Sustainability reporting in 2025 is entering a new phase. What was once treated as a compliance exercise is now becoming a defining factor for business resilience and competitiveness. Shifts in regulation, growing market expectations, and the financial reality of climate risks are forcing companies - especially in Europe’s mid-market segment - to rethink how they manage and disclose ESG information.

While the EU debates the scope of rules like the Corporate Sustainability Reporting Directive (CSRD), investors, customers, and insurers are already raising the bar. At the same time, scientific evidence shows that climate boundaries are being crossed, underscoring the urgency for businesses to act.

This article draws on insights from a recent joint webinar hosted by Coolset and Forvis Mazars, combining technology and advisory perspectives. It provides a structured overview of the three forces shaping ESG reporting today - regulations, markets, and climate risks - and what they mean for companies building long-term sustainability strategies.

The regulatory push: new rules, shifting expectations

In 2025, the regulatory environment for sustainability reporting is both expanding and shifting. The CSRD is officially in effect, bringing tens of thousands of European companies into mandatory sustainability disclosure for the first time. At the same time, many countries outside the EU are adopting the International Sustainability Standards Board (ISSB) framework, signaling a global move toward common sustainability reporting standards.

The Omnibus proposal and its impact on European businesses

Policymakers in Europe have introduced the Omnibus proposal, designed to recalibrate ESG reporting requirements. If enacted, the changes would:

• Narrow CSRD scope by excluding over 90% of the companies that were originally in-scope, many of them mid-market firms.
  
  
• Delay the first reporting obligation for some companies until 2028, effectively offering “stop-the-clock” relief.
  
  
• Simplify European Sustainability Reporting Standards (ESRS), cutting required data points by about two-thirds.
  
  

Across the Atlantic, the U.S. Securities and Exchange Commission (SEC) is delaying its climate disclosure rule amid political and legal disputes, adding to the perception of regulatory slowdowns.

Companies are not waiting for regulations

Despite these shifts, businesses are moving forward. The PwC Global Sustainability Reporting Survey 2025 shows a split response:

• Over 60% of companies report increased investment of resources and senior leadership time in sustainability reporting in the past year. Only a small minority reduced resources.
  
  
• Two-thirds of companies say their reporting provided value beyond compliance, either moderate or significant.
  
  
• 28% even report significant value – but the real story is that only 5% said they got no value at all, underscoring that benefits are widespread.
  
  
• More than 50% of respondents said pressure to provide sustainability data has increased since 2024, despite regulatory slowdowns.
  
  
• Among early CSRD reporters, a clear majority filed reports voluntarily (including in countries where CSRD wasn’t yet national law), reflecting strong stakeholder and market expectations.

This resilience reflects a broader recognition: regulation sets the baseline, but it’s not the only driver. Staying on track prepares companies for future tightening of rules and avoids reputational risks linked to non-compliance. In fact, assurance of ESG data - limited at first - is already expected, and those who invest early in reporting capabilities will be ready when stricter standards arrive.

What companies should focus on now

Even with timelines shifting, the regulatory direction is clear: disclosure requirements are becoming stricter and broader. Companies should prioritize:

• Building reliable data systems that can withstand assurance.
  
  
• Integrating ESG processes into governance and finance, not treating them as side projects.
  
  
• Preparing for upcoming regulations beyond CSRD, such as the EU Deforestation Regulation (EUDR) and Digital Product Passports, which will demand transparency across supply chains.

Regulation has already changed ESG reporting from a niche practice to a mainstream business responsibility. The smartest companies treat compliance as the minimum - and use reporting as a tool to build resilience, trust, and competitiveness.

Market forces: stakeholders driving ESG transparency

While regulation sets the baseline, market pressure is often the stronger force behind sustainability reporting. Investors, lenders, customers, and employees increasingly expect reliable ESG information to guide their decisions - and this demand is only intensifying.

Growing stakeholder pressure

As can be seen in the survey results in the section above, most companies are already dedicating more resources and leadership attention to sustainability reporting - and the majority are finding real business value in the process. This shift goes beyond compliance. It shows that stakeholders now expect sustainability data as part of standard business information.

Investors use ESG performance as a proxy for long-term resilience, customers are embedding it into supplier criteria, and employees increasingly judge employers on it. The same momentum reflected in the survey is also reshaping what markets demand, turning transparency into a baseline expectation rather than a differentiator.

Investors and capital markets

Institutional investors and banks now treat ESG metrics as part of financial risk management. Nearly 80% of global investors factor environmental and climate data into their investment decisions. Companies with credible disclosures can access capital more easily, sometimes even at better rates. Those without may face higher financing costs or fewer opportunities.

Supply chains and procurement

Large corporates are cascading ESG requirements onto their suppliers, and the pressure is accelerating. Major multinational buyers often require suppliers to disclose sustainability data to remain eligible for contracts.

Meanwhile, in broader markets, virtually all S&P 500 companies (98.6%) in 2023 published ESG reports, up from just 20% a decade ago. This statistic illustrates how investor expectations have turned non-financial reporting into standard business practice.

Looking ahead, a 2025 Bain & Company survey shows that by 2028, half of B2B buyers plan to drop suppliers that can’t meet sustainability criteria. Already, 49% of corporate buyers are reallocating spend toward more sustainable partners and away from those with weak ESG performance.

For mid-market firms, these trends mean that providing credible ESG data about carbon footprints, labor practices, or supply chain risks is becoming a prerequisite for doing business. Companies that can’t keep up may lose deals, even if they pass technical compliance thresholds.

Consumers and employees

Public expectations matter too. Around 80% of consumers remain concerned about sustainability and prefer responsible brands. Employees - especially younger talent - are drawn to companies with clear ESG commitments, viewing them as safer long-term employers.

Business value beyond compliance

Companies that embrace ESG reporting are discovering operational and strategic benefits. Collecting sustainability data often reveals inefficiencies, strengthens supply chain resilience, and sparks product innovation. Transparency builds trust and can open new markets.

Rising investment in capabilities

To meet these demands, companies are scaling up:

• 66% increased resources and leadership focus on sustainability reporting in 2025.
  
  
• Specialized roles (such as Chief Sustainability Officer) are on the rise.
  
  
• Adoption of technology is accelerating: ESG data platforms, carbon accounting tools, and disclosure management systems are replacing spreadsheets. The use of AI in reporting has more than doubled in one year, reaching 28%.

Takeaway for businesses: Market forces are making ESG reporting non-negotiable. Mid-market companies that treat transparency as an opportunity - not just an obligation - will gain access to capital, win supply chain contracts, and strengthen stakeholder trust.

Climate-related risks: the science becomes personal

If regulations set the baseline and markets accelerate adoption, climate risk defines the urgency. Climate change is no longer an abstract environmental issue - it is a direct business risk, shaping boardroom decisions and financial disclosures.

The planetary health check

In 2025, the Potsdam Institute’s Planetary Boundaries Science Lab reported that 7 of 9 critical Earth system boundaries have been breached, up from six previously. Climate change is among the breached boundaries, alongside biosphere integrity and freshwater use - all showing worsening trends. More than three-quarters of Earth’s vital systems are now under acute stress. The message is clear: businesses cannot treat climate-related risks as distant concerns; they are here, and they are intensifying.

Financial and operational impact

For companies, climate risk is translating directly into financial statements. Physical climate impacts - heatwaves, droughts, floods - have damaged agriculture, disrupted supply chains, and increased infrastructure downtime across Europe. Globally, the first half of 2025 saw an estimated $162 billion in economic losses from natural catastrophes, continuing an upward trend. Insurers are raising premiums or retreating from high-risk areas, while banks are factoring climate scenarios into lending decisions. Ignoring climate risk now means facing higher operating costs, higher financing costs, and greater vulnerability.

In the Netherlands, climate-related impacts and costs are already material. Dutch industry is responsible for approximately €7 billion annually in climate and health damages, according to a study that monetized the external costs of emissions (air pollution, health impacts, etc.).

Furthermore, the Dutch financial sector is itself exposed: in a recent technical assessment, the IMF’s Netherlands: Financial Sector Assessment noted that the Dutch banking system faces both physical flood risk and transition risk - particularly in lending to firms in high-emission sectors.

These national examples show that climate risk is not a distant threat. It is already affecting operating costs, reputational risk, and financial exposure for companies in the Netherlands.

Transition risks

Physical risks are only part of the story. Transition risks - regulatory changes, carbon pricing, technological disruption, and shifting consumer preferences - can be just as destabilizing. Companies without credible transition plans risk stranded assets and shrinking markets. That’s why ESG reporting frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) and the ISSB’s IFRS S2 climate standard place heavy emphasis on transition planning. Investors now expect interim net-zero targets, board-level oversight, and transparent governance of climate risk.

How climate change drives ESG reporting

Climate risk has become a central narrative for ESG reporting because it highlights business resilience. Measuring carbon footprints is not just about compliance - it is about understanding long-term viability. As Johan Rockström of the Potsdam Institute put it, humanity is “pushing beyond the limits of a safe operating space, increasing the risk of destabilising the planet.” For businesses, reporting is how they demonstrate accountability: disclosing how they will decarbonize, use resources more efficiently, and adapt to an uncertain climate future.

Takeaway for companies

Climate-related risks have moved into the C-suite agenda. They require companies to:

• Assess both physical and transition risks across operations and supply chains.
  
  
• Integrate climate scenarios into financial and strategic planning.
  
  
• Report credibly and transparently, using recognized frameworks like ESRS, TCFD, or ISSB.
  
  

In short, climate risk ensures ESG reporting is not just about investor relations - it is about preparing for the defining business challenge of our time.

Financial and operational implications for mid-market companies

For Europe’s mid-market companies, the evolving ESG reporting landscape brings both challenges and opportunities.

The reporting challenge

Preparing sustainability reports is resource-intensive, especially for firms doing it for the first time. Collecting reliable data on carbon emissions, energy use, workforce diversity, or supply chain practices often means:

• Implementing new data systems or ESG software
  
  
• Training staff to track and validate non-financial metrics
  
  
• Establishing internal controls similar to those used in financial reporting
  
  

Budgets are under pressure: ESG software spending has risen by about 25% between 2022 and 2025, a steep climb for mid-sized firms with tighter resources. And reporting isn’t a one-off project. Under CSRD, disclosures become an annual cycle of data collection, limited assurance (external audit), and continuous improvement - demanding collaboration between finance, HR, compliance, and operations.

The upside: efficiencies and market access

Despite the costs, there are clear business benefits. Companies that invest in reporting capabilities often uncover efficiencies - such as energy savings, waste reduction, and better asset protection against extreme weather. Studies continue to show that firms with robust ESG practices enjoy higher profitability and stronger risk management outcomes.

For mid-market firms, the rewards are tangible:

• Preferred status with multinational customers who require ESG transparency from suppliers
  
  
• Improved access to investors and ESG-focused funds
  
  
• Better financing conditions, such as sustainability-linked loans with reduced interest rates when targets are met

In short, building ESG capacity is not only about compliance. It can enhance productivity, innovation, and competitiveness.

The financial reality

The upfront costs are real. Consulting and audit fees, investments in new systems, and even capital expenditures (such as installing emissions sensors) can put pressure on profitability. But many firms are starting to treat ESG reporting like IT or quality management - an integrated part of doing business. Encouragingly, over 60% of companies globally say they have already increased resources and management time for sustainability reporting, reflecting its role as a core business function rather than a side project.

Staying adaptable

The regulatory landscape continues to evolve, particularly with the EU’s Omnibus adjustments. Mid-market firms should monitor whether they fall into CSRD scope now or in future iterations. Even those below the threshold face indirect pressure through supply chains or investors.

One pragmatic step is to start with voluntary reporting under simplified frameworks. The EU’s VSME standard, for example, offers a lighter alternative for companies with fewer than 1,000 employees. Using such frameworks allows mid-market firms to build capacity and credibility before they are formally required to report.

Key takeaway

Mid-market businesses that see ESG metrics as key performance indicators of business health - not just compliance costs - are better positioned to thrive. The companies moving early are already finding that sustainability reporting drives sharper decision-making, stronger market access, and resilience in a changing regulatory and climate landscape.

Looking ahead: competitiveness and resilience through ESG

The evolution of ESG reporting is far from over. If anything, 2025 may be remembered as the inflection point when sustainability disclosure truly became business-as-usual. Companies that internalize the three drivers - regulation, market forces, and climate risk - will be best positioned to thrive in the coming years.

This is where partnerships matter. Coolset and Forvis Mazars bring complementary strengths to help mid-market companies navigate this landscape with confidence. Coolset provides the technology and data systems to measure, manage, and report ESG metrics efficiently. Forvis Mazars brings the advisory expertise to ensure reporting is compliant, credible, and aligned with broader strategy and assurance requirements. Together, we help businesses treat ESG not as a burden but as a driver of competitiveness and resilience.

Priorities for mid-market professionals

• Stay informed and adaptive: Keep up with regulatory developments - whether it’s the EU Omnibus adjustments, new ISSB standards, or sector-specific guidance. With Forvis Mazars’ policy insights and Coolset’s software updates, companies can respond quickly without losing momentum.
  
  
• Integrate the three drivers of change: Regulations, market forces, and climate and transition risks are not separate conversations. They reinforce each other and should be addressed together. For mid-market firms, this means treating ESG reporting not as parallel workstreams, but as a single, interconnected framework that informs risk management, capital access, and long-term competitiveness. Coolset and Forvis Mazars help companies combine these perspectives into one coherent strategy.
  
  
• Leverage expertise and tools: Don’t reinvent the wheel. Use technology platforms to ease the mechanics of reporting, and lean on advisory support for materiality assessments, climate risk analysis, or assurance readiness. Coolset and Forvis Mazars together provide both the system and the strategic guidance.
  
  
• Embed ESG into strategy: Perhaps most importantly, integrate ESG into business strategy. Sustainability metrics should inform supply chain choices, investment decisions, and workforce planning. The combination of Coolset’s data-driven insights and Forvis Mazars’ advisory perspective helps companies go beyond compliance to build stronger, more resilient businesses.
  

The bigger picture

ESG reporting is shifting from a peripheral concern to a central pillar of corporate accountability. Regulations provide the foundation, market forces raise the stakes, and climate science injects urgency. For mid-market firms in Europe and beyond, embracing this shift is no longer optional - it’s a prerequisite for long-term success.

By working together, Coolset and Forvis Mazars help companies turn sustainability reporting into a strategic opportunity: unlocking value, reducing risk, and strengthening credibility in a business environment that increasingly rewards transparency.