Supply Chain & ESG webinar
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Sources:
Capgemini Research Institute (2025). A world in balance 2025: Unlocking resilience and long-term value through environmental action. [online] Capgemini. Available at: https://www.capgemini.com/insights/research-library/sustainability-trends-2025/.
Chartered Institute of Personnel and Development (CIPD) (2025). Health and wellbeing at work. [online] CIPD. Available at: https://www.cipd.org/uk/knowledge/reports/health-well-being-work/.
Deloitte (2025). 2025 C-suite sustainability report: United Kingdom insights. [online] Deloitte. Available at: https://www.deloitte.com/uk/en/issues/climate/c-suite-sustainability-report.html.
Department for Business and Trade (2026). UK Sustainability Reporting Standards. [online] GOV.UK. Available at: https://www.gov.uk/guidance/uk-sustainability-reporting-standards.
Gallup (2025). State of the Global Workplace 2025. [online] Gallup. Available at: https://www.gallup.com/workplace/349484/state-of-the-global-workplace.aspx.
Great Place To Work® (2025). Wellbeing at Work in the UK: 2025. [online] Great Place To Work®. Available at: https://www.greatplacetowork.co.uk/resources/workplace-wellbeing-report-2025.
ICAEW Insights (2024). How AI is blazing a trail in ESG reporting. [online] www.icaew.com. Available at: https://www.icaew.com/insights/viewpoints-on-the-news/2024/mar-2024/how-ai-is-blazing-a-trail-in-esg-reporting.
Johnson, L. (2025). EU legislators reach agreement to simplify sustainability reporting. [online] ESG Dive. Available at: https://www.esgdive.com/news/european-parliament-council-reach-agreement-simplify-scope-csrd-csddd-omnibus-eu/807430/.
KPMG (2024). The ESG equation: Responsibility seeds profitability. [online] KPMG. Available at: https://kpmg.com/us/en/articles/2024/esg-equation-responsibility-seeds-profitability.html.
McKinsey & Co (28AD). Superagency in the workplace: Empowering people to unlock AI’s full potential. [online] McKinsey & Co. Available at: https://www.mckinsey.com/capabilities/tech-and-ai/our-insights/superagency-in-the-workplace-empowering-people-to-unlock-ais-full-potential-at-work?stcr=948C71CCACAE4E57ACC50D4F4C9D1072&cid=eoy_2025-eml-nsl-ttn-mgp-glb--&hlkid=da2e340d420f49e4834fce6d547d42d3&hctky=15152634&hdpid=6dd74dc3-b261-436b-ab30-671222e64945.
PwC (2025). Global Sustainability Reporting Survey. [online] PwC. Available at: https://www.pwc.com/gx/en/issues/esg/global-sustainability-reporting-survey.html.
The Thomson Reuters Foundation’s AI Company Data Initiative (AICDI) (2025). AI governance gaps are creating ESG risks, world’s largest dataset finds - AICDI. [online] AICDI. Available at: https://aicdi.trust.org/ai-governance-gaps-are-creating-esg-risks-worlds-largest-dataset-finds/.
World Economic Forum (2025). Thriving Workplaces: How Employers can Improve Productivity and Change Lives. [online] Available at: https://www.weforum.org/publications/thriving-workplaces-how-employers-can-improve-productivity-and-change-lives/.