5 common issues with carbon removal credits and how to avoid them
Carbon removal credits can be a useful tool for companies to meet their net-zero targets. They also help scale solutions needed to address wider climate and nature challenges. And large-scale removal of carbon dioxide from the atmosphere is required to limit global warming to 1.5˚C. But the voluntary carbon market (VCM) used to buy and sell carbon credits faces several key challenges, including concerns around quality, supply, and greenwashing.
For companies investing in climate solutions, this may leave them between a rock and a hard place. Here we provide an overview of the common pitfalls and some practical advice on how to avoid them.
Feeling confused? See the jargon buster below for an explanation of key terms.
How should carbon removal credits be used?
Carbon dioxide removal (CDR) is not an alternative to deep emissions reduction, but it can be used in parallel to complement mitigation activities. Under the Science Based Targets initiative (SBTi) guidance, companies must reduce greenhouse gas (GHG) emissions across their full value chain by at least 90% from their baseline year to achieve net zero. Carbon removal credits can be purchased to remove and store the remaining 10% of unavoidable emissions.
Are companies still investing in carbon removals?
The VCM’s heyday is waning, but carbon removals are not. MSCI found corporations used credits worth a total of $1.4 billion in 2024, compared to $1.7 billion in 2022. But companies have increasingly been choosing higher-quality carbon removal credits over cheaper carbon avoidance credits, and MSCI projects the removal market will rise to $4–11 billion by 2030.
What’s being done to restore faith in the market?
The VCM is key to enabling large-scale private funding of carbon removal projects. It complements public finance, which is not enough to reach global net-zero targets by itself. To stimulate investment, several governments are promoting high-quality carbon credits. In April 2025, the UK launched a consultation on its carbon credit integrity framework, and in June, Singapore issued draft guidance on using carbon credits voluntarily.
Beyond government initiatives, the SBTi recently released its draft Corporate Net-Zero Standard V2, which encourages early uptake of carbon removal credits. The guidance includes a ‘removals target’ for scope 1 emissions, whereby companies gradually increase their use of carbon removals over time until all residual scope 1 emissions are matched by the net-zero target year.
Practical steps to overcome common challenges
1. Addressing quality and additionality concerns
There are several factors that can affect credit quality, such as lack of governance, tracking, short removal timescales, and additionality (i.e. projects would not have occurred without the carbon credit). Several companies have been criticised for purchasing “worthless” carbon credits that do not deliver real climate benefits, for example funding projects that would have occurred anyway.
Ensuring project due diligence, tracking, verification, and certification is crucial when choosing which credits to buy. There are a range of legitimate guidelines available to help you, including:
Integrity Council for the Voluntary Carbon Market (ICVCM).
The ICVCM has developed 10 principles to help identify carbon credits that create verifiable climate impact, such as third-party validation, permanence, and robust quantification.
Beyond confirming the integrity of each credit, you should consider your credits as a portfolio. Projects originally considered high quality could fail to live up to the initial expectations. Like other investments, diversifying your portfolio reduces overall risk.
2. Navigating the lack of standardisation
A wide range of projects and credit providers are available, with varying levels of quality. The lack of standardisation can lead to confusion, undermining market confidence and making it challenging for companies to gauge the impact and credibility of a project.
Look out for leading carbon credit providers that conduct their own due diligence on each project and ensure they’re verified by internationally recognised carbon certification standards. Some of the most widely recognised certification standards include Gold Standard and Verra’s Verified Carbon Standard (VCS).
3. Securing a shrinking supply
Demand for high-quality carbon removal projects is on the rise but supply is limited. Purchasing credits close to your net-zero target date could risk sky-high prices as many companies race to secure the dwindling reserves.
To secure carbon credits before the price is too steep, you can use carbon forward contracts, purchasing credits now to remove GHG emissions in future years. This provides a fixed price and helps fund projects that need financing to scale. But it’s worth considering the uncertain future impact of these investments as climate science is rapidly evolving.
4. Overcoming budget constraints
Companies should prioritise investing in GHG emissions reductions over credits. But most companies, particularly those in hard-to-abate sectors, will need carbon removal credits in future to balance out the remaining 10% of their emissions. For some, budget could be an issue, even without the risk of prices for high-quality credits skyrocketing the nearer we get to 2050 (assuming there are any left).
Besides carbon forward contracts, there are high-quality projects with a lower price tag. These projects often involve nature-based carbon removal methods, such as reforestation. But make sure to avoid purchasing cheap, low-quality carbon credits by ensuring project due diligence and certification, as these may not have the impact they claim and risk greenwashing allegations.
5. Avoiding reputational risks
Fossil fuel companies dominated the VCM in 2024,[1] raising concerns that companies are misusing carbon credits without reducing their own GHG emissions. Companies have faced heavy backlash for using low-quality carbon credits to make GHG emissions reductions or carbon-neutral claims.[2]
To avoid greenwashing risks, steer clear of using credits to make GHG emissions reduction, net-zero, or carbon-neutral claims. Instead, transparently report on credits used and distinguish these disclosures from your GHG emissions reporting. Include specifics on the volume and type of credits purchased, project location, purpose of use, third-party certification, and technical details.
See the European Sustainability Reporting Standards (ESRS), International Financial Reporting Standards (IFRS), and Global Reporting Initiative (GRI), for guidance on how to report on carbon removals (ESRS E1-7, IFRS S2 36e, and GRI 102-10).
Beyond their core purpose and key challenges, carbon removal projects can provide benefits like creating job opportunities in local communities, reducing air pollution, and protecting biodiversity. Look for projects that deliver positive sustainable development impacts while ensuring best practice social and environmental safeguards are in place.
There are several ways to go about purchasing carbon removal credits, and your company’s approach depends on several factors, including the maturity of your net-zero roadmap, GHG emissions reduction progress, targets, carbon credit awareness, and budget. Context supports companies to develop and implement carbon credit and wider sustainability strategies. If you’d like to talk about your organisation’s needs, please reach out to helen.fisher@contexteurope.com.
Jargon buster
Carbon credits are a market-based tool to generate funding to remove or avoid GHG emissions. One credit represents 1 metric tonne of carbon dioxide equivalent (CO2e).
Carbon removal credits remove carbon from the atmosphere for the short, medium, or long term. These include natural carbon removals, such as reforestation projects, and technological carbon removals, such as Direct Air Capture (using technology to capture carbon from the air). Companies can use these credits to remove the remaining 10% of their GHG emissions (in addition to reducing 90% of their emissions under SBTi guidance).
Carbon avoidance credits prevent additional future GHG emissions being released into the atmosphere. They should not be used to reach net zero under SBTi guidance, but investments can be made in parallel to reduction and removal activities. Examples include renewable energy and forest protection projects.
Carbon dioxide removal (CDR) refers to human activities to deliberately remove and durably store carbon dioxide from the atmosphere. CDR includes a range of technologies, practices, and approaches, such as Bioenergy with Carbon Capture and Storage (growing and burning biomass to create energy and capture the resulting GHG emissions), that all differ in integrity, maturity, timescale, mitigation potential, cost, co-benefits and side effects.
The voluntary carbon market (VCM) operates in parallel with the mandatory carbon market, enabling companies to purchase carbon credits on a voluntary basis.
The sustainability universe is watching as the EU’s new mandatory sustainability reporting standards go through the wringer. Meanwhile, the International Sustainability Standards Board (ISSB) Standards are gaining momentum.
The ISSB, born at the 2021 UN climate conference, COP26, is responsible for building a framework for companies everywhere to report sustainability information in a consistent way. Already, 17 jurisdictions across the globe — including Australia, Brazil, Hong Kong, Mexico and Nigeria — have confirmed full or partial adoption of the ISSB’s standards. An additional 16 — including Canada, China, Japan, Singapore, Uganda and the UK — are in the process of formally adopting the framework to some degree. This group of 33 committed countries includes11 of the world’s 20 largest economies.
With the ISSB Standards picking up steam, you may be wondering what you need to know (perhaps while internally panicking at the thought of yet another sustainability reporting framework). To help get you started, here are five ISSB FAQs answered.
1. What is the purpose of the ISSB Standards?
Companies globally are increasingly expected and mandated to share sustainability information. Why? To give people who want to know about a company (e.g. customers, investors, employees, partners, rating and ranking organisations, etc.) a complete picture of its performance, progress, prospects and plans.
But there is currently no one framework telling companies which sustainability information to report. Rather, there are many frameworks asking for different types of qualitative and quantitative information. This means we’re often reading cherry-picked success stories and comparing apples with oranges when evaluating sustainability performance across companies.
The ISSB Standards aim to change this. They were developed in response to strong market demand for a global sustainability reporting baseline to give companies clear guidance on what to report. In the way that traditional financial reporting is consistent and comparable across the world thanks to common standards, the ISSB wants sustainability reporting to be the same.
2. Who develops and oversees the ISSB Standards?
The International Financial Reporting Standards (IFRS) Foundation establishes the common global framework forfinancial reporting through the International Accounting Standards Board (IASB), its standards-setting body. In 2021, the IFRS Foundation introduced the ISSB — a new branch in charge of developing an equivalent international framework forsustainability reporting.
In the interest of developing a single global standard, several big sustainability frameworks and organisations were essentially absorbed into the IFRS Foundation — including the Climate Disclosure Standards Board (CDSB), the Task Force for Climate-related Financial Disclosures (TCFD), the Value Reporting Foundation’s Integrated Reporting Framework, the Sustainability Accounting Standards Board (SASB) Standards, and the World Economic Forum (WEF)’s Stakeholder Capitalism Metrics.
3. What types of information do companies need to report under the ISSB Standards?
The ISSB Standards are designed to provide useful sustainability information to external stakeholders who make financial decisions about a company (investors, lenders and creditors). So, they focus disclosures on sustainability-related risks and opportunities that could impact the decisions these stakeholders make. In other words, they focus on financial materiality.
There are two active ISSB Standards — including general disclosures (IFRS S1) and specific climate disclosures (IFRS S2) — with others being explored. Both active standards ask for information on governance, strategy, risk management, and metrics and targets for financially material sustainability topics. This mirrors the structure of the TCFD recommendations, today’s most widely adopted recommendations for climate-related risk and opportunity disclosures — since absorbed into the IFRS Foundation.
4. What is the difference between the ISSB Standards and other common reporting frameworks?
While the ISSB Standards aim to be the global baseline for sustainability reporting, they currently exist in a busy space. The European Sustainability Reporting Standards and the Global Reporting Initiative Standards are the two other big players. The fundamentals that set them apart are their breadth of focus and approach to materiality, though there is a level of interoperability across all three.
International Sustainability Standards Board (ISSB) Standards
European Sustainability Reporting Standards (ESRS)
Global Reporting Initiative (GRI) Standards
First launched
2023
2023
2000
Standard developers
International Sustainability Standards Board (ISSB)
European Financial Reporting Advisory Group (EFRAG)
Global Sustainability Standards Board (GSSB)
Geographic focus
Global
EU
Global
Key audience(s)
🎯 Focused: Existing and potential investors, lenders and creditors
🌐 Broad: Primary report users (e.g. investors, government, academics) and others affected by a company
🌐 Broad: Multi-stakeholder audience
Materiality focus
💰 Financial materiality
💰🌎 Double materiality (impact and financial)
🌎 Impact materiality
Mandatory vs. voluntary
Currently a mix. Increasingly mandatory across different jurisdictions.
Mandatory for companies in scope of the Corporate Sustainability Reporting Directive (CSRD).
+ Some out-of-scope companies are voluntarily publishing ESRS reports, signalling to the value of a double materiality approach while demonstrating transparency and leadership.
Voluntary
5. Should my company use the ISSB Standards?
First things first: Is ISSB reporting a legal requirement for your company, or will it be soon? As of July 2025, more than 30 jurisdictions either require some level of ISSB reporting or are considering if and how they will mandate it.
Depending on where you are, what you need to disclose will look different. For example, China is taking a double materiality (instead of just financial) approach to ISSB-aligned reporting, and Australia is adopting only the climate requirements. Meanwhile, the UK is looking at adopting the full set of ISSB Standards, with just six adjustments — including, for example, modifying the length of permitted transition periods.
If ISSB reporting isn’tlegally required for your company, but you’re looking to align your sustainability reporting with what leaders are doing and / or what makes most sense for your business, consider:
Are there any other reporting regulations (global or regional) we need to consider? As sustainability reporting regulations increasingly pop up across the globe, work with your legal / compliance team to understand which ones will affect your company and how you report.
Who are our key audiences? The ISSB focuses on the investor audience for sustainability reporting. Consider whether you want to reach your other audiences (e.g. employees, customers, industry) through your core report or other communications.
Where do we want to position ourselves in the sustainability landscape? The transparency and completeness of your reporting will signal the maturity and ambition of your company’s sustainability strategy. If you want to show strong commitment, voluntarily applying a globally respected framework like the ISSB could be a smart move — bearing in mind that it has less impact materiality focus than other frameworks such as ESRS and therefore may not meet all audience needs.
What information do we currently report? Understand what sustainability information is readily available for reporting. Mapping this against the ISSB disclosures and other frameworks you are considering reporting against will help you understand how much work is needed to close the gaps.
We’d love to help
We’d love to support you to evolve your reporting, no matter what stage in the journey your company is at.
Context has supported organisations worldwide with their sustainability strategy and reporting for 25+ years — from strategic visioning and action planning, through to report conceptualisation, writing and design, and delivery. With reporting regulations on the rise, we support companies to navigate the complex landscape, understand what new reporting frameworks (for example, the ISSB and ESRS) mean for them, and assess readiness.
If you could use a hand, get in touch with Helen, Managing Director at Context Europe, at helen.fisher@contexteurope.com.
How the EU’s last-minute delay to its sustainability directive affects U.S. companies
What’s going on with CSRD?
In early 2025, the EU Parliament hit the brakes on the Corporate Sustainability Reporting Directive (CSRD). After years of build-up, they’ve hit pause. Why? Because of growing anxiety in Brussels over whether Europe can stay competitive under the weight of all its new regulations.
The turning point came with a 2024 Competitiveness Report, led by former Italian PM Mario Draghi. That triggered a new “Competitiveness Compass” from the EU Commission, aimed at revitalizing economic growth. As part of that compass, CSRD and the Corporate Sustainability Due Diligence Directive (CSDDD) were flagged as too burdensome.
Leaders in France and Germany piled on. French officials called CSRD “hell for companies,” while Germany’s finance minister warned it would force around 13,000 companies to track 1,000+ data points each—an especially heavy lift for small and mid-sized businesses.
In response, the EU introduced the strangely named Omnibus Proposal in February 2025 that promises two big changes:
Fewer companies will fall under CSRD
The disclosure requirements will be streamlined
To provide time to make these they’ve delayed the CSRD effective dates by two years for many companies, including U.S. firms with significant EU operations.
What this means for U.S. companies
If your company has a large EU subsidiary, CSRD originally required the subsidiary to report in 2026 for fiscal year 2025. That’s now been pushed back to 2028 (the 2029 deadline for full Group reporting remains unchanged).
To avoid juggling two different systems, many U.S. companies had decided to report at the Group level in 2026. That means a lot of teams have already spent big on:
Double materiality assessments
New data collection systems
Staff training
So now what? Do you keep pouring money into something that might change again?
Our take: hit pause (but don’t hit delete)
Let’s be real: It’s unlikely that CSRD disappears entirely, but major revisions are very much on the table. That makes further investment risky. U.S. lobbying groups are also pushing back, and trade talks between the U.S. and EU could lead to a ‘lighter’ CSRD version for American companies. Uncertainty is the name of the game right now.
A smart game plan for 2025–2029
Here’s what we recommend:
Pause further CSRD development
Don’t invest more until the EU clarifies what the new version looks like
Keep using what you’ve built
If you’ve got materiality assessments or data systems in place, use them. But hold off on new rollouts or enhancements
Stick to your existing reporting framework
Go back to the standards your company was using before CSRD such as GRI or IFRS
Stay tuned and stay nimble
We expect more updates (and hopefully clarity) from the EU later this year
Here’s a suggested calendar for US CSOs navigating the CSRD delay, designed to balance prudence with preparedness through 2029.
CSRD Delay: Game Plan for 2025–2029
Need help with your sustainability reporting?
Context has been at the forefront of sustainability reporting since 1997, with over 500 reports completed. Based in the US and UK we are always up-to-date with the latest regulations, standards, and innovations in the field.
If you would like to talk about the best path through the CSRD uncertainty for your company, we’re here to help. Please send me an email (simon@contextamerica.com).
For more than three decades, sustainability enjoyed a steady rise. From the 1990s onwards, the direction of travel was clear: forward and upward. Influential companies embraced sustainability, creating dedicated departments and appointing Chief Sustainability Officers—a role that barely existed a decade ago and is now both recognized and well-compensated.
This shift brought real change. Companies began measuring their impacts, disclosing performance, and setting improvement goals. In many ways, sustainability became a modern industrial revolution.
But just as it seemed sustainability had reached critical mass, the momentum stalled. Today, for the first time, we are facing a concerted pushback. What is our survival strategy?
What’s Changed?
Two powerful forces have converged:
The rise of populist politics in the U.S. and across Europe.
The retreat from globalism in favor of economic nationalism.
These shifts are reshaping the business and regulatory environment for sustainability—and not in our favor.
America and Europe: A Regulatory Reversal
In the United States, environmental and social protections have been rolled back, regulatory agencies weakened, and outspoken opponents of climate action, ESG, and DEI placed in positions of power.
The EU “U Turn” on Green Deal Regulations CSDDD and CSRD
Europe is now following suit. Germany and France, longtime champions of ambitious green policy—are calling for a pause or rollback of key components of the EU Green Deal. Following a competitiveness review led by former Italian Prime Minister Mario Draghi, pivotal regulations like the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) are being stalled. Others may soon follow in what some describe as a “bonfire of EU sustainability regulations.”
ESG Investment Is Losing Steam
Meanwhile, another major driver of corporate sustainability is also in decline: ESG investing. Since 2024, ESG fund flows have reversed, sending a clear and troubling signal to corporate boardrooms—especially in an environment where every dollar must be justified.
These headwinds have led sustainability pioneer John Elkington to dub the current moment a “sustainability recession.”
Why Traditional Best Practices Need Updating
We are entering a new era where “business as usual” in sustainability no longer works. Many in the field seem caught off guard, clinging to the belief that a change in political leadership in a few years will reset the trajectory. That’s wishful thinking.
Sustainability professionals must face reality:
Have current strategies truly achieved their goals?
Are sustainability budgets being deployed as effectively as possible?
Can we always justify our programs with a robust business case?
The honest answer: “Could do better.”
A Strategy for Survival
We can’t ignore the democratic outcomes in multiple Western nations. We may not share the views of populist governments, but rejecting or resisting them outright is counterproductive. Instead, we must engage—with pragmatism.
This means reframing sustainability in business terms—efficiency, innovation, competitiveness, risk reduction. It also means listening to public concerns, especially when sustainability is viewed as elitist, remote, or economically burdensome.
Strengthening the Business Case: Ten Steps to Recalibrate Your Sustainability Strategy for Your C-suite
For years, corporate sustainability operated on the assumption that it would inevitably become a business imperative. Companies often approved budgets without hard ROI calculations—believing it was smart to get ahead of the curve.
But today, that certainty is gone.
In an era of budget pressure, tariffs, and shifting political winds, sustainability teams must work harder to prove value. The challenge now is clear: build a stronger business case—or risk losing relevance.
Below are ten practical ways to future-proof your sustainability strategy and reporting, bringing it in line with today’s corporate decision-making.
1. Simplify Processes
Sustainability is known for its complexity. Standards like GRI, SBTi, and ESG ratings are valuable, but not always efficient.
In a leaner operating environment, it’s time to be more strategic. Focus on the standards that matter most to your stakeholders—and streamline the rest. Less process, more impact.
2. Leverage Financial Metrics
Too many sustainability programs still measure environmental and social efforts without the associated financial impact.
Now is the time to track financial benefits—like energy savings, waste reduction, and material efficiency. Quantifying cost savings helps make the business case in language that resonates with the C-suite.
3. Show the Brand Benefit
Sustainability often strengthens brand trust—but this impact is rarely measured.
Work with marketing and insights teams to quantify how your efforts shape reputation. Use data from consumer research, sentiment tracking, and brand equity studies to connect the dots.
4. Integrate with Risk Management
From supply chain disruption to regulatory risk, sustainability plays a clear role in managing uncertainty.
Make that role visible. Embed it in your company’s risk disclosures and financial reports. Investors increasingly expect to see how sustainability enhances resilience.
5. Re-position Sustainability as a Competitiveness Strategy
Sustainability isn’t just about mitigating risks—it can spark innovation and open new markets. Customer preferences, especially among younger demographics and B2B buyers, are shifting toward sustainable products and services.
Highlight where your efforts are driving product innovation, differentiating your brand, or creating new revenue streams.
6. Strengthen Supply Chain Resilience
Sustainable sourcing, circular design, and supplier engagement can fortify supply chains against shocks—such as price volatility, geopolitical instability, or resource scarcity.
In a world of disrupted logistics and rising raw material costs, sustainability can demonstrate a competitive advantage in procurement and continuity planning.
7. Put a Value on People Investment
Employee-focused programs—like training, wellness, and inclusion—are often justified with soft metrics.
That’s no longer enough. Start measuring ROI by linking these programs to retention, productivity, and innovation outcomes. Data helps justify continued investment.
8. Reconnect sustainability with Economic Fairness
Many populist movements are fueled by economic disenfranchisement. Sustainability must show how it benefits workers, communities, and consumers—not just investors or the environment.
Frame sustainability as a force for local job creation, energy independence, cost-of-living relief, and community investment.
9. Focus on National Interest and Security
In a nationalist era, linking sustainability to national resilience is a powerful frame.
Emphasize reducing reliance on imported fossil fuels, reshoring clean-tech supply chains, and mitigating climate risks that affect food security or disaster preparedness.
10. Streamline Your Reporting
Sustainability reporting has become a resource-heavy exercise, often diverting attention from real-world change.
Rethink your reporting approach. Focus on what’s required, relevant, and meaningful. Then automate and consolidate wherever possible. The goal: more substance, less time.
Conclusion: Adapt to Stay Relevant
Corporate sustainability isn’t dead—it’s evolving. In today’s environment, sustainability must pull its full weight in business terms—contributing to growth, efficiency, innovation, and risk management. This is not about abandoning principles. It’s about reframing sustainability as a driver of value—and making sure that value is visible, measurable, and aligned with the times.
Need help recalibrating your sustainability strategy and reporting?
Get in touch to explore how your team can build a more resilient, results-driven program for 2025 and beyond. simon@contextamerica.com
If it takes a village to raise a child, then it takes a cross-functional team of enthusiastic experts to create a comprehensive sustainability report. But for many outside the core reporting team, the process can seem dry and a distraction (or unwanted diversion) from the day job.
As reporting requirements continue to evolve globally, it has never been more important to engage a wider group of colleagues. Sustainability professionals are under pressure. Around 70% suggest that the growing reporting burden is taking them away from delivering on-the-ground action and making progress towards company targets — a trend that will only intensify as the scope of mandatory requirements broadens.
Many sustainability specialists also suggest they are not best placed to lead on reporting. They are change agents, not risk managers.
Knowing the difference between standards
If this sounds familiar, how do you escape being stuck in ‘reporting mode’ for eternity?
Part of the answer lies in knowing the regulations — understanding the common denominators between requirements and the subtle differences. The Corporate Sustainability Reporting Directive (CSRD) and the IFRS Sustainability Standards claim to be interoperable. But the former mandates a double materiality assessment — the latter a single materiality approach assessing an issue’s impact on company financial performance. A CSRD-aligned double materiality assessment is likely to meet IFRS requirements, but not the other way around.
It’s essential to think about different reporting requirements. One framework might require you to report on renewable energy as a share of total usage and another on the source of your renewable energy. Understanding these differences makes it possible to collect the data once to comply with both rules.
Even with the best planning, knowing exactly the information you need, you have to source it from somewhere. And that means engaging the wider business — no mean feat when many teams regard sustainability data collection as dull and a distraction. So how do you break the log-jam?
Getting engaged
Resistance is normal and often stems from a lack of knowledge. Why should employees get involved? What’s in it for them? How will it help them day to day to do their job better? Here, communication, training and support are essential. And explaining issues in terms that resonate for them rather than talking explicitly about ‘sustainability’ helps.
Employees want to help build a more sustainable business — you need to explain how reporting fits into that. It’s about giving them an understanding of the regulations and the growing trend towards mandatory reporting. They need a sense of what data is required now, as well as visibility into you will be looking for in future as rules tighten, so they can have an input into the best way to collect the data.
If you work for a privately-owned company, it’s worth highlighting the temporary crunch point that comes from having to face mandatory reporting for the first time. This forces your business to play catch-up with listed companies which have been reporting for many years.
Making sustainability relevant
But, above all, you need to sell the benefits to them and how it will help them to do their job better. That means tailoring the benefits to each role.
Sustainability helps to build resilience, improve efficiency and reduce costs — music to the finance team’s ears. It also drives revenue and attracts talent — great for HR. But only if customers and potential employees are aware of your efforts and convinced of your progress. Without data, the company’s sustainability story can quickly descend into greenwashing.
Procurement teams face increasing requests from customers, suppliers and business partners for sustainability data. Their support in collating data makes that process easier. They also gain the skills and knowledge they need to support suppliers to comply with your data requests, strengthening those business partnerships.
Celebrating progress
You can’t manage what you can’t measure. Your sustainability data is part of that picture, allowing you to track progress and prioritise action. It’s important to show employees how it will help them focus on what matters and do their job better — not just how it benefits the business. It could be used to direct their efforts to decommissioning old equipment and saving energy, rather than spend time on a business case for new equipment when there’s limited budget to invest. This would spare them the frustration of having their proposal knocked back after hours of work.
Most importantly, reporting is about celebrating success. It demonstrates company — and team — progress. Supporting with data collection is their chance to showcase the good things that are going on within their team and function to the rest of the business and the wider world.
Employee engagement is tough and takes time. But, faced with The added understanding of your sustainability strategy which comes with engagement also helps drive action, shift your business towards being more sustainable, and realise your targets.
Context supports companies to tell their sustainability story — working in partnership to help identify and demonstrate progress from across the business. If you would like to talk about your organisation’s needs, please get in touch via www.contextsustainability.com or helen.fisher@contexteurope.com.
2024 has been marked by growing regulation — increasing sustainability reporting requirements and legislating issues from nature to supply chain due diligence. And with most businesses experimenting with artificial intelligence (AI), regulators also attempted to rules in place.
While the focus for years has been on climate and the environment, social issues gained greater attention. Two-thirds of companies expect to spend more on addressing social sustainability over the next few years.
As we embark on a new year, Context reflects on the events of the previous 12 months and what they mean for business. We also consider what lies ahead and how best to prepare.
01. Growing commitment to protect and promote nature
New frameworks and benchmarks increase the structure on assessing nature impacts, but concrete actions are still lagging.
Despite the pledges, there’s still some way to go. Of the companies reviewed in Nature 100’s first benchmark, two-thirds have a nature commitment — for 45%, this covers the full value chain. But only 13 organisations have kicked off a comprehensive materiality assessment.
In 2024, European regulators reinforced the need for greater action, approving the EU Nature Restoration Law. Member States must create National Restoration Plans aiming to restore at least 20% of degraded areas by 2030. The EU later delayed the Deforestation Regulation by 12 months as smaller suppliers struggled to implement the necessary due diligence.
Top tips to prepare for the year ahead
Conduct a materiality assessment. Understand your nature-related impacts, risks and opportunities, so you address them.
Develop a holistic, integrated strategy. Taking a comprehensive approach to nature strategy embeds it into the wider sustainability strategy and business model.
Set targets to restore and prevent biodiversity loss. Aligning with SBTN guidance will ensure targets are relevant, measurable and support international ambitions to reverse biodiversity loss by 2030.
02. Circularity comes of age?
The 2024 Circularity Gap Report officially declared the circular economy a megatrend.
More than one-third of Fortune 100 companies are expected to announce circularity goals within the next 12 months. Pressure is mounting on more companies to follow suit — especially the 40,000 private companies and smaller businesses coming within scope of the Corporate Sustainability Reporting Directive from 2026. They need to assess the importance of resource use and circular economy for their business as part of a full double materiality assessment.
National governments are also aiming to stimulate circular thinking across the economy. To date, more than 75 countries have a national circular economy action plan in place — another 14 are in the pipeline. While broadly welcomed, there are growing concerns about potential loopholes — for example, due to differing rules on export of electronic waste.
Explore how circularity supports wider strategy. Reduced resource use has significant cost benefits as well as helping to deliver wider sustainability ambitions. Define your circular ambition and set quantifiable targets.
Educate employees on circularity. Ensure design teams have the knowledge and skills they need to design products and services to use fewer materials and with repair, reuse and recycling in mind.
Seek out cross-industry collaboration. The transition to a circular economy will require systemic change, only achievable through widespread partnership and collaboration.
03. AI dominated the headlines
Artificial intelligence (AI) has been widely adopted, but regulation is only just starting to catch up.
As 2024 progressed, the environmental impacts of this rapid technology growth became clear, with the UN Environmental Programme publishing the most detailed lifecycle assessment to date. It revealed, for example, that AI could represent 35% of Ireland’s energy use within the next year.
As use of AI has grown so too has concern about its ethical, social and environmental impacts. The EU approved the Artificial Intelligence Act, requiring human monitoring of all systems. Stricter standards apply to high-risk applications for health, education, work and critical infrastructure. The Act also calls for standards and reporting on energy efficiency to reduce AI’s environmental impact.
Colorado became the first US state to legislate on AI, while Senator Markey introduced the federal Artificial Intelligence Environmental Impacts Act 2024 to accelerate study of AI impacts and stimulate voluntary reporting.
This regulatory push will mean that businesses and governments will have to get to grips with the issues around AI in 2025 and put plans in place to address negative consequences. To build and maintain customer trust, AI will need to be deployed ethically, securely and transparently, while minimising bias.
It’s also time to focus on the business benefits. Stakeholders want to hear how organisations are using AI to deliver positive results — whether to augment products, optimise processes or create better offerings for customers.
Top tips to prepare for the year ahead
Familiarise yourself with emerging standards. Initiatives including the Software Carbon Intensity standard aim to bring a harmonised approach to measuring AI impacts.
Ensure robust governance. The EU AI Act will come into full force in early 2026. Now’s the time to ensure policies and processes are in place guiding responsible AI use.
Start collecting data. While reporting is currently voluntary, there are growing moves to track AI’s energy use. 2025 is the year to start measuring.
04. Social issues are still overlooked by many companies
Companies and regulators are increasingly shining a spotlight on social issues.
Companies spend one-third of their time and sustainability budget on social issues — and around 40% on environmental challenges. Despite 66% of companies in the US and Europe predicting growing budgets for addressing social sustainability challenges, 26% have little or no awareness of the main issues in their industry — leaving them exposed as regulations increase, particularly around supply chains.
Companies operating in the EU would do well to prioritise supply chain management. Over three-quarters of companies have not integrated responsible procurement into their sustainability strategy. Adoption of the Corporate Sustainability Due Diligence Directive (CSDDD) will require mandatory human rights and environmental due diligence across the supply chain for large organisations from 2027.
In 2024, addressing employee engagement and wellbeing was also confirmed to make good business sense. Over 80% of executives believe that stronger commitments on employee rights would help them attract high-quality talent, appeal to new customers and increase profitability.
This comes as US companies roll back their diversity programmes. Issues including burnout, rapid skills development and adapting to the gig economy have been found to negatively impact the wellbeing of almost half of workers globally.
Discussion of human rights was never far from the headlines in 2024. The European Parliament gave final approval to the Forced Labour Regulation banning the import and sale of products suspected to be made using forced labour. In the UK, a landmark ruling relating to the import of cotton from China put increased pressure on the National Crime Agency to investigate allegations of supply chain mismanagement. Meanwhile, concerns emerged about the human rights record of COP29 host country Azerbaijan.
Top tips to prepare for the year ahead
Map your value chain and assess risks. It is essential to understand your company’s actual and potential social impacts and put in place plans to address them.
Publish commitments. As regulation increases, companies face growing pressure for transparency about their impact, but many are failing to be open about their human sustainability goals.
Publicly report impacts and due diligence processes. CSDDD requires companies to produce an annual statement on its potential and actual adverse impacts and due diligence measures.
05. Sustainability leads challenged by reporting
Sustainability leaders became increasingly concerned about the reporting burden in 2024.
Over 70% of sustainability professionals indicated that a growing focus on reporting was taking them away from the real work of delivering their sustainability goals. It has proved a particular headache for companies facing reporting requirements across multiple jurisdictions. One in three companies also have sustainability goals due to expire in 2025. They need to carve out time alongside reporting to evaluate progress and reflect on future challenges with a view to setting new targets.
Complying with the Corporate Sustainability Reporting Directive (CSRD) topped the list of challenges. It became a reality for 12,000 companies in 2024. In June, the majority of sustainability professionals polled were confident that they would be ready by the year-end deadline. But relatively new requirements, such as disclosures on biodiversity, circularity and workers in the supply chain, were proving challenging.
All eyes will be on this first wave of reports in 2025 and the extent to which their reports are deemed compliant. Watching particularly closely are the large private companies that need to prepare for their first mandatory sustainability report in 2025.
Despite long being an advocate for more reporting, there were signs of a slowdown in Europe, as 17 Member States failed to ratify the CSRD by the September deadline. This led to baby steps towards a simplified reporting regime consolidating multiple requirements — a new Omnibus Simplification Package is due out in February 2025.
Outside Europe, mandatory reporting is on the rise, with new rules taking effect in India, Singapore and Hong Kong. Canada and UAE announced plans to make reporting compulsory for larger organisations. The UK progressed with endorsement of the IFRS Sustainability Disclosure Standards — moving closer to adopting it as a successor to the Task Force on Climate-related Disclosures.
Top tips to prepare for the year ahead
Survey your sustainability universe. For those facing mandatory reporting for the first time, build a solid base by conducting a thorough double materiality assessment.
Update your strategy and targets. Based on the outcome of your materiality assessment, update targets to establish clear ambitions for 2026 and beyond.
Revisit your communications. With so many new regulations, it can be hard to know what good looks like. Review stakeholder needs and how you share your story with them, learning from peers — especially if they take a different approach.
Keep an eye to the future. Determining ‘materiality’ is challenging, but crucial as regulation increases. You may have to report a broader set of issues in future, especially as the Corporate Sustainability Due Diligence Directive approaches.
Supporting you in the year ahead
We can’t tell you exactly how things will play out in 2025, but we do know that there will be ever greater demand for action.
We’re helping clients to navigate the evolving sustainability landscape through strategy, reporting and communications support. If you’d like to chat about how we can help you prepare to face this and other challenges, please get in touch.
