Introduction

Sustainability reporting was intended to translate organisational practices regarding environmental, social and governance (ESG) factors into standardised disclosures. However, this maturation has expanded rather than resolved the ambiguity surrounding directors’ ESG duties. This paper identifies a “disclosure-duty feedback loop” grounded in two assumptions: company law steers directors through process rather than outcomes, and liability for failing to attend to ESG risks like climate change is constrained by standards of care and foreseeability. Mandatory reporting requires boards to establish and oversee systems for reliable disclosure, drawing them into the governance of underlying subject matter. Each report then becomes a benchmark against which subsequent board conduct is assessed, causing the obligation to ratchet upward as disclosure becomes mandatory and assured.

The ESG disclosure regulatory landscape

ESG disclosure has undergone a structural transformation since 2022, shifting from voluntary commitments to authoritative mandated frameworks. A three-part configuration has emerged globally. First, a large group including Singapore and the United Kingdom (UK) has converged on the International Sustainability Standards Board (ISSB) standards as a baseline. Adopting jurisdictions for these standards represent over 60 percent of global GDP. The UK published UK SRS S1 and S2 on 25 February 2026, while the Financial Conduct Authority (FCA) is consulting on mandatory application from financial years beginning 1 January 2027.

Second, the European Union (EU) remains the most expansive regime through the Corporate Sustainability Reporting Directive (CSRD). However, the Omnibus I Directive, in force from 18 March 2026, narrowed the scope while retaining double materiality. Thresholds now apply to undertakings with more than 1,000 employees and turnover above €450 million. Third, the United States (US) has withdrawn its federal mandate, but California has advanced extraterritorial requirements via SB 253 and SB 261, requiring Scope 1, 2, and 3 emissions disclosures from companies doing business in the state.

From process modification to the feedback-loop

Company law influences ESG governance by shaping decision-making processes rather than dictating outcomes. Courts generally review the process by which directors make decisions rather than the merits. The feedback loop operates through three doctrinal routes: the fiduciary duty to act in the interests of the company, the duty of care, and the duty of loyalty. In the UK, three channels exist: the s 172 fiduciary duty, the s 172(1)(d) obligation to have regard to the community and environment, and the s 174 duty of care. Singapore has two channels, while Delaware effectively has one due to universal exculpation for breaches of the duty of care.

Application of the loop to the disclosure regimes

The loop inherits limits from existing duties regarding standards, foreseeability, and enforcement. While mandatory reporting makes the duty to supervise bite harder, it does not solve the problem of linking board decisions to particular climate harms. For multinational dual reporters, the challenge is governing to the outer edge of divergent obligations. A structural gap exists where listing and incorporation jurisdictions differ; for instance, a Delaware-incorporated company listed on the Singapore Exchange (SGX) faces a loop that must cross jurisdictional divides, as duties are governed by the law of incorporation while disclosure follows listing rules.

Reform proposals

The paper proposes four reforms to discipline sustainability governance without making directors guarantors of ESG outcomes. First, ESG oversight duties should be clarified to state that boards must establish systems reasonably designed to produce reliable information. Second, safe harbours should be created for good-faith forward-looking and Scope 3 disclosures to prevent defensive boilerplate. Third, assurance should be calibrated to duty exposure, with limited assurance applied where reasonable assurance is not yet feasible. Finally, jurisdictions should adopt mutual recognition and interoperability, accepting that a board reporting diligently under one recognised equivalent regime has discharged its oversight duty.

Conclusion

Sustainability reporting reshapes directors’ duties by activating existing obligations rather than creating new ones. The paradox is not the absence of standards, but their divergence and overlap. The loop operates through domestic doctrine, requiring diligent boards to govern to the outer edge of changing obligations across different regimes. Ultimately, the duty of care is expected to perform the majority of the legal work in this evolving landscape.