What to Expect from ESG & Sustainability in 2025

Throughout 2024, the development of the ESG and sustainability landscape has been dynamic. It is anticipated that this dynamism will intensify in 2025, especially with the implementation and potential amendments to ESG-related regulations and significant geopolitical developments occurring worldwide.

Mandatory ESG

2025 will signify a shift from voluntary ESG and sustainability reports, which have traditionally been largely qualitative, to mandatory, data-driven reports that are subject to limited third-party assurance. The publication of such reports will attract considerable attention, particularly since a larger number of companies will be required to produce their first CSRD reports in 2026. These companies will be looked at closely on double materiality analysis, report on climate change targets, and approach on value chain reporting.

Value Chain & Critical Materials

Entities will have to reevaluate their supply chains to enhance resilience, reduce risk, and ensure compliance with evolving standards. The demand for critical minerals is anticipated to rise due to legal obligations or corporate commitments to reduce carbon emissions. Efforts will increasingly focus on responsible sourcing from a human rights perspective for these materials. For example, the International Energy Agency has warned that neglecting ESG considerations may limit the supply of minerals vital to the energy transition.

Traditional Environmental Issues

Traditional environmental issues, such as pollution control, chemicals stewardship, and waste management are becoming and will become more prominent due to heightened regulatory and consumer focus as well as trends in ESG and sustainability disclosures.

Net Zero

The renewed focus on net-zero commitments and transition plans continues to grow as companies work to meet ambitious climate goals. Scope 3 emissions and challenges to zero-down them will be the focus criteria of the serious companies. Some of these are already adopting more pragmatic approaches to Scope 3 emissions, emphasizing collaboration with suppliers and customers to achieve meaningful reductions.

Greenwashing

On the greenwashing front, companies must prepare for heightened scrutiny regarding their ESG claims to avoid misleading stakeholders, including consumers. Organizations need to be ready to address potential legal challenges and regulatory investigations related to ESG claims. Robust verification processes and transparent communication will be essential in mitigating legal and reputational risks.

Biodiversity

This is going to be hot-shot. In the private sector, companies are increasingly integrating natural capital considerations into their sustainability strategies, assessing their impacts on natural ecosystems, and developing plans to protect and restore biodiversity. The emergence of mandatory ESG reporting frameworks like the CSRD, alongside the growing prevalence of Taskforce on Nature-related Financial Disclosures (TNFD), indicates that companies will continue to publicly disclose more information about their impacts on nature and biodiversity.

Conclusion

As we progress through 2025, the ESG landscape is characterized by both challenges and opportunities. By staying informed and proactive, organizations can navigate the complexities of ESG and sustainability issues and position themselves for long-term success in an ever-evolving global environment.