The Sustainability Pendulum: Stakeholders Set the Course
Sustainability took several hits in 2025, though none delivered a knockout blow. Regulatory progress slowed in both the U.S. and Europe, and mounting political pressure might suggest a retreat. Yet the underlying trend remains intact. Stakeholder demand continues to exert powerful influence beyond regulation. Clients, employees, local communities, and the media still expect measurable, verifiable commitments on climate action, human rights, and responsible governance. Institutional investors, particularly outside the U.S., are maintaining ESG criteria in fiduciary mandates. This has led to a disconnect: regulatory frameworks are increasingly subject to political cycles, while social and economic expectations are evolving in a more structural, irreversible way. Sustainability itself is not in question – what remains incomplete is our collective understanding of what it truly entails.
Regulation: from expansion to recalibration
Over the past five years (2019–2024, which we might call "the era of expansion"), the European Union led global efforts to define the boundaries of corporate sustainability. The EU adopted the Corporate Sustainability Reporting Directive (CSRD), introducing European Sustainability Reporting Standards (ESRS) and mandating disclosures for approximately 50,000 companies. It also approved the Corporate Sustainability Due Diligence Directive (CSDDD) for supply chain accountability, alongside 86 additional pieces of sustainability legislation. Globally, the IFRS Foundation’s International Sustainability Standards Board (ISSB) published standards (IFRS S1 and S2) focused on financial materiality. In parallel, the U.S. Securities and Exchange Commission (SEC) proposed climate disclosure rules for listed companies, with similar initiatives emerging in the UK, India, and China. Many jurisdictions introduced binding targets aligned with the Task Force on Climate-related Financial Disclosures (TCFD), while voluntary frameworks helped pave the way for compliance. Major global asset managers (BlackRock, State Street, Vanguard) integrated ESG into investment processes, and Principles for Responsible Investment (PRI) signatories now manage over $128 trillion in assets.
2025: a setback?
In 2025, a new phase began – what we might term "the era of deceleration."
In the United States, the incoming Trump administration reversed the SEC’s climate disclosure rule. Interim SEC Chair Mark Uyeda called the rule "costly and needlessly intrusive" (appointed after Gary Gensler’s resignation in January 2025, following Trump’s election). Major banks (JPMorgan, Citi, Bank of America, Morgan Stanley, Wells Fargo, Goldman Sachs) withdrew from the Net-Zero Banking Alliance. BlackRock and others exited the Net Zero Asset Managers Initiative. New ESG fund signatories to the PRI declined, though total global AUM continued to grow. Political pressure also prompted many large U.S. companies to abandon their DEI (Diversity, Equity & Inclusion) goals.
In Europe, recalibration also occurred. The EU’s Omnibus Directive of February 26, 2025 revised sustainability due diligence requirements (CSDDD), and raised the CSRD reporting threshold to companies with over 1,000 employees – substantially reducing the number of companies subject to mandatory disclosure and simplifying the ESRS framework.
Leadership beyond compliance
Interpreting this moment as a sustainability retreat would be a mistake. The most meaningful pressure today comes not from regulation, but from markets and civil society. Consumers, employees, communities, media, and institutional investors – especially in Europe and Asia – continue to demand transparency and accountability.
One key indicator: over 1,000 new companies joined the Science Based Targets Initiative in the last 12 months. As of May 15, 2025, the initiative includes 10,572 participating firms – a clear sign of real commitment to decarbonization.
The continued rise of ESG finance also signals direction: PRI signatories manage over $128 trillion in assets. A growing majority of institutional investors are actively integrating ESG factors or planning to do so. Forecasts suggest that ESG-aligned assets will soon exceed 70% of the global market – a threshold already surpassed in some market placements.
Between 2021 and January 31, 2025, sustainable debt securities in the euro area grew steadily, often trading at yields below benchmark rates – underscoring their attractiveness and robustness (see supporting graph).
Two recent transactions illustrate the point. On April 2, 2025, China issued its first global sovereign green bond worth 6 billion yuan, fully listed on the London Stock Exchange, with demand reaching 47 billion. On April 15, 2025, Saudi Arabia issued its first green bond in euros, raising €1.5 billion for environmental projects. Led by J.P. Morgan, the offering attracted over €7.2 billion in orders, highlighting strong European demand for sustainable instruments.
ESG themes are also evolving. BlackRock has renewed its focus on decarbonization, while Goldman Sachs has prioritized biodiversity, issuing a dedicated bond on March 15, 2025.
China and India lead on ESG regulation
Both China and India are signaling a systemic shift in ESG, advancing on regulatory and industrial fronts.
In India, ESG reporting is now mandatory for major listed companies. The Securities and Exchange Board of India (SEBI) introduced the Business Responsibility and Sustainability Reporting (BRSR) framework in 2021, made mandatory in 2023. Companies must not only disclose ESG metrics but also allocate a share of revenue to sustainable activities. Pension funds are also required to consider ESG criteria in investment decisions.
China is similarly advancing. In February 2024, under the guidance of the China Securities Regulatory Commission (CSRC), the country’s three main stock exchanges issued ESG disclosure guidelines, requiring listed firms to publish ESG data by 2026. The CSRC also encourages voluntary reporting by unlisted companies, including SMEs, with broader adoption expected by 2030.
Meanwhile, China has maintained its leadership in green bonds and launched an ambitious green industrial policy, driven in part by electric vehicle manufacturers like BYD, Nio, and Vietnam’s VinFast. A symbolic but significant milestone: on April 25, 2025, Beijing announced that installed capacity from wind and solar had surpassed coal for the first time.
Social dimensions show resilience
On the social front, resilience is also evident. On February 25, 2025, 97% of Apple shareholders voted against a proposal to suspend the company’s DEI programs, despite political pressure from the Trump administration. A similar episode occurred at Levi Strauss’s annual meeting on April 23, 2025, where over 99% of shareholders opposed ending the firm’s DEI initiatives.
From compliance to competitive advantage
Despite temporary regulatory slowdowns on both sides of the Atlantic, the trajectory of sustainability remains clear and long-term. The main barrier today is not the lack of rules, but the lack of strategic vision.
Many companies – even large ones – still lack the capabilities and organizational alignment to embed sustainability into corporate strategy. When treated as a compliance checklist, ESG loses meaning and becomes a bureaucratic burden. This cultural gap can render compliance sterile, triggering passive resistance among those tasked with implementation.
Another challenge lies in fragmented reporting standards. ISSB, ESRS, SASB, GRI, VSME: each framework serves different logics, scopes, and users. This complexity can hinder alignment between reporting obligations and strategic business goals. While some diversity is inevitable during a transition phase, the absence of shared, material, and comprehensible metrics weakens accountability and impact. Sustainability only becomes a true competitive lever when translated into measurable value – across margins, risk profiles, reputation, human capital, and innovation.
In this context, sustainability is neither a passing trend nor an ideological threat. It is a structural transformation that must evolve from formal obligation to strategic asset. It cannot remain confined to regulatory checklists: it must be treated as an investment platform and innovation enabler. What is needed is a new kind of strategic and managerial literacy – one that bridges vision with data, decisions with metrics, and reporting with business strategy. Only then will sustainable business models become dominant – not because they are required, but because they are more competitive.
Toward a season of awareness
In conclusion, sustainability is undergoing a phase of transformation and maturity. The focus is shifting from checklists to materiality, from regulatory compliance to data quality and risk management. Long-term-oriented companies are beginning to use ESG reporting not only to comply, but to proactively manage performance, reputation, and capital access. Future-focused tools like climate scenario analysis are gaining traction, helping businesses anticipate how environmental, regulatory, or market factors may impact their models.
The adoption of digital reporting platforms and verifiable transition plans is also growing, increasing the credibility and measurability of sustainability commitments. This is a tangible opportunity, requiring clarity and vision. In turbulent times, business leaders must focus on sustainable growth – and on generating returns from both value and values.
Francesco Perrini is Associate Dean for Sustainability and the Diversity, Equity and Inclusion (DEI) Delegate at SDA Bocconi School of Management, where he is also responsible for ICE - Innovation and Corporate Entrepreneurship. He is a Full Professor in the Department of Management and Technology at Bocconi University.
Photo iStock / hh5800
