The Future of ESG: How 2025 Regulations Are Reshaping Business Strategy
- Gasilov Group
- 3 days ago
- 5 min read
Environmental, Social, and Governance (ESG) is no longer a siloed initiative buried in sustainability reports. In 2025, ESG is a board-level priority with strategic, financial, and reputational consequences. Regulatory momentum is accelerating across markets, driven by investor demands, climate risks, and shifting societal expectations. For business leaders, staying ahead of ESG expectations is not just compliance, it is positioning.
Global frameworks are converging—but they are also becoming more complex. The European Union’s Corporate Sustainability Reporting Directive (CSRD), which came into effect in 2024, is already reshaping ESG strategy for multinationals. It requires over 50,000 companies to disclose granular sustainability data aligned with the European Sustainability Reporting Standards (ESRS). This means more than carbon metrics. Businesses must quantify social impacts, governance structures, and even supply chain due diligence across Scope 1, 2, and critically, Scope 3 emissions.
At the same time, the United States Securities and Exchange Commission (SEC) finalized its long-anticipated climate disclosure rule in March 2025, applying mandatory climate-related financial risk disclosures for publicly listed companies. While less expansive than the CSRD, the rule underscores a global shift toward mandatory ESG transparency, not voluntary storytelling.
Why it matters now: Regulators, investors, and markets are converging on one clear demand—measurable, auditable ESG performance. And they are not moving at the same pace. That divergence adds complexity. For example:
EU-headquartered firms must disclose climate transition plans under CSRD, even if operating largely outside Europe.
US-based multinationals are navigating SEC rules while preparing for evolving global frameworks like the International Sustainability Standards Board (ISSB).
Supply chain emissions (Scope 3) remain the most difficult to quantify, yet are increasingly the focus of investor scrutiny and regulatory pressure.
The Scope 3 Challenge
Scope 3 emissions—indirect emissions from a company’s value chain—are now the biggest blind spot in ESG reporting. According to CDP data, they often account for more than 70% of total emissions but remain underreported or inconsistently calculated. In 2025, regulators are starting to close that gap. The EU’s CSRD mandates Scope 3 disclosure where material, while California’s SB 253, signed into law in late 2023, requires Scope 3 reporting from major companies doing business in the state.
For companies, this raises urgent questions: Are our data systems ESG-ready? Can we trace emissions across tier 2 and 3 suppliers? Do we have a defensible framework for materiality and double materiality assessments?
Strategic Takeaways:
Treat ESG as an enterprise risk and value driver, not a PR tool. Integrate ESG data into financial and operational decision-making processes.
Build infrastructure now for ESG data governance, scenario modeling, and audit readiness. This is especially critical for Scope 3 disclosures.
Align internal KPIs with evolving standards such as ISSB, CSRD, and the GRI to avoid fragmented compliance strategies.
State vs. Federal Momentum
In the United States, ESG policy is no longer solely defined at the federal level. California’s Climate Corporate Data Accountability Act (SB 253) and Climate-Related Financial Risk Act (SB 261) are setting the tone for other states. These laws require emissions disclosures and climate risk assessments from large businesses, including private firms meeting revenue thresholds. The result is a fragmented but rising tide of ESG expectations across jurisdictions.
For businesses operating in multiple regions, the practical challenge is standardization. Fragmentation across EU, US, UK, and Asia-Pacific frameworks is creating a new form of compliance risk—regulatory overlap without alignment. This is especially visible in industries with global value chains like manufacturing, pharmaceuticals, and consumer goods.
ESG in Australia, for example, is also undergoing a regulatory shift. In 2024, the Australian Treasury released draft legislation mandating climate-related disclosures aligned with ISSB, to be phased in starting 2025. This brings Australia into closer alignment with global norms, but also increases the urgency for regional and multinational businesses to act now.
Operationalizing ESG: What’s Next
Meeting the technical requirements of new ESG rules is one thing. Embedding ESG into business strategy is another. Executives need to push beyond checkbox reporting toward a proactive ESG operating model. That includes:
Cross-functional integration between sustainability, finance, risk, and procurement teams
Scenario planning for climate and social risks with quantified financial impacts
Digital ESG platforms that centralize and automate data capture, monitoring, and reporting
The best-performing firms are moving from lagging indicators to leading ones, identifying ESG factors that influence innovation, supply chain resilience, and brand trust. And they are not waiting for regulators to act—they are using ESG as a competitive differentiator now.
What to Watch in 2025
The ISSB’s global baseline standards are gaining traction among capital markets, with countries like Canada, the UK, Singapore, and Nigeria already committing to adoption.
The EFRAG’s digital taxonomy for sustainability disclosures will go live later this year, enabling machine-readable ESG reporting under CSRD.
Investor pressure is rising, especially from asset managers aligning with the Net Zero Asset Managers initiative, representing over $60 trillion in AUM globally.
These developments create both risk and opportunity. The businesses that will thrive are those who see ESG not as an annual report, but as a performance system.
We are advising clients globally on how to respond strategically to these shifts—from regulatory mapping and ESG data transformation to climate risk modeling and investor-grade reporting. The path forward is navigable, but it demands precision and foresight.
To start shaping your ESG advantage, reach out to our consulting team. We help organizations translate ESG complexity into strategic clarity.
Frequently Asked Questions
What is the CSRD and how does it affect companies outside the EU?
The Corporate Sustainability Reporting Directive is an EU regulation requiring detailed ESG disclosures from over 50,000 companies. Non-EU firms with significant operations in Europe must also comply. It applies based on revenue and entity presence in the EU.
What are Scope 3 emissions and why are they so important now?
Scope 3 emissions are indirect emissions from a company’s value chain. These often represent the largest share of total emissions. New regulations like the EU’s CSRD and California’s SB 253 are making Scope 3 reporting mandatory.
How can companies prepare for ESG regulations in the US?
Start by mapping applicable rules, such as SEC climate disclosures and California’s laws. Build ESG data infrastructure, integrate climate risk into financial planning, and stay aligned with ISSB and TCFD frameworks.
What’s the difference between ISSB and CSRD standards?
ISSB focuses on sustainability disclosures material to investors, while CSRD takes a broader double materiality approach, covering social and environmental impacts. Firms must align with both if operating globally.
Why should businesses invest in ESG now?
Beyond compliance, ESG performance is increasingly tied to investor decisions, capital access, and brand resilience. Early investment builds operational readiness and long-term value.
