Navigating ESG in 2025: Latham & Watkins LLP’s Key Insights for the Year Ahead

Overview

In 2025, the ESG landscape is set to evolve significantly, driven by new regulations, technological advancements, and geopolitical shifts. Companies must stay agile and informed to navigate these changes effectively. Latham and Watkins provides their insights for navigating this in the upcoming year.

Source: Latham and Watkins LLP

1. US Developments The incoming Trump administration and a Republican-led Congress are expected to scrutinize climate initiatives and ESG-related regulations. Companies should prepare for potential legal challenges and increased scrutiny from state attorneys general and federal lawmakers.

2. Mandatory ESG Reporting 2025 marks the first year of mandatory ESG reporting under the EU's Corporate Sustainability Reporting Directive (CSRD). Large EU financial institutions and entities with listed securities in the EU will be among the first to produce these reports, highlighting the importance of integrating ESG into corporate strategies.

3. AI Tools for ESG Data Management New AI tools are emerging to help companies manage ESG data more effectively. These tools can streamline data collection, analysis, and reporting, making it easier for companies to comply with regulatory requirements and improve their ESG performance.

4. Rising Litigation Risk As ESG regulations become more stringent, the risk of litigation increases. Companies must ensure they are compliant with all relevant laws and regulations to avoid potential legal challenges.

5. Energy Transition The global shift towards renewable energy continues to gain momentum. Companies need to adapt their strategies to align with this transition, focusing on reducing carbon emissions and investing in sustainable energy sources.

6. Value Chain Scrutiny There is growing scrutiny of value chains, with stakeholders demanding greater transparency and accountability. Companies must ensure their supply chains are sustainable and ethically managed to meet these expectations.

7. The "Greenlash" The backlash against ESG initiatives, known as the "greenlash," is expected to intensify. Companies should be prepared to defend their ESG strategies and demonstrate the tangible benefits of their sustainability efforts.

8. Geopolitical Developments Geopolitical events will continue to impact the ESG landscape. Companies must stay informed about global developments and adjust their strategies accordingly to mitigate risks and seize opportunities.

9. Board Oversight Directors and senior managers play a crucial role in overseeing ESG initiatives. They must stay informed about regulatory changes and ensure their companies are effectively managing ESG risks and opportunities.

10. Stakeholder Engagement Engaging with stakeholders is more important than ever. Companies should prioritize transparent communication and actively involve stakeholders in their ESG strategies to build trust and drive positive outcomes.

https://www.lw.com/en/insights/esg-and-sustainability-insights-10-things-that-should-be-top-of-mind-in-2025