The ESG evolution: What 2025 holds

Stricter regulations, rising investor expectations and rapid technological advancements are poised to make 2025 a defining year for the global environmental, social and governance (ESG) landscape.

Five trends stand out as key in shaping how companies will integrate sustainability into their operations and their strategies, explain Gabriel Buzzi and Renato Ruiz, partners at Baker Tilly in Brazil and leaders of the firm’s ESG and sustainability practice.

Beyond mitigating risks, organisations that adopt a proactive and strategic approach to these trends will be well-positioned to generate long-lasting value, build stakeholder trust and drive meaningful contributions toward a more sustainable future. 

Key ESG trends to watch in 2025 

1. The rise of ESG regulations and reporting standards 

More rigorous ESG regulations that mandate firms to disclose their performance on ESG factors are continually being introduced. Leading the way are regions like the EU, the United Kingdom and Canada, which have heightened the requirements for ESG reporting.

The implementation of IFRS S1 and S2 standards, issued by the International Sustainability Standards Board (ISSB), marks a significant milestone for the standardisation of sustainability disclosures. Focused on general sustainability reporting (S1) and climate-related disclosures (S2), these standards aim to unify reporting practices, enhancing transparency and comparability among companies globally.

“In 2025, more companies are expected to align with these standards, particularly in markets that already adopt robust frameworks like the Task Force on Climate-related Financial Disclosures”, explains Mr Buzzi.

“Adopting these standards will enable companies to seamlessly integrate sustainability information into their financial statements, providing stakeholders with clearer insights into ESG-related risks and opportunities. 

“And those companies that embrace these standards will strengthen investor confidence by streamlining data analysis and decision-making. The focus on financial materiality will ensure that disclosures are not only relevant but also closely tied to the company’s economic performance.” 

2025 presents a pivotal opportunity for companies to establish robust internal processes, train teams and prepare for the implementation of these global standards. 

2. A shift in focus from viewing decarbonisation as a limitation to recognising the opportunities for value creation in the transition 

Global carbon markets are becoming essential tools in the fight against climate change, explains Mr Ruiz.  

“This year, carbon trading is set to reach new heights due to stricter regulations and mounting pressure to achieve carbon neutrality goals. The European carbon market, a global benchmark, will continue to expand, while other regions, including Asia and Latin America, will develop their own regulations.” 

The advancement of carbon markets presents both challenges and opportunities.

“On the one hand, companies must reduce emissions to avoid high costs associated with purchasing carbon credits”, says Mr Ruiz.  

“On the other, those capable of generating credits through initiatives such as reforestation and renewable energy projects can diversify revenue streams and enhance their reputation among investors and consumers.”

Stricter regulation also drives innovation, says Mr Ruiz, with technologies like blockchain being leveraged to ensure transparency and traceability in carbon trading.  

“For multinational corporations, the challenge lies in balancing the requirements of multiple markets while exploring opportunities to create positive impacts on a global scale.” 

3. Sustainable supply chains to become a key focus for ESG performance  

In 2025, the sustainability of supply chains will be a strategic priority.  
 
“Companies face growing pressure to demonstrate that their value chains are environmentally and socially responsible”, explains Mr Ruiz.  

“This includes addressing issues such as carbon emissions, labour conditions, resource usage and impacts on local communities.” 

Regulatory impacts are also significant, notes Mr Buzzi.  

“The EU, for example, requires large companies to be accountable for their suppliers' practices, ensuring there is no forced labour or environmental harm in their operations. These demands are driving businesses to adopt technologies like artificial intelligence (AI) and blockchain to monitor their supply chains effectively. 

“Companies that can demonstrate responsibility throughout their supply chains will gain a competitive edge, earning trust from both consumers and investors. However, achieving this requires substantial investment in technology, training and collaboration with suppliers to align practices and obtain sustainability certifications.” 

4. Technology and innovation will help ESG reporting go beyond compliance  

Technology’s role in ESG management continues to grow, and 2025 promises significant advancements in this field. Integrating AI, blockchain and big data analytics into sustainability operations is transforming how companies measure, monitor and report ESG performance. 

But technology advancements help clients go beyond simple data collection and reporting says Mr Ruiz,  

“AI is being used to predict climate risks, identify energy efficiency opportunities, and model economic and environmental impact scenarios. Blockchain is revolutionising supply chain transparency, enabling products to be tracked from origin to end-user. 

“Additionally, digital platforms are enhancing stakeholder engagement, making it easier for companies to communicate with communities, employees and investors.”  

Organisations that invest in technology are not only streamlining their internal processes but are creating tangible value for stakeholders, aligning with global market expectations. 

5. A growing awareness that sustainability must be approached with a focus on human impact and perspective 

Climate justice is emerging as a central issue for 2025, highlighting the need to address the unequal impacts of climate change. Vulnerable communities, often the most affected by climate disasters, are calling for greater attention from businesses and governments to mitigate these impacts fairly and equitably. 

For businesses, climate justice involves considering both environmental and social aspects in their sustainability strategies, says Mr Buzzi.

“Companies are encouraged to develop initiatives that combine carbon reduction with social benefits, such as job creation, access to clean technologies, and investments in environmental education.”

International organisations, such as the United Nations, emphasise climate justice in their Sustainable Development Goals (SDGs), promoting more inclusive policies. For businesses, this represents an opportunity to lead by example, demonstrating a commitment to a more sustainable and just future for all. 

Opportunities to lead positive change

ESG trends for 2025 underscore the urgency for businesses to align with modern environmental and social priorities. From the consolidation of standards to the advancement of carbon markets, to the sustainability of supply chains, these trends provide clear opportunities for companies to lead positive change.  

Those companies that take a proactive and strategic approach to integrating these changes into their operations will be better positioned to navigate the complexities of the global market. Beyond simply mitigating risks, they will be positioned to generate lasting value, build stakeholder trust, and drive meaningful progress toward a sustainable future.  

Ultimately, 2025 will demand vision, innovation and dedication from companies striving to lead in this evolving landscape.