The decline of sustainability reporting requirements and the rise of AI is causing a drastic shift in the business and sustainability industries.
getty
In 2023, one of the top concerns of the business industry was sustainability and climate change. Anticipating new regulations and responding to consumer pressures, businesses began voluntarily releasing sustainability reports. With it came a new wave of sustainability “experts” looking to capitalize on the demand. As the political climate changed, the sustainability industry crashed. With the sudden rise of AI, the industry has all but abandoned sustainability for a the latest fad.
One of my areas of practice in my law firm is sustainability reporting and climate change regulations. I advise businesses on the impacts of proposals and help them navigate the changing field. As part of that, I write this column. I blindly wandered into the field in 2020, not as an environmental advocate, rather as a business owner starting a new career in law. Over the years, as I became more ingrained in the sustainability world, my professional circle narrowed to sustainability experts. My LinkedIn feed was full of “experts” and advocates giving hot takes on the development of sustainability reporting requirements. Since early 2026, that has shifted to AI.
Just a few years ago, sustainability reporting was considered an inevitability. The concept of sustainability reporting, or some variation, has existed for decades. Following the 2015 signing of the Paris Agreement, environmental activists started looking at it as a tool to force businesses to reduce greenhouse gas emissions in accordance with a goal of reaching net zero GHG by 2050.
At the 2022 conference of parties of the Paris Agreement, COP26, in Glasgow UK, the formal process of developing international sustainability reporting standards began. Even before the standards were drafted, businesses were rushing to release sustainability reports and environmental, social, and governance reports to show their environmental bona fides.
In Europe, these voluntary reports focused on environmental and human rights issues. In the United States, ESG reports also focused on LGBTQ+ and diversity, equity, and inclusion. Initially, they were little more than marketing materials, often created by the marketing department.
The development of reporting standards was linked to financial reporting, creating a directly link between the financial viability of a company and their responses to climate change. The big four accounting firms launched new sustainability reporting divisions. The financial software platform Workiva also opened a new division. The financial world was investing heavily in these new anticipated regulations.
By 2023, sustainability reporting and ESG reporting was declared “here to stay” and a part of business. The International Financial Reporting Standards Board released their sustainability reporting requirements. The European Financial Regulatory Advisory Group, the EU’s financial regulator, released their first phase of sustainability reporting standards. In the U.S., the Securities and Exchange Commission developed a climate risk related reporting rule. At the state level, California developed climate related reporting requirements, with other Democrat controlled states following suit.
Then the 2024 election cycle happened and global politics shifted to the right. In the EU, the elections for parliament centered on the restrictions on business resulting from the European Green Deal, including sustainability reporting requirements. The right leaning political parties picked up seats, while the green parties lost seats. In the U.S., President Trump won his second term and Republicans gained control of Congress. Soon, the new majorities began unraveling sustainability reporting requirements.
Businesses also reacted to the political shift. Even before the elections, businesses in the U.S. were under fire for their ESG and DEI policies. Republicans echoed the phrase “go woke, go broke” to reflect the impact of conservative boycotts of businesses that got to involved in partisan social policies. Serious legal questions also arose as to whether ESG violated fiduciary duty laws and if DEI is discriminatory. Following the elections, and under threat from the Department of Justice and states, businesses began scrapping their DEI teams.
With the rolling back of sustainability reporting requirements, businesses also downsized their sustainability teams, often rolling them under existing departments with limited scope. Companies that voluntarily released sustainability and ESG reports annually since FY 2021, stopped the practice for FY 2025. The big four accounting firms changed the subject. Workiva also shifted focus. While their 2024 Amplify conference was centered on sustainability and ESG reporting, the 2026 conference barely mentions it.
This can also been seen in the 2026 election cycle. In 2024, Florida Governor Ron Desantis initially made his presidential campaign about fighting ESG, before shifting focus. Republican governors were in a battle to be perceived as the leader on the issue. The 2026 Republican primary campaign for Florida governor hasn’t mentioned ESG, sustainability, or climate change. Congressman Byron Donalds, the presumptive Republican nominee, was involved in the issue well before it was mainstream, but has not made it part of his campaign. The most debated issue this week is over AI data centers, with every candidate trying to position themselves as the most against them.
For sustainability advocates and opponents, the next battle is in the courts. The 2025 International Court of Justice’s Advisory Opinion on the Obligations of States in Respect of Climate Change laid the legal ground work to add teeth to the Paris Agreement. A recent vote by the United Nations General Assembly reinforced the ICJ opinion. Now, environmental advocates will take the matter to the courts. Cases have already been brought against major GHG emitters and the oil industry. I expect we will soon see similar legal action against states.
It is only a matter of time before an environmental activist group brings litigation before the European Court of Justice or the European Court of Human Rights claiming the reduction in the sustainability reporting requirements of the Corporate Sustainability Reporting Directive violates the commitments of the Paris Agreement. Given prior opinions of the ECJ and ECtHR, they may find success.
However, courts are slow moving and involvement in the process is limited to attorneys. There will not be a quick turnaround that revives sustainability reporting.
The sustainability industry is in a free fall and the industry reaction reminds of me sports. In American sports, we use a term: fair weather fan. I am a big fan of college sports. Specifically, the University of Florida Gators men’s basketball team. Despite living two hours from the arena, I have only missed a handful of home games in 20 years as a season ticket holder. During that time, the program has had three national championships. We also had many years of decline where the games were miserable to attend. Those of us that stay loyal are called diehards.
Then there are the fair weather fans. They show up when the team is winning. They enjoy partaking in success, but don’t stick around when times are difficult. Often, they will switch teams based on who is winning. Someone who was a Gator when we won a national championship, suddenly becomes a ran of a rival team when they are on a winning streak.
The sustainability industry is seeing a similar exodus. With the lack of available jobs, and considerable loss of interest, people are changing teams. The new, catchy topic is AI. It seems everyone has a hot take on ways to use AI, the dangers, and the advantages. Even my inclusion of AI in the title will boost readers.
The irony of this shift is the environmental impact of AI. Sustainability, and the Paris Agreement, is focused on reducing energy consumption and moving towards net zero GHG emissions. AI is a massive consumer of energy and clean water.
AI also poses tangible financial risks for a company. Famously, one company recently spent $500 million in one month using Claude’s AI. Democrat U.S. Senator Elizabeth Warren has started to push for sustainability reporting style obligations for AI use. A proposal that I may have suggested in 2023.
Shifting from being a sustainability expert to an AI expert is like becoming a fan of a rival team. It may feel good to be on the latest bandwagon, but the die hards will remember when you try to come back. The sustainability industry definitely still has its die hards, mostly consisting of environmental activists. They continue to champion the cause of climate change and a clean environment, while others run to the AI trend. They will be quick to remind you that the sustainability industry has gone through these downfalls before and, like a housing market, bounce back when times change. How long the sustainability recession will last is unknown, but will likely take years.