As we approach 2025, businesses are facing a significant shift when it comes to ESG. Whilst there will be plenty of opportunity, this year will also bring new challenges. Heightened legislation that’s coming into place will impact businesses across Europe and the world and it’s vital that business leaders navigate this environment with care.
Here we unpack the key trends set to affect the ESG landscape in 2025.
CSRD expands influence outside of EU borders
The Corporate Sustainability Reporting Directive (CSRD), which aims to increase transparency by helping companies report on sustainable impact and performance, is expanding its influence. Originally focused on the EU, it will now affect businesses in other global markets.
The CSRD requires detailed reporting on supply chain practices, so businesses in the Middle East and other regions that supply to the EU will need to enhance their ESG practices to meet these new standards.
With sustainability reporting set worldwide, firms globally will now face considerable pressure from investors and markets to align with these standards. Even if they’re not directly in scope of the regulation.
New UK sustainability rules introduced
The UK Sustainability Reporting Standards (SRS) are to be adopted in April 2025 and are a significant step forward in regulating investments. These require the disclosure of transition plans, the creation of a UK green taxonomy, and require UK-listed companies to report their ESG related disclosures to investors and to regulators – meaning UK businesses will need to professionalise quickly.
Greenwashing will not go away, and legal ramifications and litigation will increase
Greenwashing will go beyond a reputational or market/advertising trading issue to a rigorously enforced regulatory issue. The EU adopted the Greenwashing Directive in March 2024, in conjunction with the Green Claims Directive (to be announced in 2025). These combined require companies to substantiate the voluntary green claims they make, prohibiting false environmental claims, banning generic ‘green’ labelling, as well as the use of claims based on carbon offsetting schemes.
We’ll expect to see a continued rise in greenwashing and climate litigation cases. The CMA and ASA will be cracking down on all business sectors making misleading claims, while the FCA will do the same on financial products being potentially miss-sold.
Upskilling in-house sustainability and ESG functions
With such rapid advances in regulatory requirements over the last 24 months, firms need to deploy adequate resources, time, and training into bolstering and refining their internal ESG capabilities. Legal teams will play a very important role in ensuring companies adapt to the shifting landscape to meet consumer, investor, employee and media expectations. They’ll play a critical role in ensuring there is full compliance with various pieces of ESG legislation and regulations and work closely with accounting to be sure rules are adhered to.
Sustainable finance and energy transition
With the revision of the Sustainable Finance Disclosure Regulation (SFDR) in 2024, European businesses will need to align sustainability goals with concrete and measurable transition plans. The automotive sector, for example, faces mounting pressure to reduce CO₂ emissions in line with the European Commission’s goal of climate neutrality by 2050. Again, this will spill out of the EU and affect those within its orbit, including the UK.
Legal departments will need to adapt, establishing new compliance procedures while ensuring adherence to evolving European environmental regulations.
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