Manufacturers are navigating a rapidly evolving landscape of sustainability regulations and increasing pressure for transparency. Recent developments, such as the EU's Corporate Sustainability Reporting Directive (CSRD), California's climate reporting bills (SB261 & SB253), and the rise of Extended Producer Responsibility (EPR) laws in the U.S., are reshaping industry practices. To remain competitive and compliant, manufacturers must adapt their strategies, adjust operations, and embrace more robust reporting practices.
And despite this year’s historic deregulation by the Environmental Protection Agency, most manufacturers are holding firm (79%) or expanding (10%) their U.S.-based sustainability commitments. In a recent report on geopolitical impacts, sustainability actually increased in relevance from 2023. “Our sustainability efforts are driven more by customer and internal stakeholder expectations than by regulation,” said one manufacturing leader. “Even if rules change, the business case remains.”
To explore how the industry is managing the change, Manufacturers Alliance surveyed more than 100 global industry leaders. One-third report annual revenues from $1 billion to $3 billion, with another 47% in the $3 billion to $10 billion category, and the majority come from machinery, fabricated metal, electrical equipment, and transportation equipment manufacturing subsectors. Using the survey data, this article explores how manufacturers are adapting to regulatory change, the obstacles they face, the ways they are strengthening sustainability commitments, and how technology is helping streamline compliance.
Strong Commitment to Sustainability
Source: Manufacturers Alliance survey July 2025.
Evolving Frameworks and Compliance Challenges
Sustainability reporting has transitioned from voluntary initiatives to compulsory legal requirements. The EU's CSRD mandates comprehensive disclosures on environmental, social, and governance (ESG) factors, impacting a broader range of companies. It introduces the Double Materiality Assessment (DMA) for companies to identify their positive and negative impacts on people and the environment and also consider how these factors influence the company’s financial performance and position.
Similarly, California's SB261 requires businesses to assess and disclose climate-related risks, while various U.S. states are implementing EPR laws to hold producers accountable for product life cycles. Conversely, many states have passed laws restricting consideration of ESG factors. International measures like the Carbon Border Adjustment Mechanism (CBAM) add further complexity for exporters. All of this creates a difficult landscape for manufacturers to report, track, and comply.
Our survey highlighted the top three regulations that impact member companies as the California climate reporting bills, CSRD, and SEC climate-related disclosures. Additionally, when asked about preparations for these regulations, more than 75% of survey respondents reported actively preparing for CBAM (81%), California climate reporting bills (79%), and CSRD (76%).
ESG Regulations Affecting Manufacturers
Source: Manufacturers Alliance survey July 2025.
Manufacturers are mixing and matching frameworks—Global Reporting Initiative (GRI), Sustainability accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosures (TCFD), Carbon Disclosure Project (CDP), European Sustainability Reporting Standards (ESRS)—while anticipating eventual alignment under the International Sustainability Standards Board (ISSB). The effectiveness of implementation often hinges on how sustainability responsibilities are structured internally or the company’s goals.
One VP of corporate sustainability noted: “We’re not under EU or SEC mandates, but our customers still expect detailed sustainability reporting. We choose the frameworks that best serve both compliance readiness and market transparency.”
Some organizations take a different approach, prioritizing action over ratings. “We don’t follow the standard GRI script,” said one director of sustainability. “We focus on achievable improvements—energy savings, waste reduction, and social impact—rather than chasing scores from investment bodies.”
Accountability often resides with senior leadership, which directly influences the quality and credibility of sustainability reporting. In some companies, sustainability strategy is led by the director of environmental sustainability while compliance oversight sits with the chief compliance officer, ensuring that both strategy and regulatory alignment are addressed. In other cases, the chief operating officer assumes primary responsibility, supported by the CEO, which can accelerate cross-functional coordination and resource allocation. Since sustainability reporting often requires input from multiple departments and clear decision-making authority, having senior leaders accountable helps ensure timely, consistent, and accurate disclosures that meet evolving regulatory expectations.
Our research found that for publicly traded manufacturers, disclosure requirements drive staffing expansion—adding climate reporting experts, supply chain sustainability leads, and dedicated sustainability analysts. These teams work closely with engineering and finance to track environmental performance and meet stakeholder expectations.
Among survey respondents, the three departments most actively involved in sustainability initiatives were legal (82%), sustainability (79%), and environmental health & safety (EHS) (73%). Human resources was also significantly involved at 66%, followed by supply chain (62%) and finance (59%).
Many manufacturers recognize the need for broader cross-functional collaboration that includes engineering, IT, procurement, and other departments to address the increasing complexity of Scope 3 emissions calculations and sustainability reporting requirements like CSRD.
The survey also highlighted the key challenges manufacturers face in sustainability compliance: regulatory complexity and ambiguity was the top concern among 81% of respondents, followed by ensuring data accuracy and reliability (69%), lack of clear guidance (68%), and the high cost of compliance (61%).
As one respondent shared: “We’ve got some old manufacturing plants that don’t have the level of data we need… I’m always asking for more accurate, precise data so that I can help operations make improvements and hit their goals.”
Challenges in Complying with ESG Regulations
Source: Manufacturers Alliance survey July 2025.
This complexity reflects a broader global trend. The shift in global consensus about climate change is fragmenting legal frameworks and heightening compliance risk, according to one report. Manufacturers must now navigate overlapping international requirements such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and state-level mandates like California’s climate laws, creating a patchwork of obligations that can vary significantly by jurisdiction. As Harvard Law School Forum on Corporate Governance notes, these evolving standards are increasing the legal stakes of ESG reporting, with regulators moving beyond guidance to enforcement, and stakeholders expecting more consistent, auditable disclosures.
Leveraging Technology for Compliance
Manufacturers are accelerating investment in technology to meet escalating sustainability reporting requirements because the challenges of manually managing vast sets of environmental data have quickly become unsustainable.
Legacy manual methods for sustainability reporting simply don’t scale in today’s regulatory environment. Relying on spreadsheets, paper records, and ad hoc processes often leads to fragmented, error-prone data that cannot withstand the scrutiny of assurance requirements. One real-time manufacturing analytics company argues that automated platforms are essential for centralizing and streamlining environmental metrics, enabling organizations to track and analyze performance in real time. Similarly, another source highlights that the manual collection of ESG data is not only time-consuming but also risks missing critical insights, something that can compromise compliance readiness.
To achieve audit-ready disclosures, manufacturers must also bridge the gap between their operational technology (OT) and enterprise IT systems. Real-time environmental data often resides within OT systems—such as plant-floor sensors, smart meters, and process control software—while enterprise resource planning (ERP) systems handle corporate-level reporting and governance. The Sustainability Directory notes that without this convergence, manufacturers risk creating information silos that delay reporting and reduce visibility into sustainability performance across the value chain.
Automation is becoming the linchpin in addressing this challenge. APIs an now automatically extract utility, emissions, and supply chain data from ERP, EHS, and MES systems, eliminating hours of manual entry. loT-enabled smart meters and sensors feed real-time environmental data directly into reporting platforms, while robotic process automation (RPA) handles repetitive compliance tasks such as data validation and framework alignment. These tools not only improve accuracy but also create traceable, auditable records that withstand external assurance.
Manufacturers are in various stages of making these shifts. One survey respondent was actively evaluating software systems to automate reporting and create auditable reports compliant with regulations like the CSRD. Another company was already using a platform that leverages AI to capture utility data, including electricity, natural gas, propane, and fuel, then automatically generates reports on energy usage and emissions, enabling efficient tracking by site and state. Real-world implementations show how emerging tools can both improve visibility and prepare companies for increasing regulatory scrutiny.
Beyond these individual cases, leading ESG reporting platforms, such as Workiva, IBM Envizi, and Persefoni, are embedding automation, AI, and integrated frameworks directly into their systems. These platforms allow manufacturers to pull data automatically from multiple sources (finance, HR, supply chain, EHS), map it to global reporting standards, and generate assurance-ready disclosures with built-in audit trails.
AI-powered sustainability platforms offer a path forward by bringing scalability, real-time insights, and automated validation to sustainability data management. These tools can ingest data from multiple systems, unify it for consistent framework alignment, and provide traceability to satisfy assurance requirements. In addition, integrating IT and OT enables minute-by-minute visibility into plant operations, helping companies optimize environmental performance while ensuring regulatory compliance. The result is a reporting infrastructure that not only meets today’s requirements but can adapt quickly as rules evolve.
With improved visibility into sustainability performance, manufacturers are also adapting capital investment processes to better align with compliance and environmental objectives. One company now evaluates environmental and safety projects using risk and value scores rather than traditional internal rate of return (IRR), ensuring high-priority sustainability initiatives receive the necessary funding. Another executive highlighted the challenge of balancing upfront investment costs with long-term environmental and financial returns, emphasizing the importance of selecting projects that deliver multiple benefits. A notable example is a project to improve metal melting efficiency, which simultaneously reduces costs, energy consumption, and carbon impact.
The Path Forward
The manufacturing sector is actively grappling with a rapidly changing regulatory landscape. The most significant challenges are regulatory complexity and the need for accurate, reliable data. A leading industry analysis from the Harvard Law School Forum on Corporate Governance stresses that as new ESG regulations impose higher compliance burdens, companies must proactively integrate regulatory requirements into broader sustainability strategies. It underscores the importance of governance and data management in bringing capital decisions in line with emerging regulatory realities and business goals.
Manufacturers that proactively engage with evolving regulations and invest strategically in technology and processes can move beyond compliance, creating long-term value and maintaining a competitive edge. The regulatory labyrinth is not a dead end; it's a call to innovate.
One leading manufacturer shared, “Our core goals haven’t changed. We’re still focused on environmental stewardship and inclusion and diversity—we’re just more deliberate in how we communicate about them.”
Members Only
For a deeper dive into which departments are most involved in sustainability initiatives, the roles they play, and the specific approaches manufacturers are taking to prepare for regulations, members can review graphs from our survey on these topics. This data provides a detailed look at how manufacturers are adapting their teams and strategies.
Want More?
Tap into experts and colleagues in the industry to discuss broader issues at ESG in Manufacturing 2025 in Boston from September 16-18. This event is open for you and your team members to connect on ESG commitments and culture, the current regulatory environment, Scope 3 emissions, PFAS updates, greenwashing litigation, supply chain assessments, ESG talent, and more. View the full agenda.
