The Future of Environmental, Social, and Governance (ESG) Faces Many Challenges. However, experts believe that there are still signs indicating ESG will remain a positive trend in 2025.
Five Reasons Why ESG Remains a Positive Trend in 2025
Regulatory and Geopolitical Uncertainty Will Cause Disruptions, But Multinational Companies Will Continue ESG Momentum
In 2024, the global political landscape experienced significant changes, with numerous elections across Europe, the U.S., and other regions. These geopolitical shifts will undoubtedly cause disruptions and may prompt companies to reassess how they implement and advance their ESG initiatives.
However, 99% of companies in the S&P 500 index (which represents the top 500 publicly traded companies in the U.S. by market capitalization) have reported ESG-related metrics in various ways. Most multinational companies must still comply with substantial disclosure requirements, such as the Corporate Sustainability Reporting Directive (CSRD). Major markets—including China, Hong Kong, Japan, and Singapore—have introduced key ESG regulatory developments in recent years. Even within the U.S., more individual states may follow California’s example by implementing their own regulations requiring greenhouse gas emissions reporting and climate impact disclosures.
This is why, in 2025, multinational companies will likely continue openly discussing their ESG initiatives. At the same time, they will keep investing in and refining best practices and transformative technologies to improve ESG data comprehension, reporting, and accuracy.
ESG Insights Will Remain Valuable for Forward-Thinking Business Leaders, Helping Reduce Risks and Enhance Resilience
Regardless of politics, climate change, resource scarcity, supply chain disruptions, and social instability will continue to pose risks to all businesses. Regarding climate-related risks and extreme weather events alone, S&P Global estimates that the world could lose 4.4% of GDP annually if no adaptation measures are implemented.
In 2025, business leaders who effectively manage their ESG data will be best positioned to mitigate these risks. Driving sustainable development initiatives will remain a strategic imperative for any company looking to avoid costly risks and safeguard long-term success.
The Growth of Artificial Intelligence (AI)
AI is accelerating digital transformation across various sectors, including ESG and sustainability. Nearly half of technology leaders surveyed in the PwC Pulse survey stated that AI is fully integrated into their company’s core business strategy. Meanwhile, a study by KPMG, a U.S.-based consulting firm, found that 58% of organizations view AI as an essential tool for enhancing their ESG capabilities.
In 2025, AI will continue transforming how we collect, analyze, and report ESG data, providing unprecedented real-time insights. Business leaders who leverage AI effectively will be able to make faster, more informed decisions, anticipate market changes, and drive not only short-term growth but also long-term sustainability.
However, AI technologies also consume between 1% and 1.5% of the world’s total electricity. Additionally, AI raises significant concerns regarding governance, privacy, transparency, accuracy, bias, and employee skepticism.
In 2025, financial and ESG leaders must demonstrate their ability to effectively balance AI’s synergies with human expertise—harnessing AI’s potential while addressing its inherent risks comprehensively.
Businesses Must Build ESG and Sustainability Awareness
Building sustainable organizations requires coordinated teamwork, and the need for collaboration will only continue to grow. Chief Sustainability Officers (CSOs) will continue to lead ESG strategy and reporting efforts alongside Chief Financial Officers (CFOs). Leaders in Environmental, Health, and Safety (EHS), operations, and supply chains will increasingly be relied upon to provide data that shapes and informs organizational ESG approaches.
However, starting in 2025, companies will also need to embed ESG awareness, sustainability, and data analytics into a wide range of roles across the business. For example, a recent Wolters Kluwer study found that 68% of legal professionals see a growing demand for ESG-oriented legal expertise. This awareness will increasingly be valued as a crucial component in empowering businesses to achieve transformative outcomes, cost savings, operational efficiency, and overall innovation that effective ESG programs promise.
Data-Driven ESG Programs Will Continue to Deliver Competitive Advantages
Despite geopolitical shifts, one fact remains unchanged: companies with strong ESG performance consistently outperform others—achieving 2.6 times higher total shareholder returns and enjoying operating profit margins 4.7 times greater than those with average ESG performance. Strong ESG performance is also linked to improved return on equity, return on assets, and stock prices, in addition to operational efficiency and risk management. These factors are key reasons why the ESG reporting software market is projected to grow to $4.3 billion by 2027.
These data points highlight a fundamental truth: regardless of political trends, data-driven and strategically implemented ESG and sustainability initiatives will continue to be powerful drivers of real competitive advantage.
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