Regulatory Headwinds: What’s Going On?
We’re only three months into 2025, and sustainability has already faced quite a bit of regulatory turbulence. Corporates and banks have backtracked from previous Net Zero, ESG, and DEI commitments. The United States Securities and Exchange Commission abandoned its defense of its climate disclosure reporting rule proposed in March 2024, despite 300 institutions representing over $50 trillion in assets supporting the rule. European Parliament voted to “stop the clock” on reporting requirements as the EU pushes out deadlines and pares down the list of exposed companies from previously approved regulations such as the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. As the politicization of key sustainability issues grows, so too do the associated headlines.
All that aside, the fact is, companies aren’t backing down. In some cases, they’re actually doubling down. Let’s take a look at some recent data.
The Business Case Grows Stronger
Across over 4,000 public companies covered in PwC’s 2025 State of Decarbonization report, 84% either maintained (47%) or strengthened (37%) their sustainability targets in 2024. Smaller companies further down the supply chain are also becoming increasingly involved - as evidenced by the combination of a 14% year-over-year increase in the number of businesses setting Scope 1 and 2 goals along with a decrease in the average total revenue per goal-setting business ($1.3B in 2024, down from $3.8B in 2023).
The case of positive ROI only continues to prove itself out - with over 50% of companies citing higher sales and lower costs driven by their sustainability initiatives. Efficiency, resilience, and brand differentiation continue to deliver bottom-line value. Looking ahead, 62% of 2,500 business leaders polled by the CapGemini Research Institute plan to increase their sustainability budgets this year by an average of 10.5%. Growing investment underscores a broader shift toward prioritizing long-term environmental and social goals alongside financial performance.
Amidst the noise of shifting regulations and policy debates, it’s important not to lose sight of the bigger picture: the strategic value of sustainability.
What Business Leaders Should Take Away
The current “wait-and-see” regulatory environment, particularly in the EU, offers a valuable opportunity for companies to refocus on internal progress - refining systems, increasing supply chain transparency, and aligning with credible sustainability frameworks. These investments build organizational resilience and position businesses to lead, not lag.
More than ever, sustainability is linked to investor expectations, customer trust, and competitive differentiation. Companies that embed it into their core strategy will be better equipped to meet market demands and unlock long-term value.
Regulatory timelines may ebb and flow, but the overall trajectory is unmistakable. Forward-thinking businesses recognize that sustainability outlasts any election cycle. Leaders who stay proactive during times of uncertainty will be best positioned for future regulatory alignment and long-term success.
The takeaway from top-performing companies is clear: sustainability isn’t just the right thing to do - it’s smart business.