ESG 2025

2025: A Year of ESG Reporting, Due Diligence on ESG and Global ESG Evolution

As we navigate through the 2020s, the ESG landscape continues to evolve at a rapid pace. The year 2025 stands out as a turbulent period, marked by significant uncertainty in regulatory and political developments and shifting priorities across the globe. This introduction to Chambers and Partners’ 2025 ESG guide aims to provide an overview of the key trends and themes that are shaping the ESG discourse globally.

The rise (and fall?) of EU corporate sustainability legislation

2025 has undoubtedly been the year of the Omnibus packages, which aim to amend key corporate sustainability legislation.

The adoption by the EU of the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) represented a milestone in mandatory due diligence and reporting on sustainability issues. The CSDDD requires companies to identify, prevent and mitigate adverse human rights and environmental impacts in their operations and supply chains. The CSRD mandates companies to report sustainability information based on a standardised set of disclosure requirements that is grounded on a double materiality approach. The two Directives set a new standard for corporate accountability and transparency.

However, amidst growing geopolitical unrest and uncertainty, former European Central Bank president Mario Draghi raised the alarm regarding the EU economy’s future and the deteriorating competitiveness of Europe in what is now known as the Draghi report. One of Draghi’s recommendations to increase the competitiveness of European companies was to reduce red tape and administrative burden. The European Commission (EC) heeded the call. Following the working programme for 2025 and the EU Competitiveness Compass, the EC issued the so-called Omnibus packages, with Omnibus I containing proposals to de-scope, delay and simplify certain sustainability legislation including the CSDDD and CSRD. The Council of the European Union has already adopted its position on the proposals made by the EC, but the position of the European Parliament (EP) has been reopened and will be put to a vote in November 2025. After the EP has adopted a final position by plenary vote, the three institutions will enter into three-way discussions.

The final outcome of those discussions remains to be seen, but looking at the two definite positions of the EC and the Council and the first parliament position (as it was at the time of writing), reductions in the scope of both the CSDDD and CSRD are probable. It is also likely that for the CSDDD we may expect some limitation in the due diligence mapping exercise of possible adverse impacts and the deletion of a common civil liability regime in the EU. For the CSRD, the degree of assurance required from independent assurance providers and the requirement for all in-scope companies to report on their taxonomy alignment may be amended. Furthermore, the mandate for the EC to adopt sector-specific reporting standards may be deleted, and the European Sustainability Reporting Standards intrinsically linked to the CSRD are also to be amended, and some form of a cap on the information that may be requested from SME business partners is to be expected. The CSDDD and the CSRD are not the only pieces of legislation subject to the Omnibus process, though they have been most widely publicised and are subject to the most extensive changes. The EU Taxonomy Regulation and the Carbon Border Adjustment Mechanism, for example, were included in the same Omnibus package, and other Omnibus packages have followed, with proposals either to limit the scope of certain regulations or to postpone certain requirements, such as the due diligence regime under the Batteries Regulation.

Some critics have denounced the Omnibus packages as blatant deregulation, and although the effectiveness of the EC’s simplification efforts is to be debated, it would be premature to qualify the Omnibuspackages as “the fall” of EU corporate sustainability legislation as the CSDDD and CSRD have not been repealed. Companies that are within the more limited scope will have to comply with the requirements in them. Under the CSDDD, a company will still have to put in far more effort to prevent or end adverse impacts than what is now written in any binding law, which the OECD Guidelines and the UN Guiding Principles on Business and Human Rights are not. Furthermore, other EU corporate sustainability legislation has, apart from some postponements, for now remained unchanged, such as the Conflict Minerals Regulation, the Deforestation Regulation (EUDR), the Batteries Regulation, the Forced Labour Regulation and the Ecodesign for Sustainable Products Regulation (ESPR).

Climate litigation

We have not observed a surge in new climate litigation, but with many cases still pending or being filed, climate litigation continues to evolve. In 2025 as well, there have been major developments globally to highlight.

Advisory opinion on climate change obligations of states at the International Court of Justice

On 29 March 2023, the UN General Assembly adopted the request led by Vanuatu for the International Court of Justice (ICJ) to deliver an advisory opinion on the obligations of states in respect of climate change and submitted the request to the ICJ. The request specifically asks for an opinion on the responsibility of states towards (vulnerable) states – in particular, Small Island Developing States – and towards present and future generations affected by the adverse effects of climate change. A large number of states submitted written statements or gave oral statements during the public hearings in December 2024.

On 23 July 2025, the ICJ delivered its landmark advisory opinion. A key finding of the ICJ was the equal footing of obligations derived from customary international law and other treaties, such as the obligation to do no harm, with the obligations derived from the UN climate treaties, ie, the Framework Convention, Kyoto Protocol and Paris Agreement. The ICJ found that states are under stringent due diligence obligations regarding climate change such as establishing progressively ambitious Nationally Determined Contributions (NDCs) under the Paris Agreement, which collectively are capable of limiting global warming to 1.5°C, and making their actual best efforts to achieve said NDCs. Another key finding of the ICJ was the applicability of the customary rules on state responsibility to breaches of obligations regarding climate change. The ICJ underlined that although the shared and cumulative nature of contributions to climate change presents difficulties for questions of attribution and causality, this did not make it impossible to determine these factors. We expect that this advisory opinion will lead to more inter-state climate litigation in the future.

Lliuya v RWE

On 28 May 2025, the Higher Regional Court of Hamm (Oberlandesgericht Hamm, Nordrhein-Westfalen) decided in the case of the Peruvian farmer Lliuya against German energy company RWE. In 2015, Lliuya filed a tort claim against RWE arguing that RWE’s cumulative greenhouse gas emissions had contributed to glaciers in proximity of his property melting, increasing flood risks. Lliuya argued that RWE should be held liable for 0.47% of the mitigation costs, which corresponds to RWE’s historical contribution to the global emission of greenhouse gases. Though initially dismissed by the Regional Court of Essen, the Higher Regional Court of Hamm deemed the case admissible and it continued to an evidential phase.

In the end, the Higher Regional Court rejected Lliuya’s claim, stating that the actual flood risk to Lliuya’s property was not consequential enough: two scientists specialising in alpine natural catastrophes estimated the actual chance of a flood reaching the house of the claimant in the coming 30 years to be 1% and that in that case the water would not rise higher than 20 centimetres.

However, the Higher Regional Court did underline that although this specific claim was rejected, companies can be held liable under German tort law for their contribution to global climate change and consequent impacts and risks. The Higher Regional Court even added that the significant distance between RWE’s operations and the claimant’s property was not an inherent legal challenge. This does open the possibility of other claims being successful in future and companies having to take into account potential unforeseeable claims regarding their operations, specifically because the court deemed the location of a claimant not an inherent legal hurdle. This case sets an important precedent for German tort law, but ultimately its relevance will be determined by how other courts assess the full set of facts in each specific case. This consideration by the Higher Regional Court does seem to fit in with a budding trend in civil climate litigation which we witnessed in Milieudefensie v Shell in 2024. In that case, the Court of Appeals of The Hague, although it rejected the specific claim, did recognise the special responsibility of fossil fuel companies like Shell to mitigate the negative impacts of climate change, which we will discuss in more detail below.

Milieudefensie cases against Shell and ING

In November 2024, the Court of Appeals of The Hague overturned the injunction given by the District Court of The Hague in the case of the Dutch NGO Milieudefensie against Shell. Although the Court of Appeals concluded that companies like Shell have a special responsibility to mitigate the threat of dangerous climate change based on the indirect effect of soft-law instruments and traditionally horizontal human rights through an open norm in Dutch tort law, the specific order for Shell to reduce its emissions was overturned. The Court of Appeals stated that Milieudefensie had insufficiently made the case for why Shell would not meet its own reduction targets for scope 1 and 2 emissions or why a specific reduction target on scope 3 emissions would be effective when other market participants could take over activities. Additionally, the Court of Appeals mentioned that there was no scientific consensus on reduction targets for specific companies. Milieudefensie has appealed this latest decision at the Dutch Supreme Court, arguing among other things that the Court of Appeals maintained an overly narrow framework to assess the reduction orders. The Dutch Supreme Court is expected to give its verdict in 2026. What may be interesting to note in this context is that the ICJ in its advisory opinion stated that a lack of full scientific consensus does not justify an omission to act when it comes to the obligations of states. The Dutch Supreme Court may take that into consideration.

In March 2025, Milieudefensie also initiated proceedings against the largest bank of the Netherlands, ING, citing ING’s portfolio of loans to and investment in fossil fuel companies, among others. Milieudefensie alleges that ING does too little to mitigate the threat of dangerous climate change, basing its claim on many of the same grounds used in the case against Shell. Since the Court of Appeals in that case did mention that a case against specific new investments in oil or gas fields would be more feasible due to a lock-in effect, it will be interesting to see whether that will play a role in the case against ING.

Global ESG trends and regulatory developments

North America

In the USA, the installation of the second Trump administration has had far-reaching consequences for the country’s ESG policies. The USA has withdrawn from the Paris Agreement, and the government plans to significantly roll back climate policies such as eliminating greenhouse gas emission standards. In January 2025, President Trump signed an executive order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”, targeted at diversity, equity and inclusion (DEI) policies in federal and private hiring. Twenty-eight states have now passed laws limiting or prohibiting DEI policies, and several companies, such as Amazon, Ford and Walmart, have rolled back or eliminated their DEI programmes. US-based companies have urged international subsidiaries to do the same.

Canada, on the other hand, has been proactive in integrating ESG considerations into its regulatory framework while also having to deal with the challenges of global economic and geopolitical unrest. The Canadian Securities Administrators (CSA) has introduced climate-related disclosure guidelines, emphasising the importance of transparency and accountability. Canada also expanded its legal framework against greenwashing this year, requiring companies to substantiate sustainability claims in the face of steep penalties and creating a private right of action. In Canada, like in Europe, this has led to legal risk concerns amongst companies and to “greenhushing”. Furthermore, regarding social equity, the Indigenous Loan Programme was officially launched, allowing indigenous communities to benefit from the government’s high credit rating and receive lower interest rates. The programme is intended to create economic opportunities and to support indigenous communities in developing their own economic priorities.

Europe

Although Europe continues to lead the way in ESG regulation, global political unrest did reach “Brussels” this past year. As described in detail above, the EU has started an intensive simplification process of key parts of its corporate sustainability legal framework before some of those laws would even apply, denounced by critics as deregulation. The EU Sustainable Finance Disclosure Regulation, which sets standards for financial market participants, is also under review. Still, the EU has an extensive regulatory framework on corporate sustainability and ESG. Though the scope and intensity of some laws may be reduced, the CSDDD, the CSRD, the Taxonomy Regulation, the EUDR, the ESPR, the Batteries Regulation, REACH, the European Green Deal and the Clean Industrial Deal, to name a few, have a significant impact on how companies view, arrange and envision their operations. Finally, the increased focus on greenwashing – eg, with the proposed EU Green Claims Directive – has garnered much attention in all sectors. Some companies do not report all their best efforts, known as “greenhushing”, due to fear of greenwashing claims.

Iceland, Liechtenstein, Norway, Switzerland and the UK have their own set of advanced ESG regulations, partly driven by trade agreements and relations with the EU. We also see the effects of the Omnibus packages in these countries; eg, the Swiss government has suspended ongoing legislative processes in order to align national regulations with the EU. In the Balkans, ESG regulations and standards are slowly developing, predominantly driven by trade relations with the EU, EFTA and the UK.

Asia-Pacific

ESG seems to be undergoing a boom in the Asia-Pacific region, driven both by regulatory initiatives and by market demand. In East Asian countries such as China, India, Indonesia, Japan, Malaysia, Singapore, South Korea and Vietnam, we see an increase in both public policies and regulations and private initiatives such as launching and expanding sustainable and transition investment funds and bond programmes, regulatory frameworks for renewable energy growth, mandatory quotas for sustainable aviation fuel, and industry frameworks for the net-zero transition, enhancement of ESG disclosure requirements and integration of ESG considerations into the corporate governance framework. In this regard, we see a rapid growth in countries adopting or planning to adopt the reporting standards of the International Sustainability Standards Board (ISSB).

The region’s rapid economic growth and increasing environmental challenges make ESG a critical area of focus.

In Australia and New Zealand, we also see that economic uncertainty and geopolitical unrest have changed the political discourse. Australia and New Zealand both have climate change laws and are the first countries to see migrants explicitly fleeing there due to the effects of climate change: inhabitants of island states in Polynesia and Micronesia are threatened by rising sea levels. Australia has adopted the ISSB, and 2025 will be the first financial year over which the first group of companies will have to report. New Zealand has its own Climate-Related Disclosures regime, with most companies reporting for the second time in 2025. Regulators are investigating whether the regime should be streamlined with the ISSB to align with overseas jurisdictions.

For island states in Polynesia and Micronesia, rising sea levels are an existential threat leading Vanuatu to initiate the UN General Assembly resolution that requested the ICJ to form on advisory opinion on the obligations of states regarding climate change.

In the Middle East, we are also seeing developments. The United Arab Emirates has launched its Net Zero 2050 Strategy, and Saudi Arabia has set 2060 as a goal for net zero. However, Saudi Arabian state-owned oil giant Aramco has pledged to only reduce its scope 1 and 2 emissions to net zero. And recent publications claim that Qatar (alongside the USA) is exerting pressure on the EU to further decrease CSDDD obligations by threatening trade restrictions on, most importantly, LNG.

There are also still widespread concerns regarding human rights and labour conditions and practices in Asia, such as instances of forced labour (de facto or de jure) and child labour.

Africa

ESG factors have become increasingly important in Africa, especially considering that the region has been identified as one of the most vulnerable to the adverse effects of climate change. It is also in the field of environmental sustainability that we see the clearest examples of legislation and government policies focusing on energy transition, security and efficiency, across the spectrum of different African states. Benin, Gabon, Kenya, Mauritius, Nigeria, South Africa, Uganda and Zambia have adopted stand-alone climate legislation since 2016, and the Democratic Republic of Congo (DRC), Egypt, Ghana, Morocco and Tanzania have incorporated climate change provisions into existing legal frameworks.

In general, we observe that African states such as Egypt, Ghana, Kenya, Nigeria and South Africa are currently forerunners in either the adoption of existing or the creation of new ESG standards and reporting frameworks. Here, like in Asia, we also observe a rapid growth in countries adopting or planning to adopt the reporting standards of the ISSB.

Regarding Africa, we also observe widespread concerns regarding human rights and labour conditions and practices.

It must be noted that the proliferation of ESG policies on the African continent is quite a different story, and lack thereof is not necessarily due to unwillingness. Economic development and governmental stability differs widely across the continent, with some African states being in particularly precarious situations. With multiple widespread issues such as extreme poverty, unemployment, energy and food insecurity, low connectivity and a lack of infrastructure, for many companies and individuals ESG may seem like a “luxury” they cannot afford in efforts to survive, an issue which is not nearly as prevalent or pressing in, for example, Europe or North America. In addition, it is in Africa that we see the sometimes contradictory nature of ESG: the need for certain minerals for the green transition in industrialised states has led to serious concerns about labour conditions, local environmental impact, corruption, child labour and human rights abuses in, for example, the DRC. There are also concerns that the spillover effect of European legislation such as the CSDDD will not lead to improved conditions but to severance of relations and loss of income.

Latin America

In Latin America as in Africa, ESG issues are gaining traction – albeit at a slower pace compared to other regions. Brazil, Chile, Colombia and Mexico are leading the way with regulatory initiatives on ESG themes across the board.

Laws focused on climate change have proliferated widely in Latin America, with Argentina, Brazil, Chile, Colombia, Guatemala, Honduras, Mexico, Paraguay and Peru having adopted climate change laws.

Brazil, Chile, Colombia and Mexico have adopted legislation to improve corporate transparency and sustainability. Brazil, Chile and Mexico have introduced mandatory reporting standards on ESG topics for certain companies, and Colombia has introduced a solid legal framework for green finance including disclosure requirements for issuers and its own green taxonomy. Argentina, Costa Rica and El Salvador have followed suit with ESG regulations that remain voluntary but continue to progress in creating awareness.

In Chile, an extended producer responsibility law has been adopted covering, among other things, textiles and batteries, and in Colombia and Peru, proposals on laws for enhanced waste management are pending.

Key themes in 2025

Climate change and environmental sustainability

Climate change remains a central theme in the ESG discourse. The increasing frequency of extreme weather events and the distortion in value chains due to the effects of climate change underline the urgent need to transition to a low-carbon economy. Mitigating these effects and managing the financial, physical and transition risks of climate change are driving regulatory and corporate action. Companies are under pressure to set ambitious carbon reduction targets and improve their climate resilience.

Social responsibility and human rights

Social issues, including human rights, labour practices and community engagement, are gaining prominence. The CSDDD’s focus on human rights due diligence highlights the growing importance of social responsibility in corporate governance. Companies are expected to adopt more robust policies to address social risks and ensure ethical practices throughout their supply chains. Furthermore, the role of companies’ operations in relation to violent conflicts is starting to become a subject of investigation and litigation across several jurisdictions.

Governance and accountability

Good governance is the cornerstone of effective ESG management. Companies are being held to higher standards of accountability, with increased scrutiny from regulators, investors and stakeholders. This is reflected in the recent growth of ESG and sustainability provisions in corporate governance codes around the world. Board diversity, executive compensation and anti-corruption measures are key areas of focus, as companies seek to build trust and demonstrate their commitment to ethical governance.

Outlook for 2026 and beyond

Looking ahead to 2026, several key developments are expected to shape the ESG landscape:

• Geopolitical unrest: Though we expect the regulatory landscape in the EU to stabilise, we do not expect that the period of significant geopolitical unrest is behind us. Violent conflicts and humanitarian crises of this year are likely to persist into 2026, with the role of companies in relation to those situations becoming a growing point of focus in certain jurisdictions for both public investigators and civil society. In this year, we have seen both civil cases and criminal investigations and cases in at least France, Sweden and the USA.
• Global economic trends: Economic conditions in different regions will influence ESG priorities. By way of example, the ongoing energy transition and the push for sustainable finance will drive investments in green technologies and infrastructure, while policymakers balance the interest to address generally high inflation levels.
• Climate targets: It has already been widely reported in the news that the climate goals of the Paris Agreement seem to be dropping out of sight. There has also been a call from more than 15,000 scientists to act sooner rather than later. We are thus at a crucial point; additional measures may have to be taken to meet the targets. This could put additional pressure on companies.
• Technological advancements: Innovations in technology, such as AI and blockchain, are expected to improve ESG data collection, analysis and reporting. These advancements will enable companies to better manage their ESG risks and opportunities. However, there are also growing concerns regarding the fast proliferation of AI, such as its environmental footprint, incidents of racial profiling, the spread of misinformation and the use of AI in violent conflicts.
• Stakeholder engagement: The role of stakeholders, including investors, customers and employees, will continue to be crucial in driving ESG performance. Companies that actively engage with their stakeholders and respond to their concerns will be better positioned to succeed in the evolving ESG landscape. Attention to the rights of indigenous peoples will likely grow in importance for stakeholder engagement.
• Diverging ESG regulations: Companies that are active across jurisdictions are facing increasing regulatory pressure from a variety of ESG regulatory initiatives, posing impediments to global trade.

In conclusion, 2025 has been a year of unrest for ESG developments. As we move forward, companies will need to navigate a complex, dynamic and at times seemingly capricious regulatory environment, while embracing the opportunities presented by the global shift towards sustainable and responsible business practices.