By: Karen Abramson, CEO of Wolters Kluwer Corporate Performance & ESG

It’s no secret that ESG has for the past several years become caught up in America’s political and culture wars. Multiple conservative-led states have passed legislation pushing back against ESG investment policies. Boycotts have been levied against companies that are perceived as prioritizing ESG factors. And prominent politicians have attempted to re-brand ESG concepts as being nothing more than “woke capitalism.”

Even more recently, ESG advocates have voiced considerable concern that the newly elected Trump administration will work quickly to roll back U.S. climate policies and ESG regulations, like the SEC’s newly adopted requirement for publicly traded companies to report climate-related risks.

However, even as the coming year’s evolving political climate creates a level of uncertainty around mandated ESG reporting in some geographic regions, here are five trends that encourage me to remain bullish about the future of Sustainability and ESG.

1. Uncertain regulatory and geopolitical environments will cause disruption, but multinational companies will continue their ESG momentum.

A significant number of 2024 elections around the world saw incumbents lose seats, setting expectations that conservative political leaders will roll back sustainability regulations and agreements set by their predecessors. These geopolitical shifts will undeniably cause disruption, and they’re also likely to cause companies to re-evaluate how they communicate about their ESG initiatives and progress.

However, 99% of companies in the S&P 500 already report on ESG metrics in some way. Most multinational companies must still comply with substantive disclosure regimes, like the Corporate Sustainability Reporting Directive (CSRD). Key markets including China, Hong Kong, Japan, and Singapore have driven important ESG regulatory developments in recent years. And even within the U.S., an increasing number of individual states may follow California’s lead, implementing their own regulations requiring greenhouse gas emission and climate change impact reporting.

That’s why, in 2025, multinational companies may publicly discuss their ESG initiatives with far less fanfare and new terminology. But I believe they will also continue to invest in and deepen their use of best practices and transformational technologies that make it easier to understand, report and assure the accuracy of their ESG data.

 2. ESG insights will continue to be valued by forward-thinking business leaders, because they reduce risk and strengthen resiliency.

Politics aside, climate change, resource scarcity, supply chain disruptions and social instability will continue to introduce risk into the operations of every business. When it comes to climate risks and severe weather events alone, S&P Global estimates that up to 4.4% of the world’s GDP could be lost annually in the absence of adaptation. In 2025, it will continue to be the business leaders who have a solid command of their ESG data who will be best able to mitigate those risks. Advancing sustainability initiatives will continue to be a strategic imperative for any business that wants to avoid costly risks and protect its long-term success.

 3. AI will drive digital transformation, although business leaders will need to effectively manage both its promise and its risks.

AI is driving digital transformation across diverse sectors, including ESG and Sustainability. Nearly half of all technology leaders surveyed in a recent PwC Pulse Survey said that AI was fully integrated into their companies’ core business strategy. And KPMG research indicates that 58% of organizations view AI as an integral tool to improve their ESG capabilities. In 2025, AI will continue to transform the way we collect, analyze, and report ESG data, offering unprecedented, real-time insights. Corporate leaders who tap the power of AI will be empowered to make faster, more informed decisions, anticipate market shifts, and drive not just short-term, but also long-term, sustainable growth.

However – the flip side is that AI technologies also consume between 1 to 1.5% percent of all the world’s electricity. And AI presents significant concerns related to governance, privacy, transparency, accuracy, bias, and employee skepticism.

2025 will be the year that Finance and ESG leaders must demonstrate they can effectively balance the synergistic relationship between AI technology and human insight, harnessing AI’s potential – while holistically addressing its inherent risks.

4. Businesses that build ESG and Sustainability acumen, enterprise-wide, will reap benefits.

Building sustainable organizations has always required a coordinated team effort – and that need for collaboration will only intensify. CSOs will continue to lead ESG strategy-setting and reporting efforts, alongside CFOs. EHS, operations and supply chain leaders will increasingly be tapped to provide data that shapes and informs organizational approaches to ESG.

However, in 2025 and beyond, companies will also need to embed ESG, Sustainability and data analysis acumen into a myriad of roles, across the enterprise. For example, recent research from Wolters Kluwer revealed that 68% of legal professionals see an increased demand for ESG-oriented legal expertise. This kind of acumen will increasingly be valued as an essential ingredient in empowering businesses to realize the transformative results, cost savings, and overall efficiency and innovation that effective ESG programs promise.

5. Data-backed ESG programs will continue to win significant competitive advantage.

Uncertain political environments can’t change financial reality: companies that look beyond compliance, to deliver consistently high ESG performance, score 2.6x times higher on total shareholder returns and enjoy 4.7x higher operating margins, versus companies with average ESG performance. Strong ESG performance is also linked to improved return on equity, return on assets and stock price, in addition to operational efficiency and risk management. Those are key reasons why the market for ESG reporting software is expected to grow to $4.3 billion by 2027.

These datapoints illustrate one central truth: regardless of the winds of political sentiment, strategic, data-backed ESG and sustainability initiatives will remain, above all else, tools that drive real competitive advantage.

In 2025, business that persist in prioritizing ESG data as a catalyst for innovation will continue to uncover costly inefficiencies, mitigate risk, build stronger stakeholder relationships, and strengthen their bottom lines. And those are tangible business benefits that no savvy corporate leader should ignore.