ESG Pro’s Giles Robertson considers the state of ESG in light of the Trump return to the White House. His findings may surprise you as he considers ten ESG themes for 2025
ESG Resources on demand in 2025 from experienced professionals.
1. U.K Water & Utility Sectors
The water and utility sector are facing heightened scrutiny from the UK government, industry regulators like Ofwat, and the public due to growing concerns about waste and pollution levels and questions about proper governance. Based on these increased pressures, expect increased investment in ESG-focused funds in the U.K. seeking returns in the utility and public transportation.
A recent example of a development in this area is with Lanes Group, a leader in water and wastewater services, who secured significant investment from BlackRock-managed funds in Q4 of 2024. This strategic move aligns with BlackRock’s commitment to incorporating Environmental, Social, and Governance (ESG) risks in portfolio management, ensuring sustainable growth and impactful returns.
As the UK’s water and utility management plans evolve, stakeholders will continue to find sustainable responses for water management and supply through enhanced ESG reporting throughout the supply chain. Further, investment in the utility sector in 2025 and increasing political expectation via the Labour Government’s through the regulators is expected to add weight to the sustainability agenda. This will increasingly cascade into all businesses supplying goods and services who will need to adapt to meet these demands.
2. Procurement Act 2023
The UK’s new Procurement Act, coming into effect in February 2025, will revolutionise public procurement laws by focusing on broader social and environmental outcomes. The act requires businesses to “read between the lines” when it comes to the UK Environmental and Social Governance Agenda.
It mandates a shift to the Most Advantageous Tender (MAT), prioritising social value alongside economic considerations. The law strengthens the role of social value, with a 10% minimum weighting in government contracts and encouraging more community-focused solutions, from reducing carbon emissions to supporting local supply chains.
This represents a significant step forward for both public sector buyers and suppliers to align with the broader sustainability agenda. Within the Procurement Act, we expect the initiative and drive to focus on a far more accountable supply chain analysis with deeper reporting for PPN 06/21 notices relating to scope 3 Carbon Reporting. Developing a value throughout public contracts that was not explicitly there before. Investing in ESG in 2025 is a subtle requirement and imposing a clear ESG agenda on the private and public sector.
The requirement for higher levels of training and development will increase the demand on resources within the U.K job market with increased reliance on consultancies and external advisors to support companies seeking to remain competitive in the tendering process.
The legal requirement for public sector buyers to shift from awarding contracts based on M.E.A.T (Most Economically Advantageous Tender) to M.A.T. (Most Advantageous Tender) will lead to increased ESG activity comming into February 2025.
3. Travel & Tourism: CSRD Compliance
With the new Corporate Sustainability Reporting Directive (CSRD) taking effect in 2025, through the European Member States. Large companies in travel and tourism will need to disclose business travel emissions and set long-term targets for sustainability. This move ensures transparency and accountability in how business travel impacts the environment, aligning the industry with broader EU sustainability goals.
Large companies not previously subject to NFRD will have to start following the CSRD requirements from 1st January 2025. Listed SMEs have until 1st January 2026 to get on board. Non-EU companies with significant operations within the EU are subject to CSRD. Regarding business travel specifically, complying companies will have to state their business travel emissions and submit their targets for business travel for 2025, 2030, and 2050 with increasing demand placed on travel and tourism to support the mapping and reporting requirements.
This comes with commercial pressure of “sustainability” reporting being a key component for rankings with tour operators, who control and manage the destinations for consumers and business travellers. The Global, Sustainability, Tourism Council (GSTC) is an example of the list of Global operations moving to create disclosure requirements on the international stage.
4. Advances in ESG Data and AI Integration
Throughout 2025 with the ESG regulatory and compliance requirements as set out above the AI-driven sustainability algorithms will continue to reshape ESG reporting, providing real-time insights, and improving the accuracy of data disclosures.
BlackRock, using systems like Aladdin, leading this digital transformation to understand how future ESG trends will shape the performance of it’s future investments. Tracking target companies now for the future is a key reason why business leaders need to protect their position and fully understand their ESG exposures.
With advancements in AI, organisations can enhance their ESG impact, meet regulatory requirements, and navigate complex reporting frameworks. As ESG data platforms mature, we expect new benchmarks to emerge for evaluating sustainability, which will support better-informed investment decisions.
The disclosure and accuracy of information recorded online provide a historical record of the business and forms in some cases a legal requirement and data mining and aggregation of information on ESG performance, whether through announcements or management of regulatory information will become an increasingly important reflection of reputation and the integrity of brands. Statements and information disclosed in the past may weaken future ESG positions.
There are clear commercial risks associated with negligent or false reporting that can cause harm. The development of A.I. and algorithms a “check” to ensure companies invest in proper reporting and third-party verification to ensure the accuracy of their statements and to ensure double materiality is exercised with an objective level of care and skill.
5. FCA’s Role in ESG Integration
The Financial Conduct Authority (FCA) is pushing for greater transparency and governance in ESG data and ratings, recognising their growing importance in capital markets. As more firms integrate ESG practices, the need for trustworthy third-party ESG ratings becomes paramount.
The FCA is actively working on a regulatory framework to ensure consistency and accountability in ESG data, while also encouraging voluntary industry codes of conduct to support ESG transparency through finance managers. The growing alignment with investment and the expectations to meet social value and clearer reporting to ensure better ESG regulation and transparency as part of the ongoing movement in this area.
The UK government has already asked questions of the FCA on the 24th of December 2024 seeking economic stimulation and with sustainability and innovation as the cornerstone of the manifesto, we are expecting the focus of the FCA to develop regulatory practices in ESG to develop growth within the financial markets and products that will translate into measurable outcomes for the U.K economy.
6. ESG Integration in HSQE roles
We are expecting the changing ESG landscape to cascade into transitioning roles in particular Health Safety, Quality and Environment (HSQE) are increasingly tasked with producing ESG data for both internal and external reporting. Positions where strong reporting and risk management skills, aggregation, and analysis of data, will become increasingly part of the delegation of ESG reporting and stakeholder engagement in 2025.
This shift reflects the growing importance of managing ESG risks and transparently sharing progress, ensuring businesses meet regulatory demands and stakeholder expectations.
The construction and manufacturing sectors will find there need more responsive ESG functions through the supply of goods and services particularly more weight is placed on strong ESG reporting and as Tier1 contractors build more robust reporting strategies.
7. Finance and Social Value
Our investigations show these funds require ESG reporting and a centralised investment return not just retaining a percentage of the damages in return for the risk. There are increasing opportunities for these funds to use “social value” metrics, aligning with UN Sustainable Development Goals (SDGs). Measuring social value will be critical in shaping future investment strategies, ensuring that litigation serves not only financial interests but also social and environmental progress.
It will help distinguish international risk management criteria to support and enhance political and social justice including the GRI 207 which will be a marker for clear financial transparency and set to inform international investment considerations. Many companies will be making good governance pledges and commitment to accountancy and taxation to attract external investment to achieve growth.
In 2025 and beyond larger litigation finance funds may emerge in the UK as mass tort cases, focusing on social economic redress continue to become the focus in the Supreme Court including Motor Finance and Business Energy Claims.
8. NHS Evergreen
The NHS Evergreen Assessment, as an Environmental, Social, and Governance (ESG) requirement for 2025, refers to the integration of sustainability and social responsibility into healthcare decision-making, specifically within the NHS.
This assessment will focus on evaluating healthcare initiatives and services against ESG criteria, ensuring that they meet the evolving standards for environmental sustainability, social impact, and strong governance practices. No contracts with the NHS or Trusts which relay on NHS will be awarded after 2027 unless an organisation can evidence it is meeting these requirements.
Key elements of the NHS Evergreen Assessment as an ESG requirement in 2025 include:
- Environmental Responsibility: Assessing the environmental impact of NHS services, such as energy consumption, waste management, and carbon footprint, and setting clear sustainability targets to minimise environmental harm.
- Social Impact: Evaluating the social outcomes of healthcare services, focusing on improving patient care, equity, accessibility, and community well-being, particularly for vulnerable or socio economically deprived communities.
- Governance: Ensuring transparent, accountable management of healthcare programs and initiatives, with a focus on ethical practices, data protection, and decision-making processes that prioritise the public’s health and well-being.
- Sustainability and Long-Term Planning: As part of the NHS Evergreen approach, this assessment will ensure that healthcare services are resilient, adaptable, and capable of meeting the needs of future generations, considering not only financial viability but also social and environmental factors.
The requirement for ESG compliance by 2025 reflects the NHS’s commitment to aligning its operations with broader global sustainability goals and to fostering a healthcare system that contributes positively to society and the environment.
9. B-Corp and Female Leadership
The B-Corp movement continues to grow and has an increasing popularity where decision makers are majorities are women or with an increasing client base or customer base looking for brands that identify with the B-Corp Values. Promoting gender equality and aligning female leaders in business with shared values. Therefore, significantly impact through mentorship, networking, and voice amplification.
Many sustainable B2C products are adopting B-Corp ratings. The decision regarding the alignment process with other ESG comparable needs determination as these do not always transfer easily once a business has made the commitment to B-Corp. This may cause conflict with B-Corp particularly in areas such as construction and finance in the U.K.
10. U.S ESG influences with change of Administration
Companies in the U.S. will continue to face varying ESG disclosure requirements, particularly due to the EU’s Corporate Sustainability Reporting Directive (EU CSRD). This creates challenges for institutional investors, as some companies will provide more robust ESG data than others, potentially pressuring those without such disclosures to increase transparency.
As federal ESG regulations ease, state officials, particularly in Democratic states like California and New York, may take a stronger role in defending ESG policies, possibly through legal challenges.
Smaller companies may be targeted by larger ones as federal intervention in mergers declines. Acquiring companies will need to integrate strong ESG, governance, and compliance frameworks to meet various regulatory requirements, including the EU CSRD and local climate disclosure laws. As, such the change in administration may create more acute approaches to ESG based on location, market orientation and vertical but it will not remove ESG reporting and decision making requirements by U.S firms.
For more information and ESG advice please find us at: www.esgpro.co.uk
Or call the author, Giles Robertson, directly on 07868 027080 or email gr@esgpro.co.uk
ESG Resources on demand in 2025 from experienced professionals.
