Declining sustainability reporting requirements and the rise of AI are driving dramatic changes in the business and sustainability industries.
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In 2023, one of the top concerns for the business industry was sustainability and climate change. In anticipation of new regulations and in response to consumer pressure, companies have begun publishing sustainability reports on a voluntary basis. With that came a new wave of sustainability “experts” looking to capitalize on the demand. As the political climate changed, the sustainability industry collapsed. The sudden rise of AI has caused the industry to abandon sustainability and jump on the latest fad.
One of my practice areas at my law firm is sustainability reporting and climate change regulation. I advise companies on the impact of proposals and help them navigate the changing landscape. I am writing this column as part of that effort. In 2020, I blindly wandered into this field, not as an environmental activist, but as a business owner starting a new career as a lawyer. Over the years, as I have become more deeply immersed in the world of sustainability, my professional circle has narrowed to sustainability experts. My LinkedIn feed is full of “experts” advocating for their passionate opinions on the development of sustainability reporting requirements. Since early 2026, it has shifted to AI.
Just a few years ago, sustainability reporting was considered inevitable. The concept of sustainability reporting, or variations thereof, has been around for decades. After the Paris Agreement was signed in 2015, environmentalists began considering it as a tool to force companies to reduce greenhouse gas emissions in line with the goal of achieving net-zero greenhouse gas emissions by 2050.
The formal process to develop international sustainability reporting standards began at the 2022 Conference of the Parties to the Paris Agreement, COP26, in Glasgow, UK. Even before the standards were developed, companies were rushing to publish sustainability and environmental, social and governance reports to demonstrate their environmental integrity.
In Europe, these voluntary reports focused on environmental and human rights issues. In the US, ESG reporting also focuses on LGBTQ+ and diversity, equity, and inclusion. Initially, these were just marketing materials, often created by marketing departments.
The development of reporting standards has been linked to financial reporting, creating a direct link between a company’s financial viability and its response to climate change. The Big Four accounting firms have launched new sustainability reporting departments. Financial software platform Workiva has also opened a new division. The financial community was heavily invested in these new and anticipated regulations.
It has been declared that by 2023, sustainability and ESG reporting will be “ here to stay ” and become part of business. The International Financial Reporting Standards Board has published sustainability reporting requirements. The EU’s financial regulator, the European Financial Regulation Advisory Group, has published the first stage of its sustainability reporting standards. In the United States, the Securities and Exchange Commission has developed climate risk-related reporting rules. At the state level, California has developed climate-related reporting requirements, and other Democratic-controlled states have followed suit.
Then the 2024 elections took place, and world politics shifted to the right. In the EU, business restrictions associated with the European Green Deal, including sustainability reporting requirements, were the focus of parliamentary elections. Right-wing parties gained seats, while the Greens lost seats. In the United States, President Trump won a second term and the Republican Party took control of Congress. Soon, the new majority began to unravel the requirements for sustainability reporting.
Businesses also responded to political changes. Even before the election, American companies were under fire over their ESG and DEI policies. Republicans repeated the phrase “wake up and go bankrupt,” reflecting the influence of conservative boycotts of companies involved in partisan social policies. Significant legal questions also arose regarding whether ESG violates fiduciary duty laws and whether DEI is discriminatory. After the election, companies began eliminating their DEI teams following threats from the Justice Department and states.
With the reversal of sustainability reporting requirements, companies have downsized their sustainability teams, often placing them under existing departments with limited scope. Companies that have voluntarily published sustainability and ESG reports every year since FY2021 have stopped doing so from FY2025. The four major accounting firms changed the subject. Workiva has also shifted its focus. The 2024 Amplify conference focused on sustainability and ESG reporting, but the 2026 conference barely mentions it.
We will see this in the 2026 election cycle as well. In 2024, Florida Governor Ron DeSantis initially campaigned on fighting ESG as his presidential campaign, but has since shifted his focus. Republican governors were vying to be seen as leaders on the issue. ESG, sustainability, and climate change are not mentioned in the 2026 Republican primary for Florida governor. Rep. Byron Donald, the presumptive Republican candidate, has been involved with the issue long before it became mainstream, but he hasn’t made it part of his campaign. The most debated issue this week revolves around AI data centers, with each candidate trying to take the position most opposed to AI data centers.
For sustainability proponents and opponents, the next battle is in the courts. The International Court of Justice’s 2025 Advisory Opinion on States’ Obligations on Climate Change laid the legal basis for adding teeth to the Paris Agreement. A recent vote by the United Nations General Assembly reinforced the ICJ opinion. Environmental groups will now take the issue to court. Lawsuits have already been filed against major greenhouse gas emitters and the oil industry. I expect similar legal action against the state in the near future.
It is only a matter of time before environmental activist groups take legal action to the European Court of Justice or the European Court of Human Rights, claiming that the Corporate Sustainability Reporting Directive’s reductions in sustainability reporting obligations violate the Paris Agreement commitments. They may succeed given the prior opinions of the ECJ and ECtHR.
However, courts move slowly and involvement in the process is limited to lawyers. There is no quick turnaround that would bring back sustainability reporting.
The sustainability industry is in rapid decline, and the industry’s response is reminiscent of sports. In American sports, the term “fair-weather fan” is used. I’m a big fan of college sports. Specifically, the University of Florida Gators men’s basketball team. Despite living two hours from the arena, he has only missed a handful of home games in his 20 years as a season ticket holder. During that time, the program hosted three national championships. We also slumped for years and were miserable attending games. Those of us who remain faithful are called die hards.
Then there are sunny weather fans. They show up when their team is winning. They enjoy participating in successes, but do not persist during difficult times. They often change teams based on who is winning. Someone who was a Gator when they won a national championship, suddenly becomes a rival team’s runner when they’re on a winning streak.
A similar exodus is occurring in the sustainability industry. More and more people are changing teams because there are no more jobs available and there is a significant loss of interest. A new catchy topic is AI. Everyone seems to have passionate opinions about how AI can be used, its risks, and its benefits. Just including AI in the title can make your readers feel better.
The irony of this change is the impact AI will have on the environment. Sustainability and the Paris Agreement focus on reducing energy consumption and moving towards net-zero greenhouse gas emissions. AI consumes large amounts of energy and clean water.
AI also poses tangible financial risks to businesses. Famously, a company recently spent $500 million in one month using Claude’s AI. Democratic U.S. Sen. Elizabeth Warren has begun pushing for mandatory sustainability reporting formats for the use of AI. A suggestion I might have made in 2023.
The transition from sustainability expert to AI expert is like becoming a fan of a rival team. It may feel good to be on the latest trend, but enthusiasts will remember you when you try to come back. There are definitely still some die-hard people in the sustainability industry, mostly made up of environmental activists. They continue to champion the cause of climate change and a clean environment, while others run with the AI trend. They are quick to remind us that the sustainability industry has been through these downturns before and, like the housing market, will bounce back when times change. It is unclear how long the sustainability recession will last, but it will probably be several years.
