Sustainability has become a significant challenge for organizations today, presenting itself on two fronts. Companies face external pressures from markets, regulations, and increasingly complex supply chains. Simultaneously, they must navigate internal barriers related to fragmented data, outdated systems, and inefficient processes.
On the external front, costs and risks are escalating rapidly, particularly across global supply chains. Carbon pricing is a major driver of these rising costs. In 2024 alone, global carbon pricing schemes, including emissions trading systems and carbon taxes, resulted in more than $100 billion in costs worldwide. Carbon pricing coverage continues to expand; there are now approximately 80 carbon pricing instruments in operation globally, covering 28 percent of global emissions, compared to just 5 percent in 2005.
In Europe, regulatory pressure is set to intensify. From 2026, the EU Emissions Trading System will fully include maritime transport and begin phasing out free allowances for industrial sectors and aviation. A new ETS, known as ETS 2, will follow in 2027, covering buildings, road transport, and smaller industries, with preparation and reporting starting earlier. In parallel, the EU Carbon Border Adjustment Mechanism will move into its paying phase from 2026 or 2027, depending on final EU decisions. Similar developments are underway elsewhere, including the UK CBAM planned for 2027. These changes are expected to drive a sharp increase in compliance costs.
Beyond carbon, other environmental and social costs are also rising. In Spain, taxes on non-reusable plastic packaging generated €591 million in 2023, while in the UK, Extended Producer Responsibility schemes are expected to raise £1.6 billion between 2025 and 2030. Poor occupational safety and health practices are estimated to cost the global economy around $3 trillion per year, equivalent to 4 percent of global GDP. The number of ESG-related regulations and standards worldwide has grown by nearly 700 percent since 2000, creating a much more demanding compliance environment.
Many companies face significant internal barriers. Sustainability data is often fragmented across systems, with heavy reliance on manual processes. This leads to long reporting cycles, higher error rates, and limited confidence in results. Research shows that most organizations still spend relatively modest amounts on sustainability reporting, yet nearly 90 percent expect AI to have a material impact on how sustainability reporting is delivered in the coming years, highlighting both the challenge and the opportunity.
This creates constant tension for sustainability teams. They are expected to deliver timely reporting, ensure regulatory compliance, and support sustainability targets, all while working with incomplete data, siloed systems, and high manual effort.
Finally, stakeholder expectations reinforce this pressure. Investors increasingly factor ESG, especially climate change, into their decisions. A majority of European investors now operate under ESG-based investment mandates, routinely analyze emissions data, and assess net-zero commitments. Climate change consistently ranks as the most important ESG factor influencing investment decisions.