Top 10 ESG Trends to Watch in 2025

Due to the increasing concerns regarding climate change, people are more inclined towards environmental sustainability now than ever before. Therefore, it is becoming essential for companies to adopt ESG in order to build customer trust. If companies adopt these ESG trends, they will contribute towards a sustainable future, improve their brand reputation, and gain good customer loyalty.

Besides, investors are more focused on investments aligned with their beliefs. Hence, the rising focus on ESG has changed how businesses have performed and modified how customers and investors look at sustainability.

10 ESG Trends in 2025

There was a time when ESG was considered optional instead of a necessity. However, it has become a rather essential concept even in investment decisions. Therefore, investors and businesses are trying to integrate ESG into their plans and decision-making processes. Here are the top 10 ESG trends that can make a huge difference in 2025:

Get Ready for Stricter Enforcement

More principles will be in place, and companies will focus on improving resource efficiency and reducing waste. Moreover, a significant push towards sustainability will result in innovative product designs, manufacturing, and end-of-life management of products. There is also an anticipation of a shift from traditional and linear economic models to a regenerative design.

Rising ESG Stakeholder Demands

Key developments will be driven by growing expectations from ESG stakeholders, such as more emphasis on climate risk management, more openness in corporate reporting, and aggressive diversity, equality, and inclusion programs. Additionally, businesses are increasingly demanding to exhibit ethical governance, embrace circular economy concepts, and implement sustainable supply chain strategies. 

Organizations must incorporate complete ESG strategies for long-term resilience and performance due to increased regulatory frameworks, investor scrutiny, and consumer awareness.

Focus on Transition Plans

There has been a rise in the companies with net zero pledges in 2025. As per the net zero tracker, 929 companies from Forbes 2000 have set a net zero target till June 2023 compared to 417 in December 2020. Similarly, the revenue generated has increased from USD 3.8 trillion to USD 26.4 trillion in the same period. Companies must, therefore, show a clear and measurable pathway to their stakeholders.

Accelerating the Energy Transition

The energy transition is expected to see more investment and new initiatives in 2025 despite the challenges posed by inflationary pressures and the higher cost of capital. Growth is expected in the renewable energy sector, especially in solar and wind generation. Besides, renewable energy is expected to become the most critical energy source by 2050.

Geopolitical Priorities Shape ESG

There are too many economic shifts and geopolitical tensions that are shaping the ESG landscape. Most significantly, the procurement of essential raw materials for renewable energy has become a controversial topic, with major international powers including the US, China, and the EU all devising plans to find weak points in the supply chains for essential raw materials and strengthen their resilience. 

Making Use of AI and Circularity

Companies should consider AI, circularity and frequent weather events while considering adopting and following sustainability in 2025. All these can play a significant role, and adopting them will be more complex than ever. Circularity is essential to keep using the same resources and not looking for new ones that can lead to severe environmental situations. AI can help companies in tracking and improving their sustainability data.

Keeping Pace with the Evolving Regulatory Environment

The significant economic world powers are focused on developing a regulatory ESG environment focusing on mandatory disclosures. There are four additional climate and environmental objectives to take care of in 2025:  

• Sustainable use and protection of marine resources and water
• Protection and restoration of ecosystems and biodiversity
• Transition to a circular economy
• Pollution prevention and control

New Carbon Pricing Regimes

Carbon pricing has gained significant importance in managing emissions. The EU has already adopted the CBAM, a tariff on carbon-intensive products imported to the EU and must have a report on its emissions. Since its launch, many other countries have also considered adopting the same approach. It will be required by companies effective 2026 to provide a CBAM certificate in the EU.

New Frontiers in Biodiversity and Nature Capital

In 2025, companies will also have to deal with nature capital and biodiversity as new initiatives are ramping up in these areas. For instance, a new global investor effort called Nature Action 100 has started interacting with 100 corporations that together have a market capitalization of over US$9 trillion, and it is requesting that these companies fulfil six environmental protection criteria.

Supply Chain is a Key Lever to Achieve Net Zero

The supply chain will be the critical criterion for achieving decarbonization targets. Scope 3 emissions can count to 90% of the company’s total carbon footprint, depending on the sector and the industry. However, it is tough for the company to control alone and, hence, challenging to calculate and reduce. Therefore, companies will have to collaborate to tackle this situation.

Conclusion

There is an anticipation of many new ESG trends to come in 2025. These trends will influence how customers, businesses, investors, and lawmakers tackle environmental, social, and governance issues. Hence, customers, investors, and companies must adopt these trends as soon as possible to be on top of the game. Besides, these ESG factors will also be crucial in decision-making processes while progressing towards a sustainable future.

FAQ’s on ESG Trends:

Where is sustainability headed in 2025?

In many sectors, sustainability is going to be big in 2025. There are increasing numbers of companies, so tracking and reducing emissions, environmental effects, and contributions to climate change is a significant priority.

What will be the impact of ESG by 2025?

Increased focus and consistency could be ESG’s future. Environmental, social, and governance (ESG) investments are at the vanguard of the financial industry’s tectonic transition towards sustainability.

What is the next generation ESG?

To strengthen sustainability, transparency, and social responsibility in business plans for long-term wealth creation, next-generation ESG places a strong emphasis on integrating cutting-edge technology, creative approaches, and greater stakeholder involvement.

What are the ESG megatrends?

Here are a few instances of ESG megatrends: – Population growth, ageing populations, urbanization, and migration are examples of demographic shifts that impact society and are essential megatrends.

Partham Barot is an ACCA-certified professional. showcasing his expertise in finance and accountancy. he’s revolutionising education by focusing on practical, real-world skills. Partham’s achievements underscore his commitment to elevating educational standards and empowering the next generation of professionals.