Board Priorities in 2025: Sustainability reporting
16 January 2025
Sustainability reporting - navigating the maze
The focus for sustainability reporting is on improving corporate sustainability performance. The complexity of this task is increasing, with legislation mandating comprehensive disclosures that vary by jurisdiction and a geopolitical landscape that is not always moving in the same direction.
An increasing number of countries operating under IFRS are set to implement the International Sustainability Standards Boards (ISSB) standards, moving towards a global baseline for mandatory sustainability-related financial disclosures. 2025 is the first year for in-scope companies to report under the EU Corporate Sustainability Reporting Directive (CSRD) which captures in-scope EU and non-EU companies. The interoperability of the CSRD's European Sustainability Reporting Standards and the ISSB's disclosure standards will also move closer to real world testing.
Climate transition plans are also on the uptick, serving both as regulatory policy tools and strategic frameworks. These plans outline how entities intend to contribute to and prepare for a transition towards a low carbon economy.
Investors and lenders are increasingly scrutinising the ESG performance of the companies they invest in and we are seeing legislation follow this trend. For instance, the EU Corporate Sustainability Due Diligence Directive and the German Due Diligence Supply Chain Act require in-scope companies to conduct due diligence on the environmental and human rights impacts of their business partners and take action to address these impacts. This legislation also extends its influence beyond directly obligated companies, as in-scope companies will inevitably request data from value chain partners.
These initiatives look to supersede previous taxonomy based reporting frameworks (such as the EU Taxonomy Regulation) although some countries, including the UK, are still considering the merit of introducing a taxonomy system.
To balance regulatory compliance obligations with the strategic direction of the company, Boards should consider the following priority actions in 2025.
First, they can protect value by implementing effective systems, controls, and expertise (e.g. contractual drafting) to capture and report on sustainability performance. This approach helps mitigate risks associated with greenwashing, reputational damage, and regulatory liability.
Second, they can enhance the value of sustainability reporting by strengthening governance through establishing robust processes to identify strategic opportunities and competitive advantages. This proactive stance ensures that a company not only complies with regulations but also leverages its sustainability strategy as a driver for growth and innovation.
