Issues for Boards 2025: Is ESG dead? Far from it

Each year we prepare a publication focussed on providing practical insights for Boards and GCs on emerging issues that we expect to be topical in the coming months. 

See below for our ESG section. Click here to explore our Issues for Boards 2025 publication in full. 

Is ESG dead? Far from it

The EU is pursuing a simplification of its sustainability rules, and federal climate disclosure regulation in the US is likely to be rolled back. But it is clear that, to borrow from Mark Twain, reports of ESG’s death have been greatly exaggerated. The EU’s overall level of ambition has not changed significantly, and it remains committed to the wider energy transition and decarbonisation agenda. The UK is also accelerating its clean energy agenda, and several US states are enacting their own ESG disclosure regulations, not to mention that many businesses have already concluded that climate change is, and remains, a principal risk to their businesses. Consequently, businesses will still need to navigate an evolving and increasingly fragmented regulatory environment. 

The last few years have seen ESG policy and regulation across the globe develop at a rapid pace, with new regulations focussed particularly on climate-related financial reporting and due diligence requirements. But with many economies concerned about competitiveness and rising energy costs, as well as the impact of increased regulatory burdens on businesses, we are now seeing various governments reflect on, review, and in some cases re-calibrate their ESG regulation. 

European Union: Simplification but overall ambition remains 

The EU – which has been the leader in sustainability regulation – is now embarking on a simplification project (the so-called “Omnibus package”) aimed at reducing the regulatory burden on business of complying with its sustainability reporting and due diligence rules. The particular focus is on the Corporate Sustainability Reporting Directive (CSRD),  the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy. The Omnibus package includes proposals to extend reporting timelines, reduce the number of companies in scope, reduce the number of disclosures and clarify specific requirements under the CSRD and CSDDD. 

These proposals are still at an early stage, and it remains to be seen what the final, agreed changes will be. We recommend that in-scope businesses should continue to prepare for compliance while keeping a close eye on developments. The Omnibus package is intended to simplify the sustainability requirements and give businesses more time to prepare, not do away with these rules completely.

United States: Federal rollbacks vs. state-level initiatives 

In the US, the Trump administration has already made several executive orders targeting climate and energy regulation. The US has also announced that it will leave the Paris Agreement (again) and the SEC’s proposed climate disclosure rules, which were put on pause last year, are almost certainly dead. However, individual states such as California are enacting their own climate disclosure rules which will capture many businesses operating there. In addition, US companies operating in Europe may also be caught by the various EU sustainability rules (even as amended by the Omnibus proposal), including the CSRD and CSDDD. 

United Kingdom: Accelerating the clean energy agenda 

In the UK, the direction of travel is different. Energy transition and net zero policy are still key priorities for the government, which has said that it wants to make the UK a “clean energy superpower” and the “green finance capital of the world”. For example, in its Clean Power by 2030 action plan, it estimates a need for a £40bn investment in the UK every year to reach the 2030 goal and more investment afterwards to keep this going, much of which will have to come from private investment. The government is also expected to consult this year on plans to introduce new sustainability reporting rules and transition plan requirements for UK companies. The UK, along with many other countries, is also in the process of implementing the global sustainability disclosure standards developed by the ISSB. 

Implications for businesses 

Businesses will still need to work hard on preparing for these regimes and their impacts. This is particularly the case for those operating across multiple regions, which will wish to develop strategic approaches to compliance that are resource efficient, maximise the potential to create value, and are positioned so as to effectively navigate emerging ESG related legal risks. 

Many will be reviewing the continued appropriateness of their climate strategies and sustainability-related communications to key stakeholders to ensure that they are suitably balanced, particularly as 2030 and the maturity of many near-term targets loom large.

Points to help guide your oversight of sustainability strategies in the evolving ESG landscape

• Ensure that the business has a robust process for re-evaluating sustainability-related risks on a regular basis. How is the business adapting its approach to the shifting external landscape? 
• Ensure that the business has evaluated the feasibility of existing climate-related targets, assessing whether they can be met. Have you an agreed narrative to explain challenges and dependencies to stakeholders effectively? 
• Has the business reviewed the company's sustainability strategy and public positioning against regulatory recalibrations? 
• If relevant to the business, monitor the progress and final form of the EU's Omnibus package and implications for your compliance strategy. 
• Assess the implications of international operations, ensuring that they comply with all applicable regimes (for example, different state laws in the US and EU regimes applicable to non-EU entities with EU operations).