Sustainability in 2025 is entering a new era of regulation, scrutiny and adaptation. Russell Smyth outlines some of the key trends shaping ESG strategy in the corporate world.
Sustainability is entering a new phase of regulation, scrutiny and strategic adaptation. With the first wave of Corporate Sustainability Reporting Directive (CSRD) reports set for release, companies will face heightened expectations for transparency and accountability.
But CSRD compliance is just one piece of the puzzle. From the rise of artificial intelligence in environmental, social and governance (ESG) reporting to the shifting dynamics of greenwashing and ‘greenhushing,’ this year will bring significant changes to how businesses approach sustainability.
Here are five key sustainability trends we expect to shape corporate strategies in 2025 and beyond.
Businesses brace for scrutiny
The release of the first wave of CSRD reports will happen this year, and these will be subject to a high level of scrutiny for their inaugural submissions.
The heaviest critique will likely be directed at the methodologies behind double materiality assessment (DMA) approaches, given the several updates and amendments released by the European Financial Reporting Group since the conception of the CSRD.
For the second wave of reporting organisations this year, there will be ample opportunity to learn from these initial sustainability statements. However, it is critical that any previous materiality exercises are aligned with the new DMA concept.
Moving beyond ambitions
While many corporates have felt compelled in recent years to announce high-level decarbonisation commitments, a significant number were arbitrary or made without credible plans to achieve them.
The advent of CSRD has changed this, with regulation now forcing corporates to back up these commitments with detailed, credible climate transition plans that will allow stakeholders to assess and monitor progress over time.
Given CSRD implementation timelines, we expect a wave of such transition plans to be developed and published through 2025.
Behind the green curtain
Increased scrutiny on greenwashing last year led to numerous legal battles, particularly within the oil and gas, airline and fast fashion industries. Companies faced accusations of unsubstantiated net-zero claims and misleading marketing campaigns.
This backlash has prompted a new wave of 'greenhushing', in which organisations under-communicate their sustainability efforts and quietly scale back commitments to avoid public scrutiny and reputational damage.
This trend will continue with incoming regulations such as the CSRD, the European Union’s Green Claims Directive and the Enhanced Product Labelling Directive.
These regulations will enforce transparency and accountability and ban the use of vague environmental claims, thereby enabling truly sustainable businesses to be fairly represented and allowing consumers to make informed purchasing and investment decisions.
Green fatigue
ESG faces significant headwinds in 2025. The new US administration in the White House has pulled back on the green agenda, alongside a wider politicisation of sustainability.
We have already observed several large corporates retrenching on their sustainability actions, removing ESG roles from their boards, pulling out of Net Zero pledges and revising ambitious sustainability goals.
This trend isn’t surprising and reflects an inevitable “green fatigue” creeping in among corporates. Climate action requires short-term effort for long-term reward and makes it remarkably challenging for politicians and corporates focused on the short-term, to prioritise and adapt.
The EU’s introduction of mandatory sustainability reporting isn’t a coincidence. The EU recognises that legislation is the only way to encourage widespread adoption of robust ESG strategies and ensure ESG continues to grow in importance at pace throughout EU-mandated entities.
There is also an economic reality. Renewable energy is now the lowest-cost option for new electrical generation globally, so it’s not surprising that China has scaled up its renewable capacity significantly. Two-thirds of global utility-scale solar and wind power currently under construction is located in China.
Nature is not optional
For many Irish businesses in 2025, integrating nature and biodiversity impacts and dependencies into their decision-making processes is no longer optional.
This year, the introduction of nature-related EU regulations, such as the Nature Restoration Law, will pressure corporations to make nature-based disclosures.
This is expected to increase momentum behind voluntary nature-based disclosure frameworks such as the TNFD and target setting through the Science Based Targets Network (SBTN).
This year will also see an expansion in efforts to define a set of universal ‘state of nature’ metrics, an increase in the integration of climate and nature transition planning and continued calls to close the nature finance gap and redirect nature-harming subsidies.
Russell Smyth is Partner and Head of Sustainable Futures at KPMG
LOADING...