Navigating ESG Challenges in 2025

How can businesses refine their ESG strategies and enhance transparency to mitigate risks and succeed in a rapidly evolving political and regulatory environment and face the ESG challenges in 2025?

By CSE Research Department

The upcoming U.S. political shift, with Republicans gaining control of the White House and Congress, is set to reshape Environmental, Social, and Governance (ESG) initiatives. This dynamic landscape leaves companies navigating between vocal advocates and staunch critics of ESG. Here’s what businesses should expect and how to stay ahead of the ESG challenges in 2025 according to CSE Research Department:

1. Potential Rollback of the SEC’s ESG Agenda

The incoming administration is expected to challenge the Securities and Exchange Commission’s (SEC) climate disclosure rules, potentially delaying or rescinding them. Companies operating in California, however, will still need to comply with state mandates, creating an uneven regulatory landscape. To prepare for these changes, businesses should review their ESG practices to address heightened scrutiny and engage stakeholders to mitigate risks of shareholder activism.

2. Intensified Scrutiny of Corporate DEI Programs

Corporate Diversity, Equity, and Inclusion (DEI) programs are increasingly under fire, with challenges anticipated from conservative policymakers. Many companies have already begun reviewing DEI policies to ensure compliance and manage reputational risks. By aligning DEI efforts with business goals and legal standards, organizations can sustain their commitments while addressing public concerns effectively.

3. Renewed Focus on Proxy Advisory Firms

The administration is likely to revisit restrictions on proxy advisory firms such as ISS and Glass Lewis, alongside tightening rules on ESG-related shareholder proposals. Businesses should closely monitor these developments and engage with shareholders early to address concerns, building trust through transparency and open communication.

4. Rising Pressure from Pro-ESG Coalitions

Despite reduced ESG commitments from some institutional investors, advocacy groups remain steadfast in their efforts. Companies must prepare for competing pressures from stakeholders, navigating these challenges by fostering meaningful dialogue and demonstrating a balanced approach that aligns with their long-term business strategy.

5. A Fragmented ESG Disclosure Landscape

While federal ESG regulations may decline, the European Union’s Corporate Sustainability Reporting Directive (EU CSRD) will require robust disclosures from thousands of U.S. companies. Organizations should harmonize their reporting to meet global standards, addressing gaps in transparency to satisfy investor demands and maintain competitiveness.

6. Shifts in Executive Compensation Disclosures

Executive pay disclosures may see changes, including a rollback of the Dodd-Frank clawback rule. Companies linking executive compensation to ESG objectives, such as diversity goals, should carefully document these efforts to sustain investor confidence and ensure alignment with broader ESG commitments.

7. State-Level Leadership in ESG

Democratic-led states, including California and New York, are expected to take a proactive stance on ESG, potentially introducing new regulations and legal challenges. Companies should stay ahead by monitoring state-level developments and ensuring their policies align with emerging standards.

8. ESG Implications for Mergers and Acquisitions

The evolving ESG landscape is reshaping merger and acquisition strategies. Acquiring companies must integrate ESG frameworks and ensure compliance across supply chains to meet both regulatory and investor expectations. Proactively addressing these issues can enhance deal value and mitigate potential post-merger risks.

9. Strengthened Shareholder Engagement

As the political and regulatory environment evolves, shareholder engagement will become increasingly important. Companies should maintain consistent messaging across reports, statements, and communications to uphold trust and demonstrate their commitment to sustainability goals.

10. Reduced ESG Focus During Earnings Calls

Many companies are already downplaying ESG topics in earnings calls, focusing instead on operational and financial metrics. By carefully balancing these priorities, businesses can address financial outcomes while strategically incorporating ESG updates to meet stakeholder expectations without triggering backlash.

In 2025 and beyond, companies must remain agile as ESG challenges evolve. Regularly updating ESG materiality assessments, aligning communications, and actively engaging with stakeholders will be key to navigating these complex dynamics.

By refining ESG strategies and maintaining transparency, businesses can mitigate risks and thrive amid shifting political and regulatory landscapes.

About the Center for Sustainability and Excellence (CSE)

The Center for Sustainability and Excellence (CSE) has a long-standing history in New York City, Atlanta, Houston, Chicago and California of providing Sustainability Education to global FT 500 corporations and executives.

Over the past 20 years, more than 10,000 executives from leading organizations including Google, NASA, Coca-Cola, Timberland, the Federal Reserve Bank of New York, L’Oréal, ExxonMobil, Hartford, T–Mobile, Procter & Gamble, and Macy’s were certified as sustainability ESG professionals by the CSE.

CSE’s high level professional training brings together professionals from different countries, fields and companies to join the three-day program, to develop and enhance their business strategies through ESG frameworks.

The training will focus on sustainability strategy for competitive advantage, GRI Standards, sustainability reporting trends according to CSE research, national and international legislation and other key challenges in sustainability. It will feature updated content on the SDGs and Circular Economy.

“The workshop was delivered by dynamic and knowledgeable instructors. It was a very comprehensive and practical training, attended by participants from all sectors of the economy,” says Prof. Stephan Vachon.  “I recommend it to anyone who wants a thorough and up-to-date overview of sustainability aspects in businesses,” says Vachon, Chair of the Masters of Environment and Sustainability program at the Ivey Business School.

Professionals from multiple organizations and sectors are registered in the upcoming US training this March 6-7 & 10, in order to become certified and recognized as Sustainability ESG-P Practitioners by CSE, CMI and the Chartered Management Institute (CMI). Stay tuned for more information or reach us at [email protected] for early bird and for group training at [email protected]