2025 in review – ESG compliance and reporting

In 2025, ESG compliance and reporting entered a period of profound recalibration. After years of regulatory expansion and rising disclosure expectations, the year was defined less by acceleration than by consolidation, retrenchment, and political friction. The result was not the collapse of ESG reporting, but its transformation – from a fast-growing regulatory project into a more contested, uneven, and pragmatic compliance landscape.

A year of regulatory divergence

Perhaps the clearest signal of change in 2025 was growing divergence between jurisdictions. In the US, momentum fractured. While New York State moved ahead with a mandatory climate disclosure bill, reinforcing state-level ambition, the federal picture became more uncertain. The Securities and Exchange Commission started to dismantle its climate disclosure rule quickly after President Trump’s inauguration, casting doubt over the future of mandatory climate reporting at the national level.

In Europe, the direction of travel was clearer but no less disruptive. EU institutions confirmed dramatic cuts to sustainability reporting requirements, reshaping the scope and burden of compliance for thousands of companies (article). The adoption of the Omnibus package further diluted key elements of both the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), sealing a political compromise that prioritised flexibility and competitiveness (article; article).

Simplification becomes the new watchword

A defining theme of 2025 was simplification. As part of the now infamous sustainability Omnibus, the European Financial Reporting Advisory Group (EFRAG) outlined plans to cut European Sustainability Reporting Standards (ESRS) data points by 50%, responding directly to complaints about reporting complexity and cost. The European Commission also eased reporting processes under its deforestation regulation – then delayed it for another year.

Analysis of early CSRD reports revealed why pressure for reform intensified. A review of 656 reports showed wide variation in quality, interpretation, and materiality assessments, reinforcing concerns that compliance effort was outpacing decision-useful insight. Notably, many European firms expressed broad support for CSRD in principle and were increasingly unhappy with how the Omnibus reforms were being executed.

Reporting expands – even as rules soften

Despite regulatory pullbacks, corporate sustainability reporting continued to spread. Nearly all S&P 500 companies now report on sustainability in some form, underscoring how disclosure has become a market norm rather than purely a regulatory obligation.

Even Scope 3 disclosures are on the rise. Nearly 70% of large US-listed firms now disclose Scope 3 emissions, despite political resistance to mandatory climate rules. At the same time, the broader disclosure environment shifted toward a narrower focus on financially material climate metrics rather than expansive sustainability narratives.

This trend reflected growing investor preference for comparable, decision-relevant data over volume-heavy reporting.

Standards bodies regroup and align

As policymakers stepped back, standards-setters stepped forward. In 2025, collaboration intensified among global reporting and accounting bodies. The International Sustainability Standards Board (ISSB) strengthened its partnership with the Taskforce on Nature-related Financial Disclosures (TNFD), signalling a closer alignment between climate and nature reporting frameworks.

Nature disclosures themselves gained traction, with TNFD reporting adopted by more than 700 organisations, indicating growing recognition of biodiversity as a financially material risk. Meanwhile, the GHG Protocol and ISO announced a partnership to unify carbon accounting standards, aiming to reduce fragmentation and confusion in emissions reporting.

A new task force was also launched to fill critical gaps in corporate climate reporting, reinforcing the sense that the next phase of ESG disclosure will be driven as much by technical standardisation as by regulation.

Assurance market maturity

Assurance emerged as another fault line. Standards boards teamed up to strengthen the sustainability assurance market, recognising the growing demand for credible, verifiable disclosures. 

Regulators also turned their attention to the infrastructure around ESG data assurance. The UK’s Financial Conduct Authority announced plans to regulate ESG rating providers, responding to long-standing concerns about opacity, inconsistency, and conflicts of interest.

Politics, pushback, and persistence

Finally, 2025 underscored how deeply politicised ESG compliance has become. From US pressure on global banking regulators – resisted by the Basel Committee – to EU moves aimed at easing industrial constraints, sustainability reporting increasingly intersected with competitiveness and industrial policy debates.

Yet even amid pushback, ESG reporting did not retreat. Instead, it narrowed, matured, and professionalised. By the end of 2025, the message was clear: the era of ever-expanding disclosure is over, but the era of decision-useful, assured, and strategically focused ESG reporting has only just begun.