The Assumption That Broke: Why Sustainability Reporting Didn’t Follow Europe

For more than a decade, the prevailing assumption in sustainability reporting was straightforward: when the European Union legislates, global markets adapt. This pattern, often observed in areas such as privacy or competition law, led many to expect that Europe’s sustainability reporting framework would eventually become the worldwide reference point.

That expectation is now being quietly overturned.

Across the market, companies, investors, and regulators are converging not around the EU’s reporting model, but around standards developed by the International Sustainability Standards Board (ISSB). Rather than becoming another regional framework, the ISSB has positioned itself as the common language for climate and sustainability disclosure worldwide.

This shift reveals something important about how global governance actually functions when regulatory ambition meets economic reality.

When Ambition Outruns Adoption

Europe’s Corporate Sustainability Reporting Directive (CSRD) represents one of the most comprehensive sustainability disclosure regimes ever proposed. It asks companies to assess sustainability from two directions at once: how environmental and social issues affect financial performance, and how corporate activity affects society and the planet.
In theory, this breadth is a strength. In practice, it has proven difficult to scale beyond Europe.

The directive’s depth, coupled with extensive value-chain requirements, created implementation challenges for many companies, particularly those operating across multiple jurisdictions. Over time, political pressure and concerns about administrative burden led to scope adjustments and phased rollouts, softening the directive’s global influence.

Elsewhere, the regulatory landscape has moved in parallel rather than in unison. In the United States, climate disclosure rules stalled, while state-level initiatives, such as those in California, introduced additional complexity without resolving global alignment.

For multinational organisations, the practical outcome has been a patchwork of expectations: overlapping frameworks, duplicative reporting processes, rising compliance costs, and limited comparability for investors.

Why the ISSB Gained Traction

The ISSB’s growing influence is less about bold promises and more about disciplined restraint.

A narrower, market-tested lens

The ISSB concentrates on information that is financially material to enterprise value. It does not attempt to capture the full universe of social or environmental impacts. This choice aligns with how boards, finance teams, auditors, and capital markets already evaluate risk and performance.

As a result, adoption requires adjustment, not reinvention.

Continuity rather than disruption

Instead of replacing existing practices, the ISSB consolidated widely used private frameworks into IFRS S1 and IFRS S2. For many organisations, this felt like an evolution of current reporting rather than the introduction of an unfamiliar system.

That sense of continuity lowered barriers to entry and accelerated acceptance.

Institutional credibility without political ownership

Operating under the IFRS Foundation, the ISSB benefits from governance structures already trusted in global financial reporting. It carries authority without acting as a regulator, and influence without formal enforcement power.

A neutral platform in a divided world

Crucially, the ISSB is not associated with a single political bloc. It is neither a European export nor a US initiative. Its technocratic positioning has made it easier for governments to align without framing adoption as a loss of regulatory independence.

In a geopolitically sensitive area like climate disclosure, neutrality has become a strategic asset.

From Framework to Baseline

Momentum behind the ISSB has built rapidly. Jurisdictions representing a significant share of global GDP are either adopting ISSB standards directly or aligning national requirements with them.

Support from market institutions has reinforced this trend. Global securities regulators through IOSCO, international policy forums, and large asset managers such as BlackRock and Vanguard have consistently pointed to the need for a common, decision-useful disclosure baseline.

Even within jurisdictions pursuing more expansive reporting regimes, the conversation has shifted toward compatibility. European standard setters, including EFRAG, and US state regulators are increasingly focused on interoperability rather than replacement.

The market signal is clear: the ISSB is becoming the foundation layer on which other requirements can be built.

A Different Model of Global Coordination

What is emerging is not regulatory dominance, but functional coordination.

Where state-led approaches have struggled to scale globally, a credible private standard-setter has been able to align market participants around a shared reference point. The ISSB does not prevent jurisdictions from going further.

Instead, it offers a minimum level of consistency that global capital markets can rely on.

This “baseline-plus” model reflects how governance often evolves in practice: convergence first, differentiation second.

Limits That Remain

None of this resolves every challenge. A focus on financial materiality may leave certain societal or environmental impacts outside formal disclosure. Differences in enforcement and assurance will persist across jurisdictions. Aligning broader European requirements with ISSB-based reporting will require continued coordination and pragmatism.

These questions are not peripheral. They will shape how effective sustainability reporting ultimately becomes.

What This Means for Leaders

The ISSB’s rise is not about winning a regulatory contest. It is about meeting markets where they are.

By prioritising usability, comparability, and institutional trust, the ISSB has succeeded in establishing a global reference point where more prescriptive approaches have struggled. For senior leaders, investors, and policymakers, the implication is clear: in complex global domains, the standards that endure are often those that fit existing decision-making systems rather than those that seek to transform them overnight.

Whether this approach fully captures long-term sustainability risk remains an open debate. But as a mechanism for global alignment, its effectiveness is already evident.