Five trends shaping the sustainability agenda in 2025, and the actions you can take now

1. First CSRD disclosures put a spotlight on sustainability reporting

The first wave of Corporate Sustainability Reporting Directive (CSRD) disclosures in 2025 will place sustainability reporting in the spotlight. Reporters have grappled with much uncertainty from getting to grips with the topics, data and reporting requirements to whether or not transposition of the regulations will actually occur. In contrast, the second wave, reporting in 2026 on the financial year starting 1 January 2025, will have the advantage of the richness of insight from early reporters, as well as clarity over the EU’s Omnibus impact on the CSRD, Corporate Supply Chain Due Diligence Directive (CSDDD) and EU Taxonomy.

The challenge for companies impacted in Wave 2 and beyond is to focus on the lessons to be learned and the value to be gained. Wave 2 reporters should make full use of Wave 1 reporting to provide sector-specific insights, for example on sustainability impacts, risks, opportunities and actions to develop their own reporting and refine their broader sustainability strategy.

While new reporting demands can be challenging, taking a strategic approach can help companies unlock value. Our 2024 Global CSRD survey suggests that companies are starting to appreciate this upside potential - around three-quarters of companies preparing to file under the directive say they are factoring sustainability into decision-making to a greater extent, or that they plan to do so.

The stakes are heightened by the fact that the CSRD reports not only are more extensive than anything that’s come before, they also require independent assurance – a first for sustainability disclosures that brings them into line with financial reporting. So how can businesses build trust in the numbers? The starting point is a clear picture of how their data has been acquired and how the resulting metrics have been calculated. This demands a close working partnership between sustainability reporting teams and different departments across the organisation as a part of a more systematic and joined-up approach to collection, measurement and disclosure of information.

The other big question for the board is how customers and investors are going to react to these new disclosures, especially as progress will be compared to both pledges and peers. Those who stand out positively can gain competitive advantage. However, if performance fails to live up to expectations, boards will have to take a long hard look at why, addressing whether targets are achievable and, if so, how to get back on track.

The choices ahead aren’t easy. With the quick wins in areas such as switching to renewable energy already in train, more fundamental shifts could be required in areas ranging from shutting down carbon-intensive operations to rethinking who to do business with and where. While the majority of investors agree that companies should incorporate sustainability directly into their corporate strategy, for many businesses that means grappling with direct tensions between their growth strategy and sustainability goals. Boards will want clear answers from their teams about what the different options entail, the strategic trade-offs that come with them and the investment that will be needed. The availability of reliable and insightful sustainability data can help organisations to focus on the strategies that can make the most impact and unlock new sources of value and sustainable growth.

2. Supply chain resilience and nature comes to the fore

Alongside focusing on sustainability goals within their own organisation, in the last few years we’ve seen companies increasingly trying to get to grips with sustainability challenges across their supply chains, an issue that looks set to come into even sharper focus in 2025.

Climate shocks and extreme weather events are increasingly putting supply chains and essential commodities at risk, particularly when it comes to nature. PwC research shows that, even in a low emissions scenario, 70% of the EU’s lithium supply, 60% of its maize supply and 50% of its wheat supply are at risk from either heat stress or drought, or both, by 2050. These growing strains underline the need to put sustainability at the centre of commercial business strategies, with the EU’s new CSDDD adding to the impetus.

Key questions include how to manage the impact of pollution, water scarcity and other forms of nature risk. Many organisations and big food brands are trying to transition the agricultural parts of their supply chains towards regenerative practices. These include low-till agriculture, which causes less damage to soil structure and releases less greenhouse gas, and replaces toxic pesticides with natural pest management.

What makes a supply chain sustainable stretches beyond environmental concerns, with some high profile examples of companies being put under pressure to address the human rights impacts of their global supply chains.

3. A surge in green innovation and growth

There are signs that sustainability is shifting from being a nice to have, or concern, to increasingly being recognised as a key driver of innovation and growth for the UK economy. Our 28th Annual CEO survey highlights that as the climate transition continues to impact businesses, CEOs continue to take action, and climate related investments are six times more likely to have resulted in increased revenue than decreased revenue. Against a challenging economic backdrop, more than 70% of business leaders also say they are likely to use acquisitions and divestments to access the talent and technology they need to accelerate decarbonisation and meet their net zero commitments.

PwC’s latest Global State of Climate Tech study has found that over the past year climate tech funding in the UK has risen by nearly 25%, despite a decline globally. The Government has also recognised the potential of sustainability, highlighting its role in the planned new Industrial Strategy. Our own Framework for Growth projected a £6bn gain in UK Gross Value Added (GVA) driven by potential productivity improvements linked to environmental policies, and that’s before the broader potential impact of emerging green industries is factored in.

The surge in green job openings revealed in PwC’s latest Green Jobs Barometer - which showed over 9% rise in green job adverts in the past year, despite a 22.5% contraction in the overall job market - underlines the growing confidence in the UK’s net zero transition. But it also highlights the need to address the shortage of green skills and the resulting importance of putting recruitment and upskilling at the heart of both the Government’s and businesses’ sustainability strategies.

4. Another record year for renewables, but energy demand is also rising

The energy transition has picked up pace in recent years, with clean technology deployment and capital investment surging to record levels according to the Bloomberg New Energy Outlook 2024. PwC’s Net Zero Economy Index highlights both the growth in renewables - 2023 saw a 14% rise in renewable energy capacity and sustained momentum could see renewables surpass coal as the largest source of electricity by 2025 - but also the rise in energy demand, including from the soaring use of AI. Despite the momentum on renewables, this rising demand, alongside tensions around global climate commitments, could put decarbonisation progress at risk.

Energy solutions also remain a focus for energy-related start-ups, who have captured a larger share of climate tech funding, rising to 35% in the first three quarters of 2024 from 30% in 2023. However, this funding is not reaching all corners of the energy sector.

Energy efficiency technology, adopting circular business models, and implementing advanced manufacturing processes can all drive down energy demand. Further options include asking suppliers to set up onsite generation, potentially creating new revenue lines.

While delivering clean power by 2030 has the potential to have a positive impact on people’s lives and livelihoods across the country, create high quality jobs and drive economic growth, as the UK’s clean energy strategy develops it will be critical to address the significant capital required and ensure there is alignment between the action plan and the Government’s Industrial Strategy, on both a national and regional level.

5. AI’s environmental impact comes into sharp focus

Our 28th Annual CEO survey highlights how increasingly technology and sustainability are becoming one conversation for business, rather than two.

Technology and innovation have a massive role to play in solving sustainability challenges and we’re increasingly seeing Chief Sustainability Officers and Chief Technology Officers combine forces on everything from reducing carbon emissions through to reporting and analysis.

As is the case across so many areas, we’re also already seeing the impact of Artificial intelligence (AI) in areas ranging from gauging adherence to sustainability regulation to modelling different investment options in areas such as supply chains, transport and energy efficiency. The pace at which technology is developing, especially with AI and quantum computing, will make a massive difference to being able to solve sustainability challenges more efficiently and faster.

However AI’s environmental impact is also under scrutiny, given its significant demands on energy and the water needed to cool data centres. Researchers at Cornell University in the US estimate that global AI demand may require 4.2 – 6.6 billion cubic meters of water withdrawal in 2027, which equates to around half the UK’s total annual demands.

So far the discussion on Responsible AI doesn’t often include sustainability elements, but this looks set to change. Companies need to address how they can embed their sustainability goals into their AI strategy in order to minimise any unintended environmental consequences. Potential solutions include designing AI interfaces that encourage users not to waste AI time and using AI to identify inefficiencies, optimise processes and ultimately drive energy efficiency.

Accelerating critical change

Questions are going to be coming thick and fast in 2025 as progress on sustainability is laid bare for businesses, investors and consumers. The businesses out in front recognise this as an opportunity as well as a challenge. They’re harnessing their sharper reporting capabilities to target investment where it can make the most telling difference, mobilising their business around change and turning net zero transition into a catalyst for business transformation and value creation. Let’s look at 2025 as the year businesses shift from having a sustainability strategy to a sustainable corporate strategy.