Building on key developments from 2024, the convergence of regulatory action, stakeholder expectations, and litigation risks will place transparency at the forefront of corporate sustainability in 2025. Organizations will be under growing pressure to adopt innovative solutions and refine their strategies to drive meaningful and lasting impact.
Intensified greenwashing scrutiny
Greenwashing will remain a critical challenge in 2025 as regulatory scrutiny and stakeholder expectations continue to grow. Building on momentum from 2024, the cumulative effect of new regulations and heightened awareness is already evident. According to ESG data science company RepRep, the number of companies linked to greenwashing risk decreased by 12% by June 2024. However, high-severity cases surged by 30%, highlighting the complexity of the issue.
On the regulatory front, the EU leads the charge with the Corporate Sustainability Reporting Directive (CSRD), requiring standardized and externally assured sustainability disclosures. The first reports under the CSRD, set to be published in 2025, will reveal how organizations are adapting to these rigorous standards. Complementing this is the EU’s 'Green Claims' Directive, which aims to protect consumers from greenwashing. Adopted in March 2024, this legislation sets stricter requirements for environmental claims and is poised to further enhance transparency.
In the UK, the Digital Markets, Competition and Consumers (DMCC) Act will allow the Competition and Markets Authority (CMA) to impose fines for misleading environmental claims starting in April 2025, with penalties reaching up to 10% of global turnover or £300,000. This move signals a clear warning to businesses, emphasizing the need for accuracy and accountability in ESG communications to avoid significant financial and reputational consequences.
Beyond Europe, other jurisdictions are stepping up. In Canada, Bill C-59 introduced targeted amendments to the Competition Act to prohibit greenwashing, receiving royal assent on June 20, 2024. These amendments expand enforcement powers for the Competition Bureau, making misleading environmental claims a central focus of regulatory oversight.
Investor pressure will likely remain a significant driver of greenwashing scrutiny in 2025, given ongoing skepticism about the accuracy and veracity of corporate sustainability claims. A 2023 PwC survey revealed that 94% of investors believe corporate sustainability reports contain unsupported claims, up from 87% in 2022. Similarly, EY’s 2024 Institutional Investor Survey found that 85% of investors view greenwashing as a worsening issue compared to five years ago.
A larger emphasis on the ‘S’
Social factors within ESG frameworks are set to take on greater significance in 2025, driven by evolving stakeholder expectations and demographic shifts in the workforce. An increasing number of Gen Z and Millennials are stepping into key decision-making roles, bringing with them values that prioritize corporate accountability and societal impact. Deloitte’s 2024 Gen Z and Millennial Survey uncovered that nearly two-thirds (63%) of these generations believe businesses can influence social equality, and they increasingly prefer employers committed to societal impact. This evolving workforce composition reinforces the need for companies to prioritize social issues to attract and retain talent.
Recent research further highlights the strategic importance of social factors. A recent KPMG survey reveals that social impact monitoring and measurement is the fastest-growing area of sustainability reporting. Seventy-four percent of G250 companies now report on social risk, up from 49% in 2022, underscoring the recognition that social risks influence both brand reputation and long-term valuations. KPMG concludes that understanding and addressing social impacts is no longer optional but essential for business.
Additionally, the launch of the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) in September 2024 signals a shift toward standardized global social reporting. According to Corporate Disclosures, the Taskforce aims to create an integrated framework for measuring and disclosing companies' impacts, risks, and dependencies on social issues, with a beta framework expected by the end of 2025.
Increased adoption of ESG software
Our analysis of the key developments of 2024 revealed that many companies continue to experience significant ESG reporting challenges. With only 22% of CFOs feeling ready for climate reporting and assurance requirements, a significant number of organizations remain ill-equipped to meet the demands of the evolving regulatory landscape.
Investment in ESG software will accelerate as businesses recognize its critical role in navigating these challenges. Research by Verdantix found that 81% of firms planned to increase spending on ESG data management tools in 2024, driven by stricter regulations and the need to enhance sustainability performance. Similarly, KPMG’s 2024 survey, ranked ESG-specific software as the second-highest ESG investment priority for companies, with 40% identifying it as a key focus area, just behind hiring dedicated ESG personnel (43%).
The adoption of ESG data management software is expected to accelerate as organizations face mounting pressure to prepare for external assurance, which will require tackling the risks of low-quality data head-on. Ultimately, reliable and consistent ESG disclosures will necessitate robust data governance, which is critical for improving data management and data accuracy.
Biodiversity in the spotlight
Biodiversity integration into corporate strategies is set to gain significant momentum in 2025, driven by growing recognition of the link between business operations and ecosystem health. The World Economic Forum’s Global Risks Report 2025underscores this urgency, ranking biodiversity loss and ecosystem collapse as the second most critical long-term risk over the next decade, following extreme weather events.
The EU's CSRD—and frameworks like the Task Force on Nature-related Financial Disclosures (TNFD)—will play important roles in driving the integration of biodiversity into corporate strategies. Notably, there was a 30% increase in the number of TNFD adopters from January 2024 to June 2024. With sector-specific guidance and alignment with global biodiversity goals, businesses will increasingly see it as a vital tool to understand and manage their environmental dependencies.
Under the CSRD, large EU companies are now required to disclose their impacts, dependencies, and strategies related to ecosystems, biodiversity, and nature-based risks. More specifically, ESRS E4 introduces detailed reporting requirements, covering terrestrial and aquatic ecosystems, species diversity, and financial implications tied to biodiversity. The initial release of CSRD reports in 2025 will be telling, offering a clear indication of how companies are addressing biodiversity in their double materiality assessments.
Concurrently, the Science Based Targets Network (SBTN) is poised to make significant strides in 2025. In October 2024, SBTN announced the first companies to adopt science-based targets for nature, with Kering leading the way by setting goals for both freshwater and land. As of January 2025, 150+ additional companies are preparing to set targets through SBTN's Corporate Engagement Program and service provider program.
Enhanced supply chain transparency
In 2025, supply chain due diligence will intensify as businesses face mounting regulatory pressures and rising stakeholder expectations. Companies are being pushed to achieve deeper visibility across their supply chains to manage environmental and social impacts more effectively.
Regulations like the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), which came into effect in July 2024, have raised the bar, pushing businesses to address human rights, environmental accountability, and ethical sourcing throughout their supply chains. Alongside other regulations like Canada’s Bill S-211 and the CSRD, organizations will dig deeper into their supply chains—examining everything from emissions to labor practices—to ensure they’re reporting the full picture and meet rising expectations for transparency.
According to the Harvard Law School Forum on Corporate Governance, near-shoring and reshoring value chains are expected to accelerate as companies aim to enhance resilience, reduce risks, and ensure compliance. These shifts highlight the growing expectation for businesses to trace their value chains back to the source, addressing environmental and social impacts at every stage.
Supply chain risk management will continue to be a top priority for CEOs. KPMG’s 2024 CEO Outlook survey ranks supply chains among the top three risks facing businesses, driven by geopolitical instability, inflationary pressures, cybersecurity threats, and shifting consumer demands.
Navigating the future of ESG
The trends shaping ESG in 2025 bring both challenges and opportunities. Companies must adapt to evolving regulations, prioritize transparency, and embrace innovation to remain competitive. Whether managing data more effectively or integrating biodiversity and social issues into strategies, organizations that act now will be better positioned for long-term success.
Looking to navigate 2025 with clarity and confidence? Our team is on standby to explore how Novisto can help elevate your ESG strategy.