What future for Environmental, Social, and Governance (ESG) reporting

By: Will Herman, Associate Director

Marking the 10^th anniversary of the Paris Agreement, COP30 is set to take place this November, in Belém, Brazil. The 2025 location may prove less controversial than was the case last year, but the geopolitical climate is unlikely to be less highly charged. In 2024, significant focus was given to the expected retreat of U.S. climate policy under a Trump administration while critical discussions on transitioning away from fossil fuels and mitigation were deferred.

It is perhaps unsurprising then that the importance of Environmental, Social, and Governance (ESG) reporting has become something of political hot potato in recent months, particularly in the U.S. For those in PR and corporate communications, the implications of this evolving ESG landscape are impossible to ignore.

The shifting landscape of ESG reporting

One year on from the KPMG 2024 CEO Outlook report, which stated that 60% of CEOs in the U.S. expected to see significant returns from ESG investment in the next three years, there has been a notable shift in opinion across the global political and business community. Where just 12 months ago, there remained a universal consensus on the value of ESG – KPMG’s survey found that no less than 74% of U.S. CEOs expected their ESG strategy to have the greatest impact on financial performance. Today, there is a growing divide between those same CEOs whose reversal in positioning is now distinctly at odds with the UK and wider European and Global trend.

It is perhaps telling that one quarter of those surveyed by KPMG cited the risk posed by competitors as one of the principal reasons to meet stakeholders ESG expectations, rather than the environmental impact of their business’ activity or it’s relationship with employees, and by extension, productivity.

But while the ESG debate has become increasingly polarised in the U.S., the EU remains focused on the need to remain competitive on the global stage, with ESG performance and productivity intertwined. The narrative for business leaders is no longer about whether ESG should be at the heart of their strategy, but how to make sure it is. For many, the same challenges that existed 12 months ago still loom large and are now further complicated by the need to navigate the reversal of opinion in U.S. markets, despite the continued drive for ESG compliance elsewhere.

And to add to business leaders’ woes, this remains a dynamic space within which there is distinct lack of certainty when it comes to defining compliance. Despite this, with ESG litigation on the rise, it is now imperative for businesses to face the challenge head on, and their PR teams - to face the challenge head-on.

ESG and PR: Moving beyond greenwashing

So, what does this mean for those tasked with ESG communications and PR strategy? If nothing else, it will be clear to any seasoned marketeer that ESG is no longer simply a PR exercise. Treated a such, it is increasingly likely that those responsible will fall foul of greenwashing claims. Instead, marketeers would do well to view ESG and PR activity as a strategic priority, one that helps business leaders navigate an increasingly complex commercial landscape.

For some businesses, this will mean revisiting their brand proposition and refining ESG messaging to ensure alignment between prupose, impact, and communication. This might involve a visual refresh rather than a full reband. From here, ESG communications planning can follow as usual, but this time grounded in strategic truth and reflect what matters to each distinct audience including shareholders, customers, employees and the wider community.

The future of ESG transparency and reporting

There is no avoiding the fact ESG reporting will remain complex and challenging in the years ahead. The good news is that the development of new technology, including AI, will ease the burden of collating and analysing complex data, which in turn will enable far greater transparency and credibility when it comes to reporting. This ESG transparency is vital. As with anyPR or communications plan, establishing clear KPIs that reflect the most relevant ESG issues for the business must be done at the beginning of the journey, with progress reported regularly. Both internal and external communication activity must align with real world performance against these KPIs to safeguard against the risks posed by greenwashing claims.

Now, with all eyes on Brazil in the weeks ahead, it will be interesting to see how continued negotiations to establish global goals designed to tackle climate change impact on ESG reporting and what this means for business tomorrow. Given the tumultuous year so many have experienced, and the increasingly high media profile given to the impact of climate change on communities across the world, one thing seems certain: ESG and the communication strategies that surround it are unlikely to become anything less than a top priority for investors seeking to assess long-term risk.