H&Z Management Consulting has identified 2026 as a decisive year for environmental, social and governance strategies, as regulatory pressure, investor scrutiny, and customer expectations continue to intensify. In a new white paper, the firm outlines how companies can regain momentum by focusing on a small number of structurally important ESG levers rather than reacting to fragmented demands.

The analysis comes at a time when progress on decarbonisation is becoming increasingly uneven across sectors. Research cited from KPMG shows that since 2005, the UK has reduced carbon emissions in its energy and waste sectors by 64%, while energy excluding electricity has fallen by 46%. However, transport, buildings and industry remain significant laggards, accounting for 60% of total greenhouse gas emissions in 2022, despite seeing comparatively limited reductions. Manufacturing emissions have declined by 36% since 2005, yet 61% of manufacturers remain uncertain about meeting their 2030 targets.

A Challenging ESG Backdrop

Momentum around ESG weakened in 2025 as political and financial headwinds intensified. The return of Donald Trump to the US presidency coincided with a rollback of sustainability initiatives in the world’s largest economy and growing criticism of ESG policies beyond US borders. At the same time, capital flows from major global investors began to slow, just as the transition to net zero entered its most complex and capital-intensive phase.

Against this backdrop, H&Z argues that structured ESG execution will be critical in 2026, helping companies reduce costs, lower complexity, and protect management focus during a period of heightened uncertainty.

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Strengthening ESG Data Governance

Drawing on insights from more than 1,000 experts in its SUSTAINX community, H&Z highlights persistent weaknesses in ESG data governance. Responsibility for ESG data often remains fragmented across functions, with many companies still lacking a comprehensive view of their Scope 3 emissions.

According to the firm, this fragmentation limits both compliance and strategic decision-making. While artificial intelligence and integrated digital tools could improve scalability and accuracy, limited interoperability between systems continues to constrain progress. H&Z notes that companies seeking to move beyond reporting toward decision-relevant ESG insights will need to resolve these structural data challenges and identify scalable value-creation opportunities.

Supply Chain Decarbonisation as a Resilience Lever

H&Z also points to supply chain decarbonisation as a growing strategic priority. Geopolitical tensions, climate-driven disruptions, and structural volatility are already reshaping global supply networks. In this context, resilience is increasingly viewed as a source of competitive advantage. Research from Kearney shows that 74% of business leaders now see resilience as a driver of growth.

H&Z argues that ESG initiatives can play a central role in strengthening supply chain resilience. Although complex data requirements remain a barrier, greater transparency and efficiency across supply networks can help companies manage cost pressures, maintain continuity, and reduce exposure to risk. This operational business case is becoming increasingly important in securing board-level support for ESG investments.

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Navigating Regulatory Complexity with Agility

Despite political pushback against ESG in some markets, 2026 will bring a new wave of regulatory obligations. H&Z highlights several key EU measures, including the EU Deforestation Regulation (EUDR), which tightens due diligence requirements for companies trading in the bloc. The Carbon Border Adjustment Mechanism (CBAM) will introduce carbon-based charges on imports, requiring ongoing emissions reporting, while the Packaging and Packaging Waste Regulation (PPWR) will impose stricter targets on packaging reduction, recyclability, and reuse.

Handled effectively, H&Z suggests, regulatory compliance can support both operational efficiency and reputational strength, rather than becoming a purely defensive exercise.

Focus Over Fragmentation

H&Z Partner Agnes Erben and Managing Partner Sven Steinert conclude that ESG success in 2026 will depend less on ambition and more on disciplined prioritisation. They argue that companies face greater risk from failing to act with focus than from overcommitting.

According to H&Z, the most resilient strategies will be those that secure core business performance while selectively deploying ESG initiatives where they directly improve cost positions, resilience, or customer relevance.

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