As regulatory frameworks evolve and investor expectations heighten, 2024-2025 will witness transformative changes in ESG reporting, climate action, and corporate sustainability.
- CSRD and Omnibus Proposals
In 2025, the Corporate Sustainability Reporting Directive (CSRD) will undergo significant revisions through the Omnibus proposals, aimed at simplifying sustainability reporting while maintaining alignment with the EU’s Green Deal objectives. Reporting requirements, governed by the European Sustainability Reporting Standards (ESRS), will include updates on double materiality, stakeholder material topic selection, and future revisions to the ESRS framework. Additionally, voluntary sustainability reporting will be available through the Voluntary Sustainability Reporting Standard for SMEs (VSME), with no reporting obligations for LSMEs. These revisions provide greater flexibility for certain undertakings while aligning reporting with the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation.
- CDP Expands Scope to Nature and Supply Chain Disclosures and CDP-ESRS Interoperability
A recent collaboration between CDP and EFRAG highlights strong interoperability between the CDP question bank and the European Sustainability Reporting Standard (ESRS) E1. This alignment simplifies reporting requirements and reduces complexity by ensuring consistency in climate disclosures, covering emissions, transition plans, and internal carbon pricing. The Carbon Disclosure Project (CDP) is also expanding its disclosure framework to encompass nature-related impacts and supply chain emissions. This includes climate, water, and deforestation disclosures for high-impact sectors, along with the integration of nature-related risks aligned with the Taskforce on Nature-related Financial Disclosures (TNFD). Additionally, CDP is placing increased emphasis on Scope 3 emissions by enhancing supply chain engagement, driving greater transparency and accountability across value chains.
- TNFD Framework Gains Prominence in Nature-Related Risk Management
The Taskforce on Nature-related Financial Disclosures (TNFD) is gaining traction as a critical framework for assessing and disclosing nature-related risks. By 2025, TNFD is expected to become a key tool for companies to evaluate their impacts on ecosystems and biodiversity, integrating these factors into financial decision-making and risk management frameworks. The TNFD has released its second set of sector-specific guidance to assist companies worldwide in assessing, managing, and disclosing nature-related risks and opportunities. Following the release of draft guidance in June 2024 and extensive consultation with market participants, the final sector guidance has been issued for Apparel, Textiles & Footwear, Beverages, Construction Materials, and Engineering, Construction & Real Estate. With this addition, TNFD now provides comprehensive guidance across 13 sectors, further enhancing corporate efforts to integrate nature-related considerations into decision-making and reporting frameworks.
- Net Zero Banking Alliance (NZBA) Faces Membership Decline
The Net Zero Banking Alliance (NZBA), operating under the United Nations Environment Programme Finance Initiative’s (UNEP FI) Principles for Responsible Banking (PRB), serves as a climate accelerator, guiding the banking sector toward a more sustainable global economy. It provides a structured framework and guidance to help members develop and implement net-zero targets, promoting long-term sustainability in banking practices. Despite its objectives, NZBA has faced considerable challenges in recent months, with several prominent US and Canadian banks withdrawing from the alliance between December 2024 and January 2025. These exits resulted in a 22% reduction in the total assets represented by NZBA, impacting 12% of the global banking system’s assets. However, the alliance still maintains 142 members across 44 countries, collectively managing $64 trillion in assets, with 80 European banks contributing the largest share. The reasons for these departures remain uncertain, but two key factors stand out. First, the shift in US climate policy under the new Trump administration has created more favourable conditions for fossil fuel investments, reducing the economic viability of renewable and clean energy initiatives. Second, the lack of stringent oversight within NZBA has allowed member banks to continue financing high-emission sectors without setting credible targets or implementing robust policies, ultimately undermining the alliance’s effectiveness and credibility.
- Intensified Crackdown on Greenwashing and Mandatory ESG Assurance
To protect consumers from misleading greenwashing practices, the Directive on Empowering Consumers for the Green Transition targets unfair commercial practices where environmental claims cannot be adequately substantiated. Complemented by the Green Claims Directive, both legislative measures aim to strengthen consumer rights by increasing scrutiny of companies’ environmental claims about their businesses and products. The Green Claims Directive requires companies to validate their environmental claims with verified and credible data, while independent third-party assurance is becoming increasingly essential to ensure compliance with evolving standards and uphold the integrity of ESG reporting.
