ESG in 2025 for Legal and Compliance Professionals: 25 Predictions for ‘25

To quote Yogi Berra, “It's tough to make predictions, especially about the future.” On a more serious note, Henry Kissinger said “If you do not know where you are going, every road will get you nowhere.” In this post, we provide 25 predictions to inform ESG compliance in 2025. 

The only certainty is that 2025 will be another evolving – and challenging – year for ESG compliance. However, part of the job of legal and compliance professionals is to try to anticipate where requirements and risk are heading and make sure their company is on the right road to being prepared. These predictions are intended to help make that difficult job a little easier.

Megatrends

• ESG is not going away. ESG regulation is largely here to stay, both in the United States and abroad, although there will be uncertainties and bumps in the road as discussed in later predictions. On the voluntary side, stakeholder expectations will continue to increase. 2025 will be another year of significant evolution as companies struggle to meet new compliance requirements and evolving stakeholder expectations.
• Anti-ESG sentiment also is not going away and will further intensify in the United States given recent successes. Another wave of anti-ESG legislation will be introduced at the U.S. federal level, relating to among other things climate, DEI, corporate disclosures and pension fund investing. Notwithstanding the Republican trifecta (capturing the Presidency and both houses of Congress), passage of federal anti-ESG legislation will be difficult given the slim Republican majority in the House and in the Senate the filibuster and historically slower, more deliberative approach.
• As seen in 2024, anti-ESG does not end at the U.S. border. The anti-ESG movement will continue to gain strength in Europe. However, unlike in the United States where the debate over the legitimacy of ESG often is cast in binary terms, in Europe the debate will be about the appropriate balance between economic concerns and environmental and human rights goals.
• The left and the right – with the most growth on the right – increasingly will seek to pressure companies to pick a lane on controversial social issues. The favored tactic will be social media, as further discussed below. Proactive companies will ensure they have a thoughtful framework for meeting these challenges before they arise.
• Market participants will continue to grapple with terminology. “ESG” has never been a particularly satisfying term. It suffers from being too all-encompassing and meaning very different things to different people. Unfortunately, variants of “sustainability” and “responsibility” suffer from the same shortcomings. There will not be a new widely-used replacement term for “ESG” in 2025. However, the gradual shift away from big-tent terms to an unbundled focus on relevant component environmental, social and governance impacts, risks and opportunities will continue in 2025.

Regulation, Litigation and Enforcement

• 2023-2024 will in hindsight be the peak for new ESG-related regulation. But, companies will not get a breather in 2025, as they grapple with new mandates adopted over the last couple of years. The EU Corporate Sustainability Reporting Directive will be the biggest ESG regulatory focus this year in terms of sheer number of hours and budget, but many companies also will spend significant time on compliance with new EU Deforestation Regulation and California climate disclosure requirements, as well as existing modern slavery reporting and European mandatory human rights due diligence laws, among others. Later in the year, many companies will start to turn to preparing for compliance with the new EU Corporate Sustainability Due Diligence Directive. And consequential new regulation – both pro- and anti-ESG – will continue to be introduced and adopted, just not at the head-spinning pace of the last few years. 
• Pragmatism will be a much bigger factor in EU ESG regulation in 2025. Economic considerations will receive greater weight. The ESG “it” word of the first half of the year will be “omnibus.” The eagerly awaited EU omnibus regulation will be more than a consolidation and harmonization of CSRD, CSDDD and the Taxonomy Regulation. It will reduce compliance requirements, but not as much as most companies would like to see. Changes will include both extended phase-ins and scaled back substantive compliance requirements.
• Rest-in-peace U.S. Securities and Exchange Commission climate disclosure rules. There are different paths that may result in the demise of these rules, but companies will not be required to comply with them.
• But, long-live U.S. mandatory climate disclosure. California’s climate disclosure laws will survive legal challenge. Additional blue states will move forward on mandatory disclosure of greenhouse gas emissions and climate risk.
• Globally, climate disclosure requirements will continue to gain momentum, with more jurisdictions adopting requirements largely aligned with the International Sustainability Standards Board’s climate disclosure standard (IFRS S2).
• The next acronym for ESG legal and compliance professionals: “EPR.” Over the last year, extended producer responsibility requirements have been adopted and/or taken effect in the United States and Europe, with more on the way. It will be important for companies to understand and stay ahead of EPR compliance requirements given the potentially significant compliance costs.
• Greenwashing litigation and enforcement will continue to increase in many jurisdictions. New anti-greenwashing laws and more prescriptive disclosure requirements will increase litigation and enforcement risk.

Stakeholder Engagement

• The pendulum will start to swing back in the other direction on ESG shareholder proposals. In the United States, revised SEC guidance and policy will give companies substantially more latitude to exclude proposals, although this shift largely will not bear fruit until the 2026 annual meeting season. 2025 will be the high-water mark for ESG-related proposals. This year will see a record number of anti-ESG proposals, even though they receive minimal support.
• More anti- and pro-ESG campaigns will be waged over social media. This will bring vastly greater velocity, reach and staying power to these campaigns. Social media also generally has proven to be more effective at driving quick change than other longstanding forms of ESG engagement and stakeholder pressure.

Voluntary Initiatives

• U.S. signatories will continue to leave collaborative climate initiatives. U.S. red states will continue to attack these initiatives and their participants on antitrust and other grounds. With the federal changeover in the United States, conservative-led federal agencies also will seek to exert their influence. Given U.S. conservatives’ success in damaging support for climate organizations, they will target other prominent pro-ESG initiatives beyond climate.
• Disclosure aligned with the Task Force on Nature-related Financial Disclosures framework will continue to increase, but this will remain primarily an ex-U.S. trend, with relatively little uptake by U.S. companies. 
• 2025 will be the high-water mark for annual glossy voluntary ESG/sustainability reports. In future years, these reports will begin to be supplanted by more clinical and structured EU Corporate Sustainability Reporting Directive disclosure. It will take time, but companies will gradually pull back from reporting aligned with voluntary ESG disclosure standards and frameworks that overlap with their annual CSRD reporting.

Diversity, Equity and Inclusion

• Will “D-E-I” D-I-E in 2025? Not by a longshot. But, it will become increasingly difficult to navigate. There will be more anti-DEI campaigns and lawsuits. The U.S. House and/or Senate will conduct anti-DEI hearings this year and send information requests to try to influence corporate DEI practices, similar to the 2023-2024 anti-ESG campaigns targeting the asset management industry. The U.S. federal government also will try to discourage private sector DEI initiatives through federal procurement policy and agency interpretations and guidance.
• Many more companies will scale back their DEI-related initiatives in response to stakeholder pressure and liability concerns. Companies aIso will continue to rename their programs, jettisoning references to “E.” However, programmatic changes mostly will be around the margins, with companies eliminating performative initiatives that are perceived as not doing much if anything to enhance DEI. On the flip-side, some large companies that are targeted by anti-DEI activists in 2025 will very publicly hold the line on DEI.
• Companies also will continue to scale back their DEI disclosure. However, notwithstanding the December 2024 Fifth Circuit decision vacating Nasdaq’s board diversity disclosure rules, most public companies will continue to report board diversity data, albeit with more variation in approach.

Human Rights

• The focus on illegal U.S. child labor will continue to increase. Unskilled low-wage agency and other third-party managed labor remains a risk for many companies.
• The U.S. Uyghur Forced Labor Prevention Act will continue to be vigorously enforced. This is one of the rare areas where Democrats and Republicans are almost universally aligned. However, enforcement will be driven primarily by competitive rather than human rights concerns. More generally, governments will be less focused on human rights in other countries. This shift will be especially noticeable in U.S. policy. 

The Profession

• Regulatory compliance will be a bigger share of companies’ ESG spend in 2025. In many cases, the increase will be offset at least partially by reducing spending on voluntary ESG initiatives. 
• By year-end, most large U.S.-based multinationals will have an internal “ESG counsel” or similarly titled team member on the legal department organizational chart, to more effectively and efficiently address the growing number of ESG-related legal requirements they are subject to globally. ESG controllers and data analysts also will remain in high demand. DEI professionals, not so much.
• Managing ESG regulation and legal risk will increasingly be a shared responsibility that extends beyond the legal and compliance teams. Non-lawyer sustainability and impact personnel will need to be conversant in relevant ESG regulatory and legal risk considerations and proactively take them into account in their programmatic and other initiatives.

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