A new study from King’s Business School and The University of Edinburgh Business School reveals that only 42% of global ESG and sustainability policies are mandatory, reflecting a shift towards voluntary regulations. The 2024 Carrots & Sticks report shows a decline from 2023, when 44.8% of policies were mandatory, while 55.2% were voluntary.
Carrots & Sticks is the world’s most comprehensive database of ESG and sustainability policies, containing 2,677 policies from over 130 countries, nearly 80 international and regional organisations, and 38 languages, spanning from 1897 to the present day.
The research was conducted by Dr Robyn Klingler-Vidra, Vice Dean for Global Engagement at King’s Business School, King’s College London, and Dr Adam William Chalmers from the University of Edinburgh Business School.
Mandatory ESG policies legally require businesses to meet specific sustainability standards, enforced through laws and regulations. Voluntary policies, however, provide guidelines, frameworks, and recommendations without legal obligations.
Before 2015, the majority of ESG policies— 52% —were mandatory. However, since the introduction of the United Nations Sustainable Development Goals (SDGs) in 2015, voluntary ESG policies have increasingly dominated the regulatory landscape.
Despite widespread efforts to integrate sustainability into corporate governance, the shift towards voluntary ESG frameworks has led to concerns over regulatory inconsistency and accountability gaps.
The finance and insurance sectors, along with manufacturing-related industries, face the most stringent sustainability disclosure requirements. These regulations mandate that companies report and disclose their ESG practices, environmental impact, and corporate sustainability efforts.
Dr Chalmers said, “The global ESG policy landscape is highly varied, reflecting different priorities and levels of commitment to sustainability across countries and industries.”
Dr Klingler-Vidra said, “While progress has been made in integrating ESG considerations into business practices, the decreasing number of mandatory policies and standardised guidelines continues to challenge global efforts to drive meaningful sustainability outcomes.”
Carrots & Sticks was first launched in 2006 as a collaborative initiative between the Global Reporting Initiative (GRI), the UN Environment Programme (UNEP), and KPMG International. The initiative has since tracked the evolution of global sustainability reporting standards. This year’s report underscores the growing reliance on voluntary ESG frameworks, highlighting a global trend towards self-regulation and flexibility despite increasing calls for stricter mandatory ESG compliance.
