Sustainability and ESG in 2025: What U.S. Companies Should Know

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With politics changing hands this year in the U.S., many companies are in a holding pattern when it comes to their sustainability and ESG reporting requirements and what will be the future of sustainability in the country. 

Experts and analysts predict that the expected U.S. SEC climate disclosure mandates or promoting internal agencies (e.g., EPA and OSHA) will likely not occur during this new administration, among other changes. However, it is recommended that companies should avoid taking a back seat when it comes to sustainability data collection, analysis, and reporting. One way or another, companies with operations in the U.S. and globally will likely continue to be impacted by changing sustainability regulations.  

Here are our predictions for the way forward for sustainability and ESG reporting in the U.S.:  

From Federal to State: How U.S. Sustainability Regulations Are Evolving

While priorities shift at the federal administrative level, mandating regulations and making strides in sustainability will fall into the hands of individual states. California, for example, took a significant step in late 2023 by signing two important bills into law – the Climate Corporate data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261). This impacts both public and private companies operating in California, making it critical for businesses to understand their implications and be prepared for compliance. It also supports California in meeting its ambitious plans of achieving Net Zero carbon pollution by 2045. 

New York is another state paving the way for sustainability in the country. Two proposed senate bills, S897C and S5437, align closely with California’s regulations and will mandate annual climate risk reporting for certain corporations. This bill is in the early stages of the legislation process, with expectations that companies will be impacted within the next couple of years. Other states including Washington, Ilinois, and Minnesota are expected to take similar strides.  

With the numerous state disclosure rules, each with their own requirements, sustainability reporting can get complicated quickly. Companies should remain vigilant in their regulatory efforts and associated risks, especially if they will be required to follow multiple state-specific reporting requirements. Without streamlined efforts, companies can create increased inconsistencies in their reporting and increase the potential for legal ramifications.  

Global Sustainability Regulations Will Still Impact U.S Businesses (e.g., CSRD) 

By now, many U.S. based companies are aware of and are preparing to respond to the CSRD regulation. The main purpose of this regulation is to drive increased transparency of businesses operating within the European Union, which means many U.S. companies with EU subsidiaries or operations of significant size will also be impacted.   

For the early stages of the regulation (starting in 2025), the CSRD will apply to EU-incorporated companies only. However, for the financial years beginning on or after Jan 1, 2028, non-EU companies must report if they have significant presence in the EU – specifically multinationals based outside the EU (U.S.-based companies).  

Renewable Energy Innovations Will Thrive as States Lead the Charge

While the incoming administration may put new emphasis on fossil fuels, renewable energy will still be incredibly relevant and widely used across states. Renewable energy in the U.S. has already gone through monumental innovations in the past decade, with technology companies such as Cherry Street Energy making waves nationally. And it isn’t going anywhere anytime soon. Renewables have support from corporate champions and state-level governments due to their ability to meet the “reliability, affordability and sustainability goals of state regulators and grid operators”. Investment in renewable energy is seen as a strategic move across states versus being solely for sustainability purposes, as it boosts energy efficiency, promotes domestic energy production, and reduces costs overall. 

According to the Center for Climate and Energy Solutions, twenty-five states (including California) and the District of Columbia already have electricity portfolio standards in place, where it is mandated that a certain amount of electricity must be delivered from renewable, clean energy sources. The state of New York is implementing specific mandates, including one for energy-efficient buildings. Beginning in 2026, the majority of the newly constructed buildings less than 7 stories or larger commercial buildings, will be required to use electric heat and appliances. 

 It is likely that we’ll continue to see investments in renewables over the coming years as we reach key energy and technology tipping points. The International Energy Agency (IEA) predicts that renewables will overtake coal in 2025, becoming the leading source of electricity. Other forms of renewable energy – solar and wind – have become increasingly affordable, accounting for more than three-quarters of the new power generation. We’ll see these continue to overtake the markets as the preferred energy source. 

Regardless of Regulations, Operating Sustainably is Good for Businesses

As changes continue to take place, companies should recognize the golden opportunity of sustainability that lays before them. It has been shown that investing in sustainability strategies and efforts impacts all areas of the business positively, which is why companies should continue to make strides in this area. A study by McKinsey shared that better ESG performance and a stronger proposition led to many positive impacts, including top-line growth, as companies were able to better tap into new markets and attract customers with more sustainable products. Stronger performance and embedded strategies also created cost reductions, as companies recognized areas of opportunity to decrease energy and water consumption. These companies were also better able to attract and retain top talent, as a result of showcasing their investment into sustainability.  

While many of the decisions are still up-in-the-air, it is recommended that U.S. based companies continue to take a proactive approach to sustainability regulations, knowing that they will be impacted in some way or another in the future. Climate change remains one of, if not the most pressing issue of our time, so companies are encouraged to remain diligent with their emissions reporting and management efforts.  

At Cority, our tailored sustainability software and advisory services assist our customers to effectively navigate the ever-changing sustainability landscape with confidence and ease. Contact us to explore how our solutions and advisory services can support you on your sustainability strategies. 

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