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 risk are forcing companies (especially in the European mid-market) to rethink how they manage and disclose ESG information.

While the EU debates the scope of regulations 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 breached, 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 offers a structured overview of the three forces shaping ESG reporting today (regulation, markets, and climate risk) and what they mean for companies developing long-term sustainability strategies.

The regulatory pressure: new rules, shifting expectations

In 2025, the regulatory environment for sustainability reporting is both expanding and evolving. The CSRD is officially in force, requiring tens of thousands of European companies to report on sustainability 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 movement toward common sustainability reporting standards.

The Omnibus Proposal and its impact on European businesses

Policymakers in Europe have introduced the Omnibus Proposal, designed to revise ESG reporting requirements. If adopted, the changes would:

• Narrow the scope of the CSRD by excluding more than 90% of companies originally in scope, many of which are mid-market businesses.
• Delay the first reporting obligation for some companies until 2028, effectively providing a "stop-the-clock" relief period.
• Simplify the European Sustainability Reporting Standards (ESRS), reducing the required number of data points by approximately two-thirds.

Across the Atlantic, the US Securities and Exchange Commission (SEC) is delaying its climate reporting rule amid political and legal disputes, contributing to a wider perception of regulatory slowdown.

Companies aren't waiting for regulation

Despite these shifts, companies are moving forward. The PwC Global Sustainability Reporting Survey 2025 reveals a divided response:

• More than 60% of companies report increased investment of resources and senior leadership time in sustainability reporting over the past year. Only a small minority reduced resources.
• Two-thirds of companies say their reporting delivered value beyond compliance, either moderately or significantly.
• 28% report significant value, but the real story is that only 5% said they derived no value at all, highlighting how widespread the benefits are.
• More than 50% of respondents said pressure to deliver sustainability data has increased since 2024, despite regulatory delays.
• Among early CSRD reporters, a clear majority filed reports voluntarily (including in countries where CSRD had not yet become national law), reflecting strong stakeholder and market expectations.

This resilience reflects a broader recognition: regulation sets the baseline, but it isn't the only driver. Staying on course prepares companies for future tightening of rules and avoids the reputational risks associated with non-compliance. Assurance of ESG data (initially limited in scope) is already expected, and those who invest early in reporting capabilities will be ready when stricter standards arrive.

Where companies should focus now

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

• Building reliable data systems capable of withstanding assurance review.
• Integrating ESG processes into governance and finance, rather than treating them as side projects.
• Preparing for upcoming regulations beyond the CSRD, such as the EU Deforestation Regulation (EUDR) and Digital Product Passports, which will require transparency across the entire supply chain.

Regulation has already transformed ESG reporting from a niche practice into 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 provides the foundation, 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 that demand is only growing.

Growing stakeholder pressure

As reflected in the survey results 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 to be part of standard business information.

Investors use ESG performance as a proxy for long-term resilience, customers integrate it into supplier criteria, and employees increasingly evaluate employers on it. The same momentum reflected in the survey is also shaping market 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 reporting find it easier to access capital, sometimes at more favorable terms. Those without may face higher financing costs or fewer opportunities.

Supply chains and procurement

Large companies are imposing ESG requirements on their suppliers, and the pressure is intensifying. Major multinational buyers often require suppliers to disclose sustainability data in order to remain eligible for contracts.

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

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

For mid-market companies, these trends mean that providing credible ESG data (on carbon footprints, labor practices, or supply chain risks) is becoming a prerequisite for doing business. Companies that can't keep up risk losing deals, even when they clear technical compliance thresholds.

Consumers and employees

Public expectations matter too. Around 80% of consumers remain concerned about sustainability and prefer responsible brands. Employees (especially young talent) are drawn to companies with clear ESG commitments and see 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 drives 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.
• Technology adoption is accelerating: ESG data platforms, carbon accounting tools, and disclosure management systems are replacing spreadsheets. AI use in reporting has more than doubled in a single year, reaching 28%.

Market forces are making ESG reporting non-negotiable. Mid-market businesses that view transparency as an opportunity (not just an obligation) gain access to capital, win supply chain contracts, and strengthen stakeholder trust.

Climate-related risk: the science gets personal

If regulation provides the foundation 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 board decisions and financial disclosures.

The planetary health check

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

Financial and operational impact

For businesses, climate risk translates directly into financial statements. Physical climate effects (heat waves, droughts, floods) have damaged agriculture, disrupted supply chains, and shut down infrastructure across Europe. Globally, economic losses from natural disasters in the first half of 2025 were estimated at $162 billion, a rising trend. Insurers are increasing premiums or withdrawing from high-risk areas, while banks are factoring climate scenarios into their lending decisions. Ignoring climate risk now means 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 per year in climate and health damages, according to a study that monetized the external costs of emissions (air pollution, health effects, etc.).

Furthermore, the Dutch financial sector itself is 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 risks, particularly in loans to companies in high-emission sectors.

These national examples show that climate risk is no 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 picture. Transition risks (regulatory changes, carbon pricing, technological disruption, and shifting consumer preferences) can be equally disruptive. Companies without credible transition plans risk stranded assets and shrinking markets. This is why ESG reporting frameworks such as 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 is driving ESG reporting

Climate risk has become a central narrative in ESG reporting because it speaks directly to 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 boundaries of a safe operating space, increasing the risk of destabilizing the planet." For companies, reporting is how they demonstrate accountability: disclosing how they will decarbonize, use resources more efficiently, and adapt to an uncertain climate future.

Bottom line for companies

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

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

Climate risk ensures that 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 European mid-market companies, the evolving ESG reporting landscape brings both challenges and opportunities.

The reporting challenge

Preparing sustainability reports is resource-intensive, especially for companies 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 comparable to those used in financial reporting

Budgets are under pressure: spending on ESG software has risen by approximately 25% between 2022 and 2025, a steep climb for mid-sized businesses with limited resources. And reporting is not a one-time project. Under the CSRD, disclosures become an annual cycle of data collection, limited assurance (external audit), and continuous improvement, requiring collaboration across 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 consistently show that companies with robust ESG practices enjoy higher profitability and stronger risk management outcomes.

For mid-market businesses, the rewards are tangible:

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

Building ESG capability is not just about compliance. It can improve productivity, drive innovation, and strengthen competitiveness.

The financial reality

The upfront costs are real. Advisory and audit fees, investments in new systems, and even capital expenditures (such as installing emissions sensors) can put pressure on profitability. But many companies are beginning to treat ESG reporting like IT or quality management: an integrated part of doing business. More than 60% of companies globally say they have already increased resources and management time dedicated to 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 companies should monitor whether they fall within the CSRD's scope now or in future iterations. Even those below the threshold face indirect pressure through supply chains or investors.

A pragmatic step is to begin with voluntary reporting under simplified frameworks. The EU's VSME standard, for example, offers a lighter-weight option for companies with fewer than 1,000 employees. Using such frameworks allows mid-market businesses to build capability and credibility before they are formally required to report.

Key takeaway

Mid-market companies that treat ESG metrics as key indicators of business health (not just compliance costs) are better positioned to thrive. Those that move 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 at which sustainability reporting 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 years ahead.

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 that reporting is compliant, credible, and aligned with broader strategy and assurance requirements. Together, Coolset and Forvis Mazars help companies view 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 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: Regulation, market forces, and climate and transition risks are not separate conversations. They reinforce one another and must be addressed together. For mid-market companies, this means not treating ESG reporting as parallel workstreams, but as a single, integrated framework that informs risk management, capital access, and long-term competitiveness. Coolset and Forvis Mazars help companies bring these perspectives together into one coherent strategy.
• Leverage expertise and tools: Don't reinvent the wheel. Use technology platforms to handle the mechanics of reporting, and lean on advisory support for materiality analyses, climate risk assessments, or assurance readiness. Coolset and Forvis Mazars together provide both the system and the strategic guidance.
• Embed ESG in strategy: Most importantly, integrate ESG into business strategy. Sustainability metrics should inform supply chain decisions, investment choices, and workforce planning. The combination of Coolset's data-driven insights and Forvis Mazars' advisory perspective helps companies move beyond compliance to build stronger, more resilient businesses.

The bigger picture

ESG reporting is shifting from a peripheral concern to a central pillar of business accountability. Regulation provides the foundation, market forces raise the stakes, and climate science injects urgency. For mid-market companies in Europe and beyond, embracing this shift is no longer optional; it is a requirement 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.