3 ESG Predictions for Multinational Corporations in 2025
The incoming U.S. administration’s position on climate change, regulation, and Environmental, Social and Governance (ESG) disclosures is poised to wreak havoc on environmental progress. The potential rollback of US-based commitments may force multinational corporations (MNCs) to navigate a complex regulatory landscape, balancing compliance in international markets while avoiding lawsuits from boardroom activists, shareholders, and domestic consumers. This "Not In My Back Yard" (NIMBY) mentality could lead to a fragmented approach to emissions regulations, further complicating the path to sustainability.
Following are three things I see on the horizon for ESG and sustainability in 2025.
Prediction 1) Innovation At Risk
The confusion of the new regulatory environment promises to stifle ESG software investment, innovation and strategic flexibility – with a potential domino effect to follow: Companies would opt to redraw their plans at the expense of pursuing innovative sustainability initiatives that fit better within the prescribed frameworks. This would result in a more rigid approach to sustainability, where businesses prioritize regulatory compliance over genuine environmental and social impact. And ultimately, progress would slow down in corporate sustainability efforts, as businesses become more conservative in their ESG communications and disclosures.
Prediction 2) Evolving ESG Efforts & the Role of AI
Those who take on ESG efforts without having boardroom and executive sponsorship risk failure, simply because ESG reporting can be very disruptive to a company’s workflow across all departments, including externally with suppliers and customers. Company-wide support and engagement is crucial.
However, companies who opt to integrate artificial intelligence (AI) with advanced technologies in their workflows have an opportunity to revolutionize data collection, analysis and governance to create true business value. Automation will be a driver for data gathering from a wide range of sources; improving the accuracy of ESG metrics will result in more reliable and timely reporting. Using AI to follow the ‘digital thread’ to enhance end-to-end traceability and auditability of ESG data will create a fast ROI.
Prediction 3) Companies to Expand Data Science, Analytics Requirements
As ESG culture becomes mainstream for companies, scalability and flexibility should become table stakes for any ESG reporting. This will become critical given the diversity and large volumes of ESG data to be able to identify both sustainability and business trends, patterns, insights and opportunities. AI’s ability to apply advanced analytics and insights will become a daily outcome. This will drive companies to expand their data science and analytics requirements leading to additional staffing skills, software innovation and services opportunities.
Looking Forward
MNCs will still need an ESG disclosures strategy that is truly global. While they will still invest in collecting emissions data, they should also focus on planning to implement a double materiality assessment (DMA). The outcome of a DMA is a list of material important sustainability-related Impacts, Risks, and Opportunities (IROs). These IROs then determine the specific disclosures and data points the company must include in its final sustainability report.
AI and advanced technologies for ESG should be in every CEO’s top 10 strategic goals. Investment in building out the company’s AI roadmap with ESG as a leading workload will release unknown business outcomes and accelerate business process re-engineering. Companies who adopt AI into ESG processes will also become more efficient at producing their goods and services, be more competitive than their peers and be more sustainable – something that will be evident in their ESG reporting.
The incoming U.S. administration’s position on climate change, regulation, and Environmental, Social and Governance (ESG) disclosures is poised to wreak havoc on environmental progress. The potential rollback of US-based commitments may force multinational corporations (MNCs) to navigate a complex regulatory landscape, balancing compliance in international markets while avoiding lawsuits from boardroom activists, shareholders, and domestic consumers. This "Not In My Back Yard" (NIMBY) mentality could lead to a fragmented approach to emissions regulations, further complicating the path to sustainability.
Following are three things I see on the horizon for ESG and sustainability in 2025.
Prediction 1) Innovation At Risk
The confusion of the new regulatory environment promises to stifle ESG software investment, innovation and strategic flexibility – with a potential domino effect to follow: Companies would opt to redraw their plans at the expense of pursuing innovative sustainability initiatives that fit better within the prescribed frameworks. This would result in a more rigid approach to sustainability, where businesses prioritize regulatory compliance over genuine environmental and social impact. And ultimately, progress would slow down in corporate sustainability efforts, as businesses become more conservative in their ESG communications and disclosures.
Prediction 2) Evolving ESG Efforts & the Role of AI
Those who take on ESG efforts without having boardroom and executive sponsorship risk failure, simply because ESG reporting can be very disruptive to a company’s workflow across all departments, including externally with suppliers and customers. Company-wide support and engagement is crucial.
However, companies who opt to integrate artificial intelligence (AI) with advanced technologies in their workflows have an opportunity to revolutionize data collection, analysis and governance to create true business value. Automation will be a driver for data gathering from a wide range of sources; improving the accuracy of ESG metrics will result in more reliable and timely reporting. Using AI to follow the ‘digital thread’ to enhance end-to-end traceability and auditability of ESG data will create a fast ROI.
Prediction 3) Companies to Expand Data Science, Analytics Requirements
As ESG culture becomes mainstream for companies, scalability and flexibility should become table stakes for any ESG reporting. This will become critical given the diversity and large volumes of ESG data to be able to identify both sustainability and business trends, patterns, insights and opportunities. AI’s ability to apply advanced analytics and insights will become a daily outcome. This will drive companies to expand their data science and analytics requirements leading to additional staffing skills, software innovation and services opportunities.
Looking Forward
MNCs will still need an ESG disclosures strategy that is truly global. While they will still invest in collecting emissions data, they should also focus on planning to implement a double materiality assessment (DMA). The outcome of a DMA is a list of material important sustainability-related Impacts, Risks, and Opportunities (IROs). These IROs then determine the specific disclosures and data points the company must include in its final sustainability report.
AI and advanced technologies for ESG should be in every CEO’s top 10 strategic goals. Investment in building out the company’s AI roadmap with ESG as a leading workload will release unknown business outcomes and accelerate business process re-engineering. Companies who adopt AI into ESG processes will also become more efficient at producing their goods and services, be more competitive than their peers and be more sustainable – something that will be evident in their ESG reporting.
