The ESG landscape is evolving rapidly, with new trends and challenges emerging as companies, investors, and governments adapt to growing instability. From floods in Spain and wildfires in LA to regime changes and shifts in legislation, 2025 could be the year that defines a new approach to risk management in business. Looking ahead, Diginex envisions a future where ESG is shaped by innovations in data transparency, regulatory changes, and a heightened focus on social responsibility. Our expert advisory team has identified several key trends that will play a pivotal role in shaping the future of ESG.
- Mandatory Reporting Revolution: A Shift in Corporate Accountability
Sustainability reporting is rapidly transitioning from voluntary to mandatory, driven by new regulations like the EU's Corporate Sustainability Reporting Directive (CSRD), the anticipated SEC climate disclosure rules, and the growing influence of the International Sustainability Standards Board (ISSB) standards. This shift marks a fundamental change in corporate accountability, pushing companies to disclose their environmental and social impacts with greater rigor and transparency.
In Europe under the CSRD, around 50,000 EU companies, as well as non-EU companies with significant operations in Europe, will be required to report under the European Sustainability Reporting Standards (ESRS) starting in FY2024. Companies that fail to comply with these new regulations risk facing penalties, trade barriers, or exclusion from EU markets. This change will have a ripple effect across global supply chains, affecting businesses in North America and Asia that maintain partnerships with European companies.
- Data Quality and Assurance: The Need for Accurate, Verifiable Information
As sustainability reporting becomes mandatory and regulated, there is an increasing demand for higher-quality, more reliable data. With disclosures facing growing scrutiny from regulators, investors and other stakeholders, the need for accurate, complete and verifiable data is more critical than ever. Mandatory assurance and verification of ESG data will be essential to ensure the integrity of these disclosures. This move is driven by both regulatory requirements and the rising concern over greenwashing practices, making third-party verification a crucial step in maintaining transparency and trust in sustainability reporting.
- Global Convergence of Standards: Towards Unified ESG Reporting
The alignment of global ESG frameworks—such as the ISSB, CSRD, and GRI—is driving a trend toward greater harmonization in sustainability reporting. The launch of the IFRS Foundation's ISSB Standards (IFRS S1 and S2) in 2023 set a unified framework for global sustainability reporting. Meanwhile, the CSRD in the EU and frameworks like GRI and SASB are aligning with the ISSB, reducing fragmentation in reporting. Businesses that adopt these harmonized frameworks can benefit from cost savings, simplified communication with stakeholders, and enhanced credibility with investors.
- Double-Materiality as the New Norm: A Shift in ESG Reporting
The EU’s double-materiality approach is setting a global precedent, requiring companies to assess both financial risks and their environmental/social impacts. Double materiality, as outlined in the CSRD, requires companies to evaluate both financial materiality (the impact on the company) and environmental/social materiality (the impact of the company on the environment and society).
While Europe is leading in the adoption of this approach, the US remains more focused on financial materiality, as seen in frameworks like ISSB and SASB. This geopolitical divide reflects differing stakeholder pressures: Europe emphasizes sustainability leadership, while the US is more investor centric. For companies with global operations, navigating both approaches will become increasingly critical, creating a growing demand for expertise in materiality assessments.
- Technology-Driven Reporting: Empowering Efficiency and Transparency
The adoption of emerging technologies such as AI, blockchain, and ESG platforms is set to accelerate, enabling companies to collect real-time data, enhance transparency, and improve traceability—all crucial for meeting regulatory demands. As ESG regulations like the CSRD and SEC disclosure mandates require companies to process vast amounts of sustainability data, the need for innovative technology solutions has never been greater.
By 2025, the acceleration of ESG tech adoption is likely to become a defining trend, with businesses increasingly relying on tools to manage and report their sustainability efforts effectively. Emerging technologies like blockchain and AI are enabling real-time data collection, validation, and reporting, while tools such as sustainability software (e.g., Diginex and Salesforce Net Zero Cloud) streamline compliance and reporting processes.
- Biodiversity and Nature-Related Disclosures: Prioritizing Climate and Nature in ESG Strategies
As extreme weather events like wildfires, floods and other natural catastrophes become more frequent and severe, businesses and frameworks will increasingly need to prioritize climate risk within their ESG strategies. By 2025, the growing intensity of these events will make it impossible to ignore the direct impact of climate change on supply chains, infrastructure, and operations. Reports like the IPCC AR6 highlight the mounting physical risks associated with global warming, emphasizing the urgency for businesses to act.
In parallel, biodiversity and nature-related disclosures are gaining momentum, with frameworks like the TNFD pushing companies to address both climate and biodiversity impacts in their sustainability strategies.
- US & New Administration: Navigating Shifting ESG Priorities
The evolving political landscape in the US could reshape ESG priorities, particularly around diversity, equity, and inclusion (DEI). With a new administration taking office in 2025, federal support for ESG initiatives—such as the SEC’s climate disclosure proposal—is difficult to predict. At the state level, ESG legislation remains fragmented, but federal leadership could help unify expectations, providing clearer guidance for businesses.
