C-suite executives are expected to stay ahead of changing laws and regulations to avoid risks, protect their organizations, and maintain an edge in their industries. This can be incredibly challenging as regulatory changes come from many sources including government legislation, industry standards, and international agreements. Navigating these shifts requires constant vigilance and adaptability, as regulatory frameworks continue to evolve across different jurisdictions. For instance, the General Data Protection Regulation (GDPR), in the European Union, has set a global benchmark for data privacy, prompting the rise of similar laws in other regions. Additionally, environmental regulations are becoming more stringent, driven by global and organizational initiatives to help fight climate change. Initiatives like Corporate Social Responsibility (CSR) are no longer optional but necessitated by society.
Let’s further explore the trends in regulations involving changes in data privacy, environmental sustainability, and corporate governance.
Key Regulatory Changes to Watch
Digital Transformative Technology
With more and more costly data breaches on the rise, regulators worldwide are tightening data privacy laws. For example, the California Consumer Privacy Act (CCPA) and its updates have set landmark standards for data protection in the U.S. The California Privacy Protection Agency (CPPA) also recently released a draft of regulations on artificial intelligence (AI) and automated decision-making technology (ADMT) usage. Even though the regulations are still in development, Matt Kosinski urges organizations to pay close attention to their development because “the state is home to many of the world’s biggest technology companies, any AI regulations that California adopts could have an impact far beyond its borders.” In addition to the CPPA’s draft of regulations on AI and AMDT, the European Union (EU) passed the EU AI Act. According to artificialintelligenceact.eu, “Like the EU’s General Data Protection Regulation (GDPR) in 2018, the EU AI Act could become a global standard, determining to what extent AI has a positive rather than negative effect on your life wherever you may be.”
Environmental Regulations
Organizations face stricter environmental regulations now more than ever with initiatives such as CSR being driven by governing bodies globally. In May 2024, the Council of the European Union adopted the Corporate Sustainability Due Diligence Directive (CSDDD). Anna Hauck offers this summary of the directive, “Once in force and transposed into national laws, the CSDDD will require companies falling within the scope of the law to perform risk-based due diligence, in order to identify and address any adverse impacts on human rights and the environment in their own operations, those of their subsidiaries, and their direct and indirect business partners.” This directive from the EU underscores the rising demand for social and environmental responsibility.
Corporate Governance
Enhanced corporate governance regulations are placing greater emphasis on transparency, accountability, and ethical business practices. The Sarbanes-Oxley Act (SOX) in the U.S. continues to influence corporate governance standards, with recent updates focusing on executive compensation and board diversity. Even though SOX comes from U.S. legislation, it affects companies participating in U.S. stock exchanges. According to an article from RSM, “While compliance with SOX may initially pose challenges, it can also confer a competitive advantage by enhancing transparency, credibility, and investor trust, thereby facilitating access to capital and opportunities for growth.” In addition to SOX, the Corporate Transparency Act (CTA) provides regulations to combat money laundering, terrorism financing, and other illicit financial activities by increasing transparency in corporate ownership. As of January 1, 2024, the Corporate Transparency Act (CTA) requires many U.S.-based and registered companies to report beneficial ownership details to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), regardless of their business activities.
Global Trade Compliance
Trade regulations are also adjusting with new tariffs, sanctions, and trade agreements affecting global supply chains. Companies engaged in international trade must stay informed about these changes to avoid disruptions and maintain compliance with customs regulations. In an article from the World Economic Forum (WEF), “In the last 10 years alone, the volume of cross-border trade increased by around 25%.” WEF’s article, which focuses on digitalization’s role in disrupting global trade, notes this trend in global trade compliance:
“Trade regulation is also becoming more interconnected with domestic policies. New sustainability measures such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), for example, target production processes that take place within the export market but are enforced at the border before entering the import market.”
Strategies for Staying Ahead of Regulatory Changes
C-suite executives should regularly monitor regulatory developments in their industry and region by subscribing to legal and regulatory updates, participating in industry forums, and consulting with legal experts. It is also important to strengthen your compliance programs. This includes developing comprehensive policies and procedures, regularly conducting compliance audits, and providing ongoing training for employees. Technology also plays a critical role in helping to ensure compliance. For example, automated compliance management systems can help companies track regulatory changes while data analytics can be used to identify compliance gaps.
Furthermore, networking to build strong relationships with regulators can provide early warnings about upcoming changes. There are a variety of ways to engage regulators such as participating in public forums and joining industry associations. In addition, compliance should be embedded in organizational culture. Professionals in the C-suite should encourage ethical behavior at the top level and promote transparency. Rewarding compliance can create a workplace environment where regulatory adherence is a shared responsibility.
Navigating the “in flux” regulatory landscape is a constant challenge for C-suite executives. By staying informed, strengthening compliance programs, leveraging technology, engaging with regulators, and fostering a culture of compliance, organizations can turn regulatory challenges into opportunities. In an era of heightened scrutiny, compliance is not just about avoiding penalties—it’s about building a proactive, resilient, and sustainable business that will better the life of future generations.
Resources: IBM, What you need to know about the CCPA draft rules on AI and automated decision-making technology, Thomson Reuters, What the latest step in CSDDD means for corporate risk and legal professions, WEF, Digitalization is disrupting global trade – here’s how AI can help customs and businesses to respond, Baker Botts, The Corporate Transparency Act: It’s Time to Prepare for the January 1, 2025 Deadline
