Is ESG fading?

In 2015, the Paris Climate Agreement and the United Nations’ 2030 Sustainable Development Goals (SDGs) marked a turning point in global business strategy. These frameworks redefined prosperity, not just in terms of profit, but through environmental stewardship, social equity, and long-term resilience.

During that pivotal year, for the first time, leaders from government, business, NGOs, and civil society reached a consensus: the future of business must be informed by ethical considerations and social responsibility, not solely profitability. And I had the honour of directing the planning and execution of programme strategies, global engagement initiatives, and advocacy efforts.

Fast forward to 2025, and the question isn’t whether environmental sustainability, social interdependencies such as human rights and ethical supply chains, and governance matters. It’s whether businesses are equipped to act on it.

ESG and SDGs: Not Buzzwords. Strategic Imperatives.

Environmental, Social, and Governance (ESG) principles were never meant to be a trend. They are strategic levers for risk mitigation, innovation, and stakeholder trust. Yet too often, ESG is misunderstood, misused, or dangerously deprioritised, particularly in smaller enterprises where resources are stretched and priorities compete.

In a 2023 UN Global Compact survey of senior executives showed that 94% viewed the SDGs as a powerful, unifying global framework, and 98% of CEOs acknowledged their responsibility to make business more sustainable, up 15% since 2013. Intent is high. The vision is clear. But implementation still lags.

This isn’t a question of will. It’s a question of how. In today’s regulatory landscape, ESG is no longer optional. It’s operational. And, here’s the truth: SMEs are not exempt. They are essential.

2025 Regulatory Shifts: What SMEs Must Know

The ESG landscape has transformed dramatically:

• EU CSRD Implementation: Thousands of companies, including SMEs, are now reporting under the Corporate Sustainability Reporting Directive (CSRD), with mandatory disclosures aligned to the European Sustainability Reporting Standards (ESRS). The 2025 Omnibus Simplification Package has eased some thresholds, but the double materiality principle remains central.

• EU Taxonomy & SFDR: Businesses must now quantify the percentage of revenue, CapEx, and OpEx aligned with sustainable activities. This demands robust data governance and taxonomy-aligned reporting.

• Corporate Sustainability Due Diligence Directive (CSDDD): Supply chain ethics are under the microscope. SMEs supplying to larger firms must demonstrate human rights and environmental due diligence, with phased enforcement beginning in 2026.

• US SEC Climate Disclosure Rules: For SMEs operating in or supplying to US-listed companies, climate-related disclosures, including Scope 1 and 2 emissions, are becoming standard practice.

  
  

These developments are not just compliance challenges, they’re strategic opportunities.

The Transition: From ESG as Acronym to ESG as Action

The conversation is shifting, from pledges to performance, from slogans to solutions. SMEs have a critical role to play in this transformation. Not because they’re forced to, but because they’re uniquely positioned to innovate, adapt, and lead.

If we want ESG and SDG frameworks to remain credible, they must become:

• Strategically embedded, not bolted on

• Transparent and data-driven, not anecdotal

• Collaborative, not competitive

• Long-term in vision, not reactive to headlines

The planet needs it. Society expects it. Business can benefit from it

Sustainability, ethics, social justice, people and planet as a priority, is not a trend. It’s a transformation. And your business has a starring role to play. If you choose to lead.

Find out more about how Scarlet Kites Strategy can support your team