Episode 28: Sustainability trends in 2025

Podcast transcript 

The transcript highlights below have been edited for clarity. 

Changes to the sustainability landscape in 2025 

Mark Lee 

I'll introduce the panelists that I have assembled today to tackle 2025 trends in the sustainability space. We have a panel of ERM speakers from across the US, Latin America and Asia to explore our annual trends report.  

Based in California is Aiste Brackley, who is the director of the ERM Sustainability Institute. Andrew or Andy Angle is a research and networks manager based on the East Coast of the US in Washington DC. Across the Pacific is Rebecca Green, ERM’s technology sector lead in Asia Pacific based in Yokohama, Japan. Finally, Ricardo Zibas is based in Sao Paulo in Brazil and is the head of ERM’s climate change and corporate sustainability practice in Latin America.  

Andy, you lead the trends research within a wider team that works on trends all year long so that we can produce both our quarterly and annual reports. What strikes you about how this year's findings are different than other recent years? 

Andrew Angle  

A major theme that jumped out to me is the ability of macro issues like the global election wave that's swept the world in 2024 and the emergence of artificial intelligence (AI) to influence almost all aspects of the ten sustainability trends we cover in the report. While we've seen this before in terms of big issues impacting many different sustainability trends, the scale of this year's impact was different. Just for 2024’s global elections, you can see the impact everywhere when it comes to sustainability, from how the world is approaching climate action and how the future of sustainability disclosure initiatives are shaping up in the face of more right wing swinging elections in 2024; to how companies are ensuring supply chain resilience and speaking out on political issues. And then, of course, AI seems to be everywhere and is affecting everything from how companies are pursuing corporate climate goals and how companies are approaching geopolitical relationships, sustainability disclosure and worker training. There's truly not an issue where AI has not impacted companies over the past year. 

Mark Lee 

Aiste, you've also been part of this process for multiple years now. You're based in the US and you also watch developments closely in the EU. Can you give us a sense of how you think a couple of the trends are going to play out in those regions in 2025 and give one or two key developments that companies should expect? 

Aiste Brackley  

I was reflecting today just before the podcast how much things have changed in just one year. We had a similar conversation around the same time last year. We were staring down a year where more than seventy countries were heading to the polls, more than half of the world's population. A lot of uncertainty. Nowhere will this be watched more closely than here in the US, where the pendulum is swinging right with the election of Donald Trump as president and a Republican led Congress. It's really hard to predict what will happen. I think what we can say with certainty though, is that we will continue to see polarization between staunch proponents of ESG and sustainability and those who oppose it. And we will watch it play out. We will likely see the rollback of some of the ESG-related legislation and rules like the Securities and Exchange Commission (SEC) climate rule that was proposed by the Biden administration. We're likely to see some setbacks to environmental regulations as well as the climate rules, for instance, methane emissions regulations and others.  

In the EU, while we don't have a lot of major elections, they will be deciding who will be in power for the next two years. But a major development on the EU side will be the first sustainability reports of EU headquartered companies that are aligned with the Corporate Sustainability Reporting Directive (CSRD). That’s a major milestone and this space is being watched by companies all over the world as they look to align with these regulations and comply globally. In many ways that will set the tone for what's to come, so a lot of developments. I think while there will likely be some changes in legislation, one thing for sure is that the train will keep moving. We have the energy transition in motion. It's what economics, dynamics, laws and rules currently support. It actually makes sense for businesses and this is the train that will not stop. We will see increasing investments in renewable energy and in the US in particular with the Reduction Inflation Act, continuing investment in clean energy, and similarly in Europe that space will continue to grow. 

Mark Lee 

Rebecca, through the lens of the regions where you live and work, how do you see a couple of the 2025 trends playing out in APAC? 

Rebecca Green 

I absolutely agree with Aiste that the train will keep moving, including in Asia Pacific. Some of the political uncertainty, while there is some, and I'll touch on that, does not exist here like in other geographies. So, there will be continued advancements in climate change regulations, in advancing renewable energy, in discussions around other carbon free energy solutions within the region. That said, I also will pull the word unpredictable from Aiste, in that there are situations like what's happening in Korea, where we need to stabilize a government before we start talking about what's going to happen with climate environmental regulations.  

Working every day in Asia Pacific reminds me how diverse the region is, from Australia to India to countries like Japan, Korea and Singapore. So, there's a lot going on but we're also not facing a lot of that backlash towards ESG yet. It still seems that green will continue to be something that companies are willing to invest in, companies and governments want to solve. Japan for example is advancing its revised energy policy on green transformation. So, I think we will continue to see that train move forward. Keep an eye on the instability within the political situation and the fallout from whatever happens with geopolitical tensions with other regions. 

Mark Lee 

Ricardo, how about where you're sitting? 

Ricardo Zibas 

I will use the same metaphor. So, the train has left the station, but I'd like to highlight two of the trends. The first one is responding to climate change. And why is that? Last year we saw a dramatic increase in natural disasters in the region, such as the water scarcity in Mexico, the early hurricane season in the Caribbean and the floods in the southern part of Brazil. Although many companies in the region are already measuring their climate risk, those events were able to scale up the importance of climate change mitigation and adaptation to a whole new universe of companies, not only the large multinationals but also local and regional organizations. I think 2025 will be the year that climate change will finally become a material topic for the C-Suite in Latin America.  

The other trend I would say is a mix between safeguarding natural systems and building sustainable supply chains. As a hotspot for biodiversity and natural resources, the question of how to safeguard natural systems is becoming a key issue for Latin American organizations, which got even more momentum after the biodiversity Conference of the Parties (COP) held in Colombia last year. So business is starting to realize the importance of measuring and reporting their impact on nature. The first issue is getting more and more attention as markets demand more information from their suppliers and many of them are located in Latin America. Finally, it's also linked to climate change because a huge part of greenhouse emissions come from land use change and illegal deforestation, especially in Brazil, where they account for the larger part of emissions. 

Progress towards the Paris Agreement climate goals 

Mark Lee 

Andy, you and Aiste touched that there are going to be shifts in transparency and stakeholder scrutiny or demand around climate. That applies to both countries who are supposed to bring their updated nationally determined contributions (NDCs) to COP 30, the next climate COP in Brazil, and a whole bunch of companies that are facing the first requirement to release their CSRD and International Sustainability Standards Board (ISSB) aligned disclosures. 

What do you think this is going to mean for companies and countries stepping up to the challenge of meeting or maintaining progress towards the Paris Agreement, especially given some of the ESG backlash and other factors we see. 

Andrew Angle  

Absolutely, I'll break things down into both countries and companies. Starting with countries, you mentioned COP 30 in Brazil, we are seeing many prepare for COP 30 by publishing their third generation of NDCs, which are countries’ overarching climate targets under the Paris Agreement. This includes the host country, Brazil, which raised its goal to reduce emissions by 67% by 2035 from 2005 levels, and the United Kingdom, which committed to an 81% reduction by 2035 from 1990 levels. We also expect a flurry of other updated NDCs for 2035 in the run up to the February 2025 deadline. At COP 30 itself, expect discussions around climate finance to continue following the agreement in Baku at COP 29 to triple climate finance to developing countries to $300 billion annually by 2035.  

For companies, many of which have already set emissions reduction goals, their attention is shifting to the hard work of implementation. Here we expect that climate transition planning is rising up agendas as these companies look to define strategies for how they will shift their companies towards the low carbon economy and integrate associated actions into their wider business strategies. While many companies are now publishing climate transition plans, fewer have fully aligned them with 1.5°C, so expect more numbers there to rise in the coming year. Also expect the number of initiatives, such as the Transition Plan Task Force, emerge to help companies develop stronger and more comprehensive climate transition plans to help propel action forward.  

Mark Lee 

Ricardo, Andy touched on Brazil being host of COP 30 next year. What are your expectations for the event and how might it be different, if indeed it will be? 

Ricardo Zibas 

That's a good question. Every time I return from a COP, I have been part of the Brazilian delegation since COP 12 in 2006, my usual answer is that we have to keep in mind that COP is always a process. Some of them have more announcements than others, but the negotiation building blocks and the road map have to be agreed many COPs before. From that angle, COP 30 is expected to be one of those ‘announcement COPs’. One positive note is the so-called Troika, which is from Dubai to Berlin, it's a group which aims to keep the negotiations momentum going despite the changes of COP Presidency and assures a more structured workflow. So that's the reason why we are expecting a delivery announcement COP. That said, there are expectations on the implementation of the Global Stocktake recommendations, also to align the NDCs with the goals of the Paris Agreement, efforts to expand climate finance, especially considering the divided opinions, and also for the developments on Article 6 and the carbon markets. 

Mark Lee 

Rebecca, in a moment where there's backlash, we saw companies last year restating or revising their overall sustainability strategies and sometimes specifically their climate strategies. We did an ERM research survey across the course of the year in which we found that APAC company executive leaders were significantly more positive about their organization’s climate performance than business leaders in other regions. Wonder if you can put a finger on why that might be so?  

Rebecca Green 

I had to read that survey again and again because I was trying to imagine sitting in Asia Pacific as if I were an executive in a company, to understand why my outlook on climate would be more positive than my peers in North America or the EU. Reflecting on this, Asia based corporations have a tendency to lag a little bit compared to EU and NA and their climate regulations. But that said, I'm sitting in a country with a relatively well defined NDC, that's a good starting place, so we've got a plan as a country, we know where we’re going. Then on top of that, the plans I've set might not be until 2040 or likely 2050 for net neutrality. So, I think there's been a tremendous amount of progress made in getting policies in place, in establishing these goals and setting up the corporate governance structure to enact on these goals. And it's a feel-good spot right now. But it might be a temporary honeymoon period to some extent, not taking away anything from all of that progress that's been made. But as we look to do the hard work in implementing the decarbonization plans, that's where I think a little bit of that positivity will come with frustration that we've seen from other geographies. So, I think in terms of addressing that this year, the coming years are a good time to get ahead of that, stay competitive and, for APAC headquartered companies who might be facing value chain pressures either from EU regulations or from other companies who've set more aggressive targets, it's a good time to get a handle on that. So, I think we're going to see more focus on that area this year.  

Managing supply chain challenges 

Mark Lee 

Aiste, what do you expect in the supply chain space and what should companies expect in terms of supply chain and value chain evolution in 2025? 

Aiste Brackley  

I feel like every time you talk about supply chain, we have to talk about disruptions. I don’t think there has been a year where we can say it’s going to be a great year ahead for supply chains. I think it's going to be one of those years, where again, there's quite a lot of unpredictability. And definitely a direct connection to the climate challenges that we're facing to the geopolitical landscape that is very uncertain. Just four quick points here on supply chains. I think on climate, I was just reading a report today from a supply chains intelligence firm that essentially predicts that water will be causing the major disruption to supply chain, that will be the greatest risk for the coming year. This is closely related to the extreme weather events that we're having and all the other unpredictable climate emergencies that companies are facing, so expect more of that.  

The second area, also related to climate, but perhaps more how we are tackling it on the expectations that are related to decarbonization of the supply chain. So, companies are already grappling with how to reduce emissions in the supply chain. But what we're seeing is a growing number of regulations that are being put in place, such as the Carbon Border Adjustment Mechanism in the EU, the UK is introducing similar rules and others. Combined with the disclosure expectations, companies will really need to zero in on their supply chains, understand where everything's coming from and where are the real levers to decarbonize those supply chains.  

The third area is tariffs and free trade. Again, with the political environment, while free trade continues to grow, I think we're also seeing a number of restrictions. Likely from the US administration that Mexico, Canada, China, will see more tariffs, more trade wars and uncertainty for companies, to which many are likely to respond with more onshoring, which may be good or bad depending on the situation and how companies tackle that. And the last issue I will mention is critical minerals and tensions over their supply and what is needed for clean energy transition. I think we'll see more happening in that space. 

Mark Lee 

Ricardo, I want to ask you about critical mineral supply chains in Latin America, how it's affecting companies in your region. Clearly there's a race for critical minerals to supply the low energy transition and technology. It's a bit of a Wild West. How do you perceive what's happening? How is that shaping or reshaping supply chains from where you sit? 

Ricardo Zibas 

The demand for minerals for the global energy transition will continue to drive mining investment across Latin America in 2025. Usually, the number one challenge holding investment back is the complexity and length of the permitting process. There is a thin line between the Wild West and a lot of red tape. So legal and political uncertainty is also featuring in Mexico, while in Argentina the change of government a year ago has created favorable market expectations, but at a huge social cost and increased inequality. Nevertheless, the total preoperational capital expenditure for the next year in Latin America is material, it's around $60 billion. 

Mark Lee 

Ricardo, are people and the societies that we're talking about excited about the investment and growth this represents or worried about the potential impacts of the mining and other industries that are involved? 

Ricardo Zibas 

Well, I think there is a perception of mixed feelings Mark, because Latin America is not a homogeneous region. Usually what we see with the communities that are very close to the facilities or to the assets, there is increased questioning or challenges to companies on their resource use and what will be the benefits of having such an operation next door. 

For communities that are living outside or are not close, they're quite excited because it poses a new cycle of money investment and it's not only mining, but all the infrastructure and the logistics that you need to assemble a project of that size. There are also huge investments in ports that export minerals, so it's a whole complex chain of investments and events that will also help solve one of our biggest issues in Latin America, which is logistics and infrastructure. 

Mark Lee 

Rebecca, when I think about the trade, geopolitics and supply chains between APAC and the rest of the world, there is still a great degree of truth about how much of supply comes from China in particular, but also from the region in general for the whole world. Then in technology terms, there's incredible tension around chips, AI and the sophistication and use of these technologies, in addition to who gets to control those. Can you see that shaking and reshaping supply chains from where you sit in Japan? 

Rebecca Green 

Absolutely, I think that uncertainty will remain, largely due to the geopolitical tensions associated with these supply chain issues you mentioned. That means we're going to continue to see further diversification of supply chains. So that's something we've been observing at a much more rapid pace and with that comes an entirely different set of sustainability challenges. We've got supply chains relatively well set up in China, Japan, Korea, which have a handle on renewable energy plans, a handle on health and safety issues.  

But now we're seeing that diversification to countries like Thailand, Vietnam, India at a pretty rapid pace and that's creating some chaos. That's creating challenges with permitting and on what are we going to do about renewable and energy in these new countries? What are we going to do about circularity and waste recovery in these new countries that we're operating in? I think that part of it is going to be the next challenge that we're really going to look at. So, the first step is stabilizing supply chains and diversifying. But we can't assume that what's worked and what's in place in the current supply chain is going to translate perfectly to the new countries of investment. I think this year there's going to be much more progress on that now that we're more certain that the diversification is going to continue. 

AI and technology trends driving the sustainability agenda  

Mark Lee 

Andy, in your opening, you said this has been the year of AI and technology. Certainly, it's rapidly surged forward and beyond AI, it's data centers and their growth and the energy and other demand that goes with that. It's critical minerals, social media and its influence on our politics. Technology is without question in the spotlight. Another part of the story is the sustainability-related opportunities for technology to help sustainability progress across all sectors. So, what about that angle? What can technology do to drive this agenda forward? 

Andrew Angle  

Absolutely, there's been a lot of focus on AI over the past year, both for its potential to transform the economy and also sustainability action. I mentioned this at the start, but for companies, when it comes to AI and sustainability efforts, there's front office benefits from streamlining sustainability disclosure processes that might have taken a lot of human power and effort over the last few years and things like operational efficiencies in terms of reducing emissions, increasing water use efficiency and environmental impact reduction methods through AI. Of course, there has been lots of focus on AI, however it is not the only show in town when it comes to applying technology to sustainability. In our annual trends report, we touch on technologies like artificial and virtual reality, which are being integrated with artificial intelligence as well. These are helping companies better train workers on how to handle things like dangerous situations that they might not have been able to train on before without actually physically placing them in dangerous situations. Then there's also the more emerging technologies, things like quantum computing and spatial computing that will likely push the ball forward for companies, both in terms of business opportunities as well as sustainability performance improvements as well.  

Mark, you mentioned about AI and technology’s broader environmental impacts, of course companies also must account for these impacts outside of just performance improvements. AI itself has an incredibly high energy consumption, which in turn leads to high carbon footprints, when that energy consumption is being met by fossil fuels and non-renewable energy resource. So, companies that are involved in AI must directly account for these impacts. So far, we've mostly seen technology companies that are directly involved in developing and implementing artificial intelligence, that are making moves to mitigate the environmental impacts of AI. However, all companies are going to have to eventually confront AI’s environmental impacts down the line as well. 

I mentioned companies in the technology space, some of the most notable examples come from the United States, where major titan companies like Google and Amazon are exploring the use of small modular nuclear reactors to power data centers and reduce emissions, as well as Microsoft, who is working to revitalize the Three Mile Island nuclear power plant in Pennsylvania to power its AI activities, while ensuring it meets its decarbonization goals. I expect a lot of these developments, especially from the technology side, to continue as companies look to make sure that AI doesn't put their climate goals out of reach. 

Mark Lee 

Rebecca, I’m curious if you have a perspective from your region on whether the perception and application of new technologies as a sustainability problem solver is similar or different? 

Rebecca Green 

I can touch on this more from an industry perspective, as the technology industry lead for the region. Something Andrew said about the increased demands for energy and water to back these AI technology solutions is absolutely real. I think there's going to be some really interesting solutions to address this if we want AI to help be a part of the sustainable solutions. We have the data centers, and so we need to use the energy and the water. And tech is becoming part of the energy solution as well. Whether it's generation of renewable energy, generation of carbon free energy or smart grid solutions, tech companies need to help advance that through collaboration with local governments.  

I think this space is going to be incredibly dynamic over the coming years. We're still seeing AI data centers being cited not yet built, but we've got to solve for these. We've got to figure this out and I think it's going to be a really interesting space to watch. I'm very excited to see how technology companies are going to help advance carbon free energy solutions in the coming years. 

Mark Lee 

Ricardo, what about you? 

Ricardo Zibas 

One thing that grabbed my attention is that for the first time last year, we had a community blocking a data center in the greater Sao Paulo area because of energy consumption and that has never happened before. Communities are becoming aware of all the burning of energy from those assets but on the other hand especially, we see a lot of investments in not only new technologies, but also new processes, such as biofuels, sustainable fuels and especially hydrogen gathering pace in the region. Of course, a bottleneck is direct foreign investment. It's also a very sensitive issue in Latin America because the mantra to attract direct foreign investment is always market liberalization and workforce flexibilization. There is a perception that it also brings more inequality and more poverty, so we are trying to find a middle way to address those issues. 

How to drive sustainability through collaboration 

Mark Lee 

How do we improve global collaboration in a fragmented, uncertain, complex world? I'd like to ask each of you what opportunities you see for collaboration in the sustainability space that will make a difference?  

Ricardo Zibas 

There are a lot of different views on that angle. There is also this terminology which they call the world with G-Zero governance, which nobody is leading. I think the key is to understand that the challenges are common not only to companies but to sectors and at the end of the day to societies as well. There is a huge space for cyclical collaboration in different geographies as well as technology transfer. We can unlock competitive advantage and more rational resource use. As we live in a more connected world, let's use it as an advantage to fill the gaps and build bridges instead of increase polarization. 

Aiste Brackley  

Yes, talking about polarization, I'm in a country that's deeply polarized and fragmented. I think collaboration will change over the next two years. I think it will be different. Recently we saw, for instance, a number of banks leaving the Net Zero Banking Alliance and other companies following in similar footsteps. I think that will open space for more individual action. I think there's a silver lining there. Not all collaborations have delivered in the past. There was so much focus on messaging and the symbolic language that comes with that. I think the focus will shift more inwards and open the door also for more internal collaboration within companies between finance, sustainability, HR, legal and all the other teams. I think it will evolve but collaboration will stay for sure. 

Andrew Angle  

We've talked a lot about this global wave of elections. Of course, this is going to mean the sustainability policy landscape is likely to be a lot different. I'm thinking more fragmented and less ambitious. One way I see collaboration moving forward is through a trend we talk about in the report itself and that is responsible policy engagement. This is where companies work with policy makers to develop laws and regulations that really align with the company's own sustainability objectives.  

This might seem hard in the wake of some elections, particularly places like the United States, where a party that's more anti-climate action is in power. But as we saw today, just on Capitol Hill here in Washington, DC, the Trump administration’s Energy Secretary nominee talked a lot about fossil fuels but also about innovative new energy technologies, things like carbon capture and hydrogen, that'll likely be essential to decarbonization going forward. So, companies have room to engage on some of these more innovative topics when it comes to energy and decarbonization. I would encourage companies to focus on types of engagement at the policy level that is actually going to push action forward and that might find receptive voices in the chambers of power throughout their countries that they operate in. 

Rebecca Green 

Beyond collaboration, what I would like to see and hope to see is that we have more conversion and alignment of what we're asking companies and others to do, in terms of practical implementation, so that we can come up with solutions. We’re essentially all wanting the same thing. We have the same goals, largely the same objectives. But it’s how we're asking for it, so not just collaborating on solving an issue, but aligning and converging on those asks so that we can really drive progress. 

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