Compliance & Legal

Keeping compliance and legal frameworks resilient

Indirect exposure arises from climate impacts triggering regulatory change, enforcement actions, or legal claims. Organisations with complex global operations, fragmented compliance systems, or limited regulatory expertise are more sensitive to evolving requirements.

Non-compliance in one area (e.g., emissions reporting or supply chain due diligence) can lead to broader legal and reputational consequences across markets.

Vulnerabilities

What are the climate and nature risks to compliance and legal functions?

The climate and nature pressures that can increase legal exposure, compliance complexity, and regulatory uncertainty.

Climate change, biodiversity loss, ecosystem degradation, and accelerating policy responses are reshaping the legal and regulatory environments in which businesses operate. New disclosure requirements, supply chain due diligence obligations, emissions regulations, biodiversity reporting expectations, and environmental liability regimes are increasing the volume and complexity of compliance requirements.

At the same time, climate-related litigation is expanding globally, with legal actions increasingly targeting not only environmental performance, but also corporate governance, risk disclosures, and transition planning. Businesses may face regulatory penalties, legal disputes, or enforcement action where systems fail to keep pace with evolving requirements or where environmental risks are not adequately identified and managed.

What are the factors affecting businesses' exposure to compliance and legal disruption?

How exposed a business is to evolving environmental regulations, legal obligations, and enforcement risks.

Businesses operating across multiple jurisdictions, sectors, or value chains are often more exposed because environmental regulations and reporting requirements are evolving at different speeds. Companies with extensive international operations, climate-sensitive supply chains, or significant environmental footprints may face overlapping obligations covering emissions, nature impacts, product standards, human rights, and due diligence.

Exposure also increases where operations depend on jurisdictions experiencing rapid policy change as governments respond to climate and biodiversity commitments. As regulations become more complex and interconnected, maintaining oversight across all legal requirements becomes increasingly challenging.

What affects a business's sensitivity to compliance and legal risks?

How much a business relies on stable regulation, effective governance, and legal certainty.

Businesses are more sensitive where compliance systems are fragmented, regulatory monitoring is limited, or governance structures struggle to coordinate responses across functions. Organisations with limited in-house legal expertise, inconsistent reporting systems, or poor environmental data may find it more difficult to respond to new requirements or demonstrate compliance.

Sensitivity is also heightened where business models depend on environmental claims, sustainability-linked finance, public procurement contracts, or investor confidence, because inaccuracies or governance failures can quickly generate legal and reputational consequences.

What are the knock-on effects of compliance and legal disruption?

How regulatory breaches and legal challenges can create wider business impacts.

Compliance failures rarely remain confined to legal departments. Regulatory breaches can increase operational costs, delay projects, restrict market access, and trigger enhanced regulatory scrutiny across multiple jurisdictions. Legal disputes may weaken investor confidence, increase borrowing costs, and create reputational damage that affects customers, partners, and employees.

Over time, repeated compliance failures can reduce strategic flexibility and divert resources away from innovation and adaptation, making it harder for businesses to respond to future climate and nature risks.

Solutions

How can businesses keep compliance and legal frameworks resilient?

Businesses are responding by centralising global compliance systems, proactively tracking climate-related regulatory changes across markets, investing in specialised ESG and legal expertise, and strengthening supply chain due diligence to mitigate the risk of enforcement actions and litigation.

Examples of business adaptations and responses

Tony’s Chocolonely

Strengthening deforestation due diligence in cocoa sourcing

Through Tony’s Open Chain, Tony’s Chocolonely combines farm mapping, environmental screening and follow-up investigations to manage deforestation exposure and strengthen preparedness for environmental due-diligence requirements.

Beiersdorf

Redesigning formulations to manage wastewater and regulatory risk

Beiersdorf is screening ingredients and reformulating European products to reduce persistent substances entering wastewater, addressing environmental impacts while preparing for tighter pollution controls and producer-responsibility requirements.