Corporate Sustainability Reporting in 2025: Five Key Trends

In the rapidly evolving domain of corporate sustainability, the year 2025 has been identified as a juncture regarding the development of reporting standards and practices. In the context of a growing regulatory complexity, it is imperative for businesses to comprehend the regulatory environment to ensure both compliance and competitive advantage.

Key Trends Shaping Corporate Sustainability in 2025

1. Regionalization of Standards and Regulatory Divergence

One of the most notable trends is the growing divergence in regulatory approaches across regions. As Deutsche Bank Research noted in their 20 March 2025 report, there has been an escalating politicization of the energy transition, with regulatory stringency showing significant variation across different jurisdictions. This creates a complex landscape for multinational corporations to navigate.

The JPMorgan ESG Wire highlights a notable example of regulatory divergence in digital assets, noting a contrast between the US, which is leading the way in innovation, and the UK, which is lagging behind, while the EU is making progress. This pattern is evident across multiple sustainability domains.

2. Evolution of Emissions Reporting Requirements

The Science Based Targets initiative (SBTi) is undergoing a substantial revision process that will significantly influence how companies approach emissions targets. According to a Kepler Cheuvreux analysis dated 18 March 2025, the SBTi's proposal includes the following elements:

• Alignment with maintaining a 1.5-degree temperature increase across all scopes.

• Different requirements for "Category A" firms (large companies in all countries and medium companies in high and upper-middle income countries) versus "Category B" firms (medium-sized companies in lower-middle and low-income countries and small companies in all countries).

• Tightened timeframes for near-term targets from 5-10 years to up to five years.

• Greater flexibility in scope 3 emissions reporting.

Particularly noteworthy is the proposed shift from reduction requirements to "alignment" of scope 3 emissions-causing activities with net-zero trajectories, This could potentially allow companies to set targets on the share of low-carbon products rather than absolute emissions reductions.

3. Increased Scrutiny of Green Claims

As scrutiny of greenwashing intensifies, companies are under increasing pressure to substantiate their environmental claims, particularly in relation to their sustainability practices. The Science Based Targets Initiative (SBTi) has proposed changes to strengthen the credibility of zero-carbon electricity claims, particularly in the context of Scope 2 emissions. These proposed changes require that:

• Zero or lower carbon energy claims must be substantiated by physical traceability of the energy source.

• Companies will be expected to use contractual instruments that ensure geographic and temporal matching "to the extent practicable" to ensure that the energy sourced is consistent with the claimed carbon reduction efforts.

• Companies will be required to report annually on the contractual instruments they use to procure energy, providing further transparency in their sustainability reporting.

In the context of green bonds, the BIS report raises concerns about the potential for "greenwashing" in the "use of proceeds" type of green bond. While this structure allows funds to be allocated to specific environmental projects, it risks undermining the authenticity of the green bond's impact if not carefully tracked. The report highlights that when proceeds are not specifically tied to a defined green project, it becomes difficult to determine whether the funds are truly supporting environmentally beneficial activities or simply being used for general corporate purposes. A loophole may open that could lead to misleading claims about a company's environmental efforts.

Given these concerns, there is a growing call for more rigorous verification processes and transparent impact reporting for both corporate claims and green bond issuance. Effective monitoring and clear, accurate reporting will be essential to restore confidence in corporate sustainability claims and ensure that green investments deliver the environmental benefits they promise

4. Integration of Carbon Dioxide Removal (CDR)

For the first time, the SBTi proposal introduces a role for carbon removal in addressing residual emissions between the target base year and the net zero target year. The proposal:

• Limits the use of CDR in the short term to Scope 1 emissions (which are a small minority for most companies outside of utilities, heavy industry and transport services)

• Proposes two potential approaches: either requiring companies to set specific short term carbon removal targets with increasing percentages each year, or allowing flexibility to address residual emissions through either abatement or removal without specific targets.

  
  

5. Focus on Physical Climate Risk

Insurance and risk modelling are increasingly incorporating climate-related impacts. According to the findings of Deutsche Bank's Climate, Security and Technology Day, climate change is "having a significant impact on risk modelling in the insurance industry", with specific impacts including:

• Reassessment of risk profiles (extended tails or shifts in overall distributions)

• Increased prominence of secondary perils such as wildfires and floods - Insurance coverage gaps, with only about "20-40% of losses insured" in some recent catastrophes

• Challenges in pricing risk appropriately due to regulatory constraints (e.g. price caps).