Can 2025 Be the Year of ESG Transformation for a Sustainable Future?

The era of voluntary ESG reporting is ending as governments tighten disclosure rules. For instance, companies with securities listed in the European Union are being closely watched for their approach to double materiality analysis and climate reporting.

What 2025 Holds

The International Sustainability Standards Board (ISSB) has introduced International Financial Reporting Standards (IFRS) S1 and S2 standards to unify sustainability reporting. These standards enhance transparency and comparability across industries. Over 25 jurisdictions have adopted ISSB standards to ensure consistency in reporting.

Further, companies must report both their environmental impact and how climate change affects operations. This dual approach, incorporating financial and non-financial risks, is becoming standard practice. Multinational technology company Siemens uses double materiality assessments to identify sustainability impacts and improve strategies addressing environmental and social costs.

Next, the “S” in ESG is gaining prominence as companies strengthen DEI initiatives, fair labour practices, ethical sourcing and workers’ rights.

AI and blockchain are also transforming ESG reporting. AI enhances data accuracy, streamlines collection and automates report generation by analysing internal databases. Generative AI translates findings into digestible narratives for regulators and stakeholders. Blockchain ensures data integrity and supply chain transparency through decentralised ledgers.

ESG is key to achieving the Sustainable Development Goals (SDGs). Environmental preservation, social well-being and governance responsibilities within ESG frameworks help businesses measure and implement activities aligned with the SDGs.

Companies are also prioritising climate action by reducing emissions, using renewable energy and promoting circular economy models. Investments in renewable energy and energy efficiency are driving impact reduction efforts.

Key Tenet of Corporate Strategy

ESG has become central to corporate strategy. Tata Motors’ commitment to sustainable mobility exemplifies how ESG fosters innovation and market leadership. However, greenwashing and data transparency remain concerns. Companies must use frameworks like the GRI, SASB and TCFD for genuine and comparable reporting.

As regulations evolve, prioritising ESG strengthens resilience, financial performance and stakeholder trust. ESG is not just a strategic imperative but a pathway to a sustainable future.