As we move into 2025 – with the new financial year commencing in April – ESG considerations are reshaping business strategies. Regulatory changes, technological advancements, and evolving stakeholder expectations are driving the ESG space. ESG is no longer a peripheral concern – it is central to corporate success.
Strengthened Regulatory frameworks
Across the globe, governments are intensifying ESG disclosure requirements. The global ESG framework is getting more fragmented. Europe and Asia are continuing ambitious regulations like the EU Corporate Sustainability Reporting Directive (CSRD) and emphasizing transparency and accountability.
In contrast, the US faces political resistance leading to a phenomenon called” hashing”, where companies quietly pursue ESG goals to avoid backlash. On the other side, the Security and Exchange Commission has introduced climate disclosure rules that require registrants to report Scope 1 and Scope 2 emissions and material climate-related risks.
These regulations reflect a global push towards standardized ESG reporting frameworks such as the ones developed by the International Sustainability Standards Board (ISSB).
ESG as a financial imperative
ESG is increasingly viewed as a financial performance driver rather than an ethical obligation. Global ESG assets are expected to reach $41 trillion in 2025, with significant growth in ESG debt markets and exchange-traded funds (ETFs). These trends indicate investor confidence in sustainable finance – a viable pathway for long-term returns.
Additionally, companies are leveraging AI to analyze ESG Data to gain competitive advantages. These AI tools provide deeper insights into sustainability metrics helping businesses identify risks and opportunities while optimizing resource allocation.
Social value gaining prominence.
The S in ESG has always been gaining importance and Avtar’s role in that as most of our clients know has been in the forefront – Its 25 years now for us. Companies are increasingly prioritizing social impact through various initiatives that focus on employee well-being, workplace culture and the likes. This aligns with consumer demand for socially responsible practices and enhances brand loyalty.
Climate Action & Renewable Energy
The focus on climate change continues to be dominant in 2025. Countries are accelerating their transition to renewable energy with an ambitious net-zero target – even India has been pushing for Solar power.
There is also a growing focus on embodied carbon – emissions around construction materials & processes. The adoption of science-based targets for buildings indicates this shift towards holistic sustainability.
Challenges amid Polarization
Though there is focus & progress being made, ESG faces challenges in certain regions due to various reasons. For example, in the US some states have resisted climate-focused policies citing potential economic drawbacks. Another example is the energy security concerns due to conflicts like Russia’s invasion of Ukraine have temporarily increased reliance on fossil fuels.
Looking ahead – Transformation & Adaptability
2025 seems to be a transformation period for ESG as organizations adapt to the evolving demands. With the widely adopted 2030 net-zero target fast approaching, business must accelerate their efforts to reduce emissions while navigating regulatory complexities.
Key focus areas in this space include:
- Understanding the current levels of ESG implementation of organizations and training members to understand the purpose of ESG.
- Enhancing data quality by implementing technology where required
- Expanding / Introducing renewable energy products and other sustainability initiatives
- Corporate initiatives around addressing social inequalities
The future of ESG is ultimately in its integration into regular business strategies. Companies moving towards this will contribute to a sustainable planet and position themselves as leaders in an increasingly purpose-driven economy.
(Refer to our article on ESG A Growth Engine for Business Leaders on how this could be achieved)
Navigating the business towards these complexities of ESG implementation can take time but is necessary. Whether your organization is beginning its ESG journey or enhancing your already commenced ESG journey, we at Avtar are here to provide end-to-end guidance specific to your needs. We could help in assessing where you are today to setting measurable goals, integrating data management tools for effective compliance, or providing certification around ESG practices.
Reach out to bhanukumar@avtarcc.com for more information about our ESG services.
