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.
Over 500 companies have pledged to use the Task Force for Nature-related Financial Disclosures (TNFD) framework for reporting — with more set to follow suit. A year-long pilot by the Science Based Targets Network (SBTN) to develop validated targets for nature ends in January 2025. Approved targets will be listed on a new tracker, helping the next wave of companies to set goals. The TNFD is expected to release updated guidance on nature transition planning following its consultation.
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.
Governments too are dragging their heels, with 85% failing to deliver their first national biodiversity strategy and action plan (NBSAP) before COP-16 in October. One bright spot — the US published its first National Ocean Biodiversity Strategy recognising the need for greater marine protection, as Norway approved deep sea mining in its waters.
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.
Articles and discussions on the circular economy have increased threefold over five years. In parallel, companies, including IKEA, Cisco and Dell, have integrated circular principles into their sustainability strategy — prompted in part by new ISO standards on material reuse.
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.
With its Ecodesign for Sustainable Products Regulation (in force since July), the EU is encouraging companies to incorporate circular considerations from the outset. And companies have growing options for materials reuse at their disposal. In 2024, researchers identified new ways to make biodegradable plastics from textile waste, to recycle cement and to reuse carbon fibre panels from cars and trains. But use of secondary material dropped by 20%.
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.
Negotiations for a Global Treaty on Plastic Pollution progressed, but at the end of the fifth session there was no agreement on reducing plastic production and talks rolled over into 2025.
Top tips to prepare for the year ahead
- 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.
Nearly three-quarters of businesses have started using generative artificial intelligence (Gen AI) and growth shows no signs of slowing. The AI market is predicted to reach $1,339 billion in 2030 — more than six times its current size.
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.
Google’s emissions soared 48% due to AI, despite using the technology to identify efficiencies.
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.
helen.fisher@contexteurope.com
www.contextsustainability.com
