MEXICO: An Introduction to Environment

Sustainability in Mexico: From Business Trend to Legal Obligation?

In Mexico, sustainability has moved from being a marketing slogan or corporate value to a decisive factor in long-term business survival. The country is under simultaneous pressure to meet international environmental commitments and to protect its own natural resources, all while navigating a global economy that increasingly rewards green innovation and penalises environmental inaction.

Shifts in the global agenda – such as decarbonisation targets, the transition to circular production models, new environmental fiscal instruments and stricter water governance – are rapidly altering the country’s legal and operational environment. For companies, these changes mean more than compliance; they require a rethinking of production systems, supply chains and investment priorities. Industries with significant environmental footprints – including food and beverage, tourism, agriculture, mining, energy and manufacturing – are having to adapt the fastest. In doing so, they face higher regulatory and market expectations, but also new opportunities in areas such as green finance, carbon credit markets and sustainability-driven procurement.

Water Management and Treatment: a Strategic Resource Under Pressure

Water has become the clearest example of how environmental realities directly shape business continuity. Scarcity – driven by recurring droughts, aquifer overuse and widespread contamination – is now a structural risk. As of April 2025, over half the territory in 14 of Mexico’s 32 states was experiencing moderate to exceptional drought, and water availability in the Valley of Mexico is projected to drop further by 2030.

The response has been twofold: legislative reform and public-private co-operation. A proposed General Water Law aims to harmonise state regulations, strengthen enforcement, and ensure the human right to water and sanitation. Meanwhile, the 2025 National Agreement for the Human Right to Water and Sustainability has secured commitments from industries to reallocate concessional water volumes for public supply, invest more than MXN21 billion in efficiency measures, and expand water treatment and reuse capacity.

Technology is reshaping what is possible. Membrane filtration, biofactories, and electro-deionisation are enabling high-quality wastewater reuse, while AI-powered systems and 5G networks help detect leaks and optimise flows in real-time. Blockchain-based traceability is emerging as a transparency tool, allowing regulators, consumers and business partners to verify where water comes from, how it is treated and how it is reused. For companies, integrating these tools is not just about compliance – it is about building operational resilience, safeguarding reputation and maintaining their social licence to operate.

The Carbon Credit Market: Between Regulation and Opportunity

Mexico’s carbon credit market is another space where regulatory uncertainty coexists with business potential. The country’s Emissions Trading System (ETS) remains in an extended pilot phase, delaying the creation of a fully regulated market. Still, voluntary carbon credit activity has accelerated: from 300,000 to over one million CO₂ tons traded in just three years, supported by 248 projects in 25 states. Most follow international standards such as Verra and Gold Standard, ensuring credibility with investors and buyers.

Although the lack of a formalised framework makes some investors cautious, recent developments suggest movement toward consolidation. The creation of the Consultative Council for the Development of Mexico’s Carbon Market and the inclusion of ETS strengthening measures in the Environmental Agenda 2025 point to greater institutional support. Practical examples of market opportunity are already visible – landfill methane capture projects, for instance, both reduce a potent greenhouse gas and generate credits that may also qualify for Clean Energy Certificates (CELs).

For many companies, engaging in voluntary carbon markets is a way to meet corporate social responsibility goals ahead of regulation. Projects in reforestation, forest conservation, energy efficiency and waste management allow them to offset emissions, enhance their public image and attract green financing. When the ETS becomes fully operational, demand for high-quality credit is expected to grow, potentially integrating voluntary and compliance markets under clearer, more predictable rules.

The Circular Economy: Building a Framework for Change

The circular economy offers a way to align economic growth with environmental limits. By designing out waste, extending product lifespans, recovering materials and regenerating ecosystems, it shifts business models away from “take-make-dispose” and towards closed loops of value. For Mexico, where environmental degradation costs an estimated 4.1% of GDP annually, the potential benefits are significant.

At the federal level, three initiatives for a General Law on the Circular Economy (LGEC) have been introduced. While not imposing mandatory obligations on companies, the LGEC would set a national baseline for states to align their own laws, promote shared responsibility across value chains, and incentivise adoption through tools such as a Green Label and a National Circular Economy Strategy.

States are not waiting for federal approval. Mexico City and Oaxaca already have their own circular economy laws, and Nuevo León is moving in the same direction. In practice, the shift is most visible in high-waste sectors: packaging companies in Jalisco are experimenting with bio-based materials from agave and corn residues, while electronics firms in Baja California have partnered with NGOs and local governments to launch take-back and refurbishment programmes.

Transitioning to circularity requires investment in new technologies, redesigning products for durability and repairability, and forming partnerships for waste valorisation. For businesses, the payoff includes reduced environmental footprints, improved access to environmentally conscious markets, and stronger consumer loyalty.

Environmental Taxes: a Fragmented but Expanding Landscape

Environmental taxation in Mexico has been developing primarily at the state level, resulting in a patchwork of approaches. This diversity complicates compliance for multi-state operators but also reflects each state’s ability to tailor fiscal measures to its own environmental challenges.

The most common categories include:

• air emissions – CO₂ and methane taxes in states such as Baja California, Mexico City and Zacatecas (MXN250 per ton);
• water, soil and subsoil contamination – levies in Durango, Guanajuato, Nuevo León, Yucatán and Zacatecas;
• material extraction – charges on stone, sand and other natural resources in Baja California, Campeche, Coahuila and others; and
• final waste disposal – taxes in Durango, the State of Mexico, Guanajuato, Querétaro and Zacatecas.

This fragmentation means that companies must conduct detailed regional assessments to ensure compliance and manage risk. Yet, these taxes also send a clear market signal: pollution carries an increasing cost. By investing in cleaner technologies, efficient processes and sustainable waste management, companies can reduce their tax burden while improving competitiveness and reputation.

Conclusions

Across water, carbon markets, circular production and environmental taxation, one message is consistent: sustainability in Mexico is no longer optional. It has become a central factor in compliance, operational stability and competitive positioning.

The most successful companies will be those that move early on adopting clean technologies, redesigning processes, engaging transparently with regulators and communities, and integrating sustainability into core strategy. These actions not only ensure compliance with an evolving legal framework but also unlock opportunities for innovation, efficiency and leadership in a global market that increasingly rewards environmental responsibility.

In this new reality, proactive adaptation is more than good corporate citizenship – it is a sound, forward-looking business strategy.