Key ESG Trends to Watch in 2025
Hey there, sustainability change-makers! 🌱 Wishing you a very Happy New Year! 🎉
As the clock resets and we welcome another trip around the sun, take a moment for reflection and renewal, and gear up to make 2025 a year to remember. 🌟 Let's make this year count by continuing to create positive change and making the world a greener, more sustainable place! 🌍💚
One thing is certain: 2025 will be a year of transformation. As we step into 2025, sustainability factors are more crucial than ever. 🌍🌱🏭
Here are the key ESG trends to keep an eye on:
1. Climate Action and Net-Zero Commitments to become more data-driven and realistic 🌡️
Data Point: By 2025, over 50% of the world's largest companies are expected to have net-zero targets (Source: CDP).
Insight: Recent “noise” coming from the US has highlighted a surge in companies either withdrawing from NetZero associations or simply cutting their past ESG commitments. This is clearly regrettable, but this may also reflect that some initial targets that were set without sufficient prior analysis. The trend will be to monitor those whose commitments are SBTI backed or what plans are being put forward to substantiate their commitments.
As a C-suite Leader, three essential questions you can ask:
Are our net-zero targets backed by solid, credible plans and frameworks? 🌍 This ensures your commitments are based on sound science and are sufficiently ambitious to meet the goals of the Paris Agreement.
Is our value chain analysis and underlying data sufficiently accurate to make realistic Net Zero commitments? This helps you to understand your emissions footprint fully and identify areas where you can make pragmatic, meaningful adjustments.
What actionable steps and interim targets are in place to achieve our net-zero goals, and how will we track progress transparently? 🔄 Clear, common-sense plans with milestones ensure accountability and stakeholder confidence.
2. Sustainable Supply Chains to become a key focus for ESG performance 🚚
Data Point: Supply chain emissions account for over 90% of greenhouse gas emissions in many sectors.
Insight: Expect a trends towards more transparency and accountability in supply chains. Within less than 2yrs that data will have to be audited (as opposed to Scope 1 and 2 data that must already be certified). This massive amount of data collection, verification, support, and improvement cannot be done by hand. Achieving supply chain ESG transformation shall require both digital solutions AND financing. Without proper financial incentives, and support to invest, one cannot expect suppliers to achieve our shared ESG targets. Solidarity with supply chains is crucial.
As a C-suite Leader, three insightful questions you can ask:
Are we leveraging digital tools to get better transparency and traceability in our supply chain? 🤖 Investing in dynamic, real-time solutions is essential for monitoring and managing supply chain emissions effectively so you can see the evolving picture and respond quickly, without exploding your own costs...
What financial incentives and support are we offering to help suppliers meet ESG targets? 💸 Providing resources fosters resilience and shared responsibility across the supply chain. For your suppliers to meet targets, ensure that they have the resources they need to invest in sustainable practices. Robustness and supply chain resilience is becoming an ever-critical subject!
Have we identified the key emission hotspots in our supply chain? 🔍 Focusing on high-impact areas ensures resources are allocated for maximum effect, driving substantial ESG progress. A dynamic solution allows companies to react quickly and effectively vis-à-vis a supplier.
4. Regulatory Landscape to become more harmonized 🏛️
Data Point: The EU's Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD) will be fully implemented by 2025.
Insight: We’re hearing more and more from companies outside of Europe that are moving to CSRD. The CSRD is clearly becoming a globally-accepted ESG reporting standard, as IFRS and US GAAP have become in accounting. We expect to see that trend further progressing, simplifying greatly the reporting life of suppliers working with multiple geographies…
As a C-suite Leader, three critical questions you can ask:
Are we prepared to comply with the EU's SFDR and CSRD regulations by 2025? 📋 Ensuring readiness avoids reputational, financial, and legal risks while positioning us as a leader.
Is our global ESG reporting set up to simplify and standardize our sustainability disclosures in a cost-effective, transparent way? 🌏 If you are a global company, chances are that you are subject to CSRD and other ESG regulations. Consider whether it is useful to approach ESG as a business and operational excellence transformation project.
Are our suppliers equipped to meet regulatory standards around sustainability? 🤝 Supporting suppliers ensures compliance and builds investor trust. It also gives an opportunity to differentiate from competitors through higher performance and lower purchasing costs.
5. Green Finance and ESG Investing as a driver of competitive advantage 💰
Data Point: ESG assets are projected to reach $53 trillion by 2025, representing more than a third of global assets under management (Source: Bloomberg Intelligence).
Insight: Investors will continue to prioritize ESG factors in their decision-making. But...greenium is existing finance solutions revolves only around 2-3bps. We expect more growth coming from sustainable trade finance where greeniums can achieve 300bps (i.e. 3%), hence a much stronger incentive for corporates to move in the right direction => such as Koaloo.Fi.
As a C-Suite Leader, three strategic questions you can ask:
How can we align our corporate strategy with the growing focus on ESG to attract investment while remaining competitive and credible? 🌱 A well-integrated strategy attracts investment and aligns with regulatory standards while boosting credibility.
Are we utilizing green finance or ESG finance solutions for competitive advantage? 📈 Consider the operational changes needed to unlock greeniums and ensure measurable impact. Check if you have the right partnerships, technologies, or resources in place to facilitate a transition to more sustainable practices. Decide if you are in a place to quantify and verify the impact of these changes to access potential greenium benefits.
Are we crafting a compelling ESG narrative to engage stakeholders? 🗣️ Effective storytelling builds trust and loyalty, showcasing long-term value through clear and credible communication.
6. Technology and Innovation to help ESG reporting go beyond compliance 💡
Data Point: The global market for ESG data and analytics is expected to grow at a CAGR of 20% from 2023 to 2028 (Source: MarketsandMarkets).
Insight: Advancements in AI, machine learning, and data analytics will enhance ESG reporting and decision-making. One should not forget that such technologies are only as good as the quality of the underlying data. Public/unaudited data needs to be handled as a result with extreme care. Likewise, internal AND supply chain data needs to be thoroughly checked to ensure its reliability (both quality and time) before feeding any AI solutions. There is still no magic in tech…
As a C-Suite Leader, three pivotal questions you can ask...
How can we ensure the quality and reliability of our ESG data across internal operations and our value chain? 🔬 Robust governance frameworks are essential for effective actionable insights, taking into account the accuracy, timeliness, and completeness of ESG data. Think about the processes you have or need to set up to ensure data integrity for your analytics and decision-making systems. Check to see if you have the right cross-functional team or partners to mitigate data quality issues across the supply chain.
What technologies and talent will give us an edge in ESG analytics? 🤖 Smart investments in AI and ML tools help meet compliance needs and make strategic decisions... without blowing up budgets and without needing to grow teams exponentially. You don’t need to do it yourself indeed. External providers like us can provide it to you directly; zero capex required 😊.
How can we use ESG analytics to create value for stakeholders? 💡 Transforming insights into measurable actions builds trust and drives impactful decisions. The point is to have good ESG data insights to make informed decisions that resonate with investors, customers, and regulators. The ultimate goal is to achieve measurable business and societal benefits!
7. Consumer and Stakeholder Engagement linked to affordable sustainability 👥
Data Point: 70% of consumers are willing to pay a premium for brands that are sustainable and socially responsible (Source: IBM). Really?
Insight: Should inflation remain, we believe consumers’ willingness to pay a premium for ESG will actually be very limited. We hear instead companies asking for better ESG performance for the same price. Competition is tough indeed. We thus believe ESG premium will be sought on cost reduction rather than price increases. Reducing financial costs presents a massive arbitrage opportunity to contain prices as a result.
As a C-suite Leader, here are 3 perceptive questions you can ask:
How can we integrate ESG principles to deliver value without raising prices for consumers? 🏷️ Focus on cost-saving opportunities to balance sustainability with affordability. People want affordable, yet sustainable products and services. Think about how you can leverage ESG-driven financial mechanisms to lower operational costs and improve profit margins while advancing sustainability goals. Ensure that ESG efforts contribute directly to price competitiveness, demonstrating your ability to align sustainable practices with economic value for consumers.
How can we showcase our ESG impact to differentiate our brand? 🌟 Combining clear metrics with relatable storytelling strengthens trust and brand equity. ESG is about ‘talking the talk’ and ‘walking the walk’. Consider how you measure and communicate ESG performance effectively to stakeholders, with clear evidence of tangible benefits. Think about what innovative approaches you can take to make ESG efforts visible, all the while making sustainability profitable for you.
Are we staying competitive in a market where ESG is a baseline expectation? 🔄 It’s back to strategy basics. Consider if your strategies exceed baselines standards and go beyond compliance to create real differentiation. What would that take? Consider if you have a wide enough market benchmark goggles to know what’s going on and what you need to do to remain relevant and competitive.
8. Success will be open source more than ever 🌳
Data Point: On average, eight different departments within a company are involved in ESG. Yet, how often do they truly exchange with one another to coordinate their actions?
Insight: ESG is so wide and becoming so technical (e.g. think of biodiversity and carbon accounting expertise and how many experts can cover both?...). Companies, investors are facing similar challenges, often wondering how good or bad they truly are. Solutions require true/open dialogue, across silos, across markets. Hence the necessity to adopt an open-source mentality to drive efficient change.
As a C-suite Leader, here are some reflective questions you can ask:
How can we break down internal silos to ensure effective ESG collaboration? 🔄 Fostering dialogue and seamless cross-departmental coordination is key. Ensure that they are opportunities for ‘real, no-bullshit' cross-departmental dialogue, knowledge sharing, and strong top-to-bottom ESG initiatives to align actions, avoid duplication, and improve. Consider if you’ve made smart investments in tools that enable seamless data exchange and collaboration among teams working on ESG projects.
Are we engaging stakeholders to promote open, transparent ESG dialogue? 🤝 Collaborating with peers, NGOs, and regulators accelerates progress and innovation. Let’s face it. There is no Planet B. When it comes to sustainability, a different approach for success is required. So, ask yourself if your company actively participate in or contribute to open-source ESG initiatives, such as shared standards, methodologies, or technologies. And if not, think about how to create partnerships that promote collective learning and innovation. That may also simplify your suppliers' lives greatly...
How do we build a culture that values openness and shared learning in ESG? 🎉 Mindset is key because ESG is beyond reporting and compliance. It’s really about a full company transformation to be ready and prepared for the future. So consider whether you are actually encouraging a mindset of collaboration and co-creation within the organization, supported by leadership and clear incentives.
Stay Ahead of the Curve 🌟
As we navigate these trends, it's clear that ESG is not just a buzzword but a fundamental shift in how businesses operate. 🌍💼
Our shared objective should then be to aim for true/material change, striking the right balance between E, S, and G aspects of our decisions. ⚖️🌱🤝
Should you want to further discuss the above trends and what solutions exist to ride them, never hesitate to contact us. 📞💬
Or if you are interested in exploring how ESG can leverage supply chain financing, financial cost reduction, and automate/secure data collection/analysis from suppliers: just reach out here. We are always happy to help! 🔗📊
😊 Join us to shape the future of ESG transformation. Let's make sustainability profitable together. 🌟💚
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