The current state of regenerative agriculture in apparel

Regenerative agriculture in apparel raw material sourcing and supply chains is shifting from pilots to scale. In fact, there are strong examples of progress in cotton production, where multiyear programs are maturing, buyer commitments are steadier, and positive outcomes for nature, climate, and people are emerging.

Better Cotton, a leading cotton sustainability programme, is even evolving its own standard to explicitly target regenerative outcomes (soil health, biodiversity, water). This is not the same as Regenerative Organic Certified (ROC); instead, it’s an update to Better Cotton’s Principles & Criteria and claims guidance. The revised standard is expected in 2026 with phased implementation thereafter. Learn more about the Better Cotton Independent Assessment Process here.

Beyond cotton, interest is also expanding to wool, linen, and hemp. However, practice changes can involve risks to yield, especially in the short-term. Moreover, processing capabilities to efficiently segregate product or run small batches remain limited, slowing progress.

To maintain momentum, these challenges must be converted into opportunities:

• Farmers need upfront transition finance
• Brands need measurement that covers soil, carbon, water, livelihoods, and biodiversity
• Marketing needs claim language that can be substantiated
• Traceability must connect field outcomes to finished goods

Additionally, trust and cash flow determine the speed of continued advancement. The focus should be on pairing procurement teams with finance and sustainability, establishing auditable Measurement, Reporting, and Verification (MRV) systems, and scaling portfolios rather than relying on one-off pilots.

Measurement, Reporting, and Verification (MRV) — the systems that turn field‑level data into credible, auditable product claims.

In this article, we outline the key issues preventing the scaling of regenerative agriculture in apparel and identify six key steps that brands can follow to move from pilots to programmes.

What’s blocking scale?

Financing the transition

Practice changes cost money, yet early-year expenses (e.g., seed for cover crops, equipment, agronomy support, tech support) can depress yields. Most brands want outcomes, but capital rarely reaches farms and suppliers at the right moment. A potential solution is a blended approach: supplier funds, multiyear offtakes with floor pricing or premiums, and pay-for-outcomes models that return savings to replenish the pool.

Verification & data quality

Credible MRV must track soil health, biodiversity signals, and water impacts. Metrics should connect those field outcomes to real batches through chain-of-custody tracking methods. Data should be interoperable, auditable, and simple enough for growers to use. Overclaiming regenerative benefits typically starts where measurement stops. One way to address this is to specify the evidence before crafting the message.

Claims & consumer trust

“Regenerative” is a farming system, not a product adjective. Harmonize language across channels, align with green claims rules, and set substantiation thresholds that marketing, legal, and procurement all approve. Communicate progress, limitations, and uncertainty plainly.

Supply alignment

Crop calendars, fiber mix, and regional variability don’t always match buying cycles. Spinner/mill readiness and ginning/processing capacity are real constraints, but they also present some of the biggest opportunities. De-risk with portfolio sourcing, staged scale-up, and multiyear commitments that reward performance, not just enrollment.

How to avoid common pitfalls

• Start with a portfolio (regions & fibers) instead of single-project bets
• Avoid carbon tunnel vision by assessing potential impact across a suite of environmental and social indicators
• Match multiyear buying commitments with financing mechanisms that pay for farm practice changes early and over time, recouping via premiums or verified outcomes
• Design claims governance before marketing
• Build MRV that’s auditable, not just inspirational

Pushing the Industry

To move from pilots to a repeatable, defensible program, we recommend brands implement these pragmatic actions within a 6–12-month period:

Step 1: Understand your sourcing

Know the sourcing regions, producers, and farming systems supplying your ingredients and materials. These systems often produce more than one crop or material and should be valued holistically for regenerative agriculture to work.

Step 2: Set a regenerative thesis by region and fibre

Define what “good” means for your priority regions and fibres across outcomes (soil health, water, biodiversity, farmer livelihoods, etc.). Specify acceptable assurance and verification pathways, and the evidence required to make claims.

Step 3: Secure the financing pathway

Commit capital and mechanisms that reach farms when needed and recycle value as outcomes are achieved.

Step 4: Build credible MRV & data flow

Define the metrics and methods you’ll use and decide who holds which data from farm to finished goods. Ensure a third party can verify the data, and that your systems can share them.

Step 5: Claims governance

Make credibility a process, not a slogan. Build a structured process for managing and validating marketing and product claims, ensuring they are accurate, compliant, and consistent across all channels. Strong governance is vital to protecting brand credibility, reducing legal risk, and building consumer trust.

Step 6: Phase adoption

Start small, track credible positive outcomes, then pursue expansion. Consider predefined go/no-go criteria and regular reviews to course-correct along the way.

How Anthesis can help

At Anthesis, we recognise the pivotal role of regenerative agriculture in shaping the future of our planet. Our global team of experts collaborates with clients throughout the value chain to co-create regenerative solutions that not only uphold sustainability principles but also drive positive business outcomes.

We support clients in creating clear roadmaps to engage suppliers and farmers, to develop practical regenerative strategies, and to effectively communicate their progress.

COP30 has underscored a clear message: the era of half-measures is over. With global leaders pledging accelerated action on renewables, nature-based solutions, and just transitions, businesses have a unique opportunity to align with this momentum. Power Purchase Agreements (PPAs) are not just a tool for decarbonisation – they are a strategic lever for delivering on the integrated climate and nature commitments spotlighted in Belém. 

Why PPAs matter in the COP30 context 

COP30’s announcements emphasised scaling clean energy, protecting ecosystems, and embedding nature into climate strategies. Initiatives like the Tropical Forest Forever Facility and the Belém 4x pledge to quadruple sustainable fuels by 2035 signal a decisive shift toward integrated solutions.

For businesses, PPAs offer a practical way to contribute to these global goals – by securing renewable electricity, reducing emissions, and supporting the systemic transition away from fossil fuels. Anthesis helps organisations embed PPAs within broader Net Zero and nature-positive strategies, ensuring that energy procurement aligns with biodiversity protection and resilience objectives. 

1. Accelerate carbon reduction and nature goals 

When physically delivered, PPAs significantly lower Scope 2 emissions, advancing corporate net-zero targets. In the spirit of COP30’s call for synergy between climate and nature, PPAs can be paired with nature-based solutions – such as forest conservation or biodiversity credits – to deliver holistic impact. 

2. Enhance cost predictability and stability 

Energy price volatility continues to pose a significant risk. COP30 underscored the importance of building resilient economies, and PPAs offer that resilience by securing predictable rates. This allows businesses to manage costs effectively while supporting the clean energy growth that COP30 leaders pledged $1 trillion toward achieving by 2030. 

3. Strengthening ESG performance and market leadership 

COP30 reinforced that climate action is now an economic imperative. Demonstrating renewable energy procurement through PPAs positions your organisation as a leader in the nature-positive economy emerging from Belém, attracting sustainable investment, and meeting rising stakeholder expectations. 

4. Support global energy transition and nature finance 

By entering into PPAs, businesses help scale renewable infrastructure – a priority echoed in COP30’s Global Renewables Alliance and the push to triple renewable capacity by 2030. This action complements nature finance mechanisms launched at COP30, such as the TFFF, which aims to protect one billion hectares of tropical forest. 

Integrating PPAs into your COP30-aligned strategy 

PPAs are more than an energy contract – they are a cornerstone of a climate and nature strategy that reflects the integrated approach championed at COP30. As governments and businesses move from pledges to practice, now is the time to embed PPAs into your roadmap for Net Zero and nature-positive outcomes. 

Following the inaugural Anthesis Ireland Connect event held in June 2025, Anthesis brought together another group of sustainability professionals from across a variety of organisations and industries in November 2025 to explore two highly relevant themes in today’s business landscape: organisational purpose, and the business case for sustainability.

Picking up on challenges and topics that were raised back in June, the group reflected on insights from Anthesis’ latest Purpose Gap report, which looks at the difference between what organisations say and do around purpose. The group discussed how purpose can move beyond words to become a tangible and meaningful part of how businesses operate and, ultimately, succeed.

Anthesis Ireland Connect aims to be a forum in which sustainability professionals can discuss shared challenges and opportunities in an inclusive, pre-competitive space whilst also strengthening connections and relationships with peers. From the latest research, inspiring case studies and open discussions at our November event, three key insights stood out…

Key takeaways

Insight #1: The Purpose Gap is real and it’s costing businesses

• Anthesis shared new research showing that while 89% of Irish employees believe purpose is important in their workplace, 18% are thinking about leaving their job because they don’t see that purpose in action within their companies. This disconnect can have real consequences, impacting negatively on both company revenue and reputation.
• The Purpose Gap is the difference between what companies say in terms of their purpose statements, compared with what the company does in practice. This year’s report showed that the gap is widening for the first time in four years. Attendees were eager to explore what’s behind the trends that are causing this widening gap, from challenging global conditions to leadership perceptions.
• Among the problems identified were a so-called “glass floor” on corporate communications; and too much focus on external-facing initiatives rather than internal ones that truly engage the workforce.

Insight #2: Purpose in practice: the FoodCloud story

• The story of FoodCloud’s evolution brought purpose to life in a powerful way. The organisation exists to connect surplus food with those who need it most. In a world where one billion people go hungry and 40% of food is wasted, FoodCloud has created a smart, scalable solution leveraging logistics, technology, and strong partnerships.FoodCloud’s success is further derived through the alignment of its own purpose with that of its partners, enabling them to achieve their own social and environmental goals. Beyond food redistribution, the team also educates charities on how to make the best use of food donations and supports the Irish Government in reaching national food waste targets.
• Even with its strong social impact, FoodCloud recognises there’s more to do, particularly around understanding and reducing the environmental impact of its own operations.

Insight #3: Turning purpose into value

• The event wrapped up with a practical session to help organisations understand where and how sustainability creates business value. Participants wanted to establish a credible business case linking sustainability initiatives to revenue and tangible business growth.
• Attendees worked together to apply an Anthesis value creation framework to real-life examples.
• Individuals emphasised the critical nature of the sustainability function acting – and being treated like – any other business function.  It was stressed that sustainability teams, when interacting with those functions, must speak the business language in terms of performance metrics, expected growth, opex, capex etc.

The Journey to Sustainable Performance

Sustainable Performance is the strategic journey that starts with purpose and ends with measurable business value.

A copy of the The Purpose Gap report which informed part of the agenda can be found here. Now in its fourth year, the 2025 report shows where purpose is thriving, where it’s faltering, and how teams can learn from purpose leaders to turn it into a strategic advantage.

The October episode of Anthesis’ Purposing podcast, featuring Sarah Gillard, CEO of A Blueprint for Better Business, discusses the 2025 Purpose Gap report in more depth, specifically around what the ‘purpose gap’ reveals about leadership and trust.

The EU Batteries Regulation (Regulation (EU) 2023/1542, EUBR) came into force in August 2023 as part of the European Green Deal and Circular Economy Action Plan. It applies to economic operators (manufacturers, importers, distributors) placing portable, automotive, EV, and industrial batteries on the EU market with turnover above €40 million, unless part of a group that exceeds that threshold.

The due diligence guidelines are a cornerstone of this framework, addressing human rights, environmental, and social risks in the batteries supply chain. The aim is to prevent human rights abuses, environmental degradation, and conflict financing in the sourcing of critical raw materials such as lithium, cobalt, nickel, and natural graphite.

While enforcement of the due diligence obligations has been delayed to August 2027, companies should not wait to act. Preparing well in advance can help companies avoid added complexity and challenges when obligations do come into effect, and can lead to added business value in the lead up to enforcement.  

Compliance requirements

Chapter 7 of the EUBR (‘Obligations of economic operators as regards battery due diligence policies’) comprises seven articles and sets out five key requirement areas:

1. Due Diligence Policy (Article 48): Create and maintain a documented policy for battery supply chain due diligence, verified by an independent auditor.
2. Management System & Traceability (Article 49): Implement internal systems and traceability mechanisms to monitor supply chains and address grievances.
3. Risk Assessment & Mitigation (Article 50): Identify human rights and environmental risks in battery material supply chains and develop strategies to mitigate them.
4. Independent Verification (Article 51): Have all due diligence processes independently reviewed and validated by a notified third party.
5. Annual Reporting & Disclosure (Article 52): Publish an annual report detailing due diligence actions, findings, and corrective measures.

Steps companies can take to prepare

To prepare for compliance with EUBR due diligence requirements, companies should consider the following key steps:

1. Clarify governance and compliance responsibilities: Gain a solid understanding of the EUBR legal requirements and establish an internal governance structure to ensure compliance obligations can be effectively managed.
2. Map the supply chain: Build visibility into the battery supply chain, with a focus on identifying upstream suppliers and high-risk areas that require closer scrutiny.
3. Communicate and engage with suppliers: Begin collecting traceability information by working closely with suppliers. Consider systems to support this outreach, data collection, and reporting such as Anthesis Compliance Suite (ACS). Strengthen engagement by presenting a clear business case for why providing traceability data benefits both sides.
4. Conduct a rigorous risk and impact assessment: Conduct a thorough risk assessment to identify the most significant human rights and environmental risks and associated impacts, as well as priority areas for action across the battery supply chain.
5. Implement risk mitigation strategies: Begin acting on risk assessment findings by deploying appropriate mitigation measures. These may include supplier audits, self-assessment questionnaires for Tier 1 suppliers, in-depth human rights impact assessments (HRIAs), and partnerships with civil society organisations.
6. Develop a due diligence policy: Formalise your approach in a due diligence policy, which will not only meet EUBR requirements but can also serve as a foundation for compliance with broader regulatory frameworks such as the CSDDD.

Why start preparing now?

Long lead times

Establishing due diligence systems is a complex process that requires significant time and resources. By August 2027, these systems must be independently verified, which means companies should begin preparing now to avoid a last-minute scramble.

Clear expectations despite limited guidance

While the European Commission has not yet published detailed guidelines, foundational frameworks – such as the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights (UNGPs) – have long defined what constitutes best practice in due diligence. The regulatory text may leave some room for interpretation, but the core expectations are unlikely to change.

Business value beyond compliance

The risk assessment required under the EUBR is not just a regulatory burden. It can serve as a valuable management tool to uncover risks that could affect business operations, as well as impacts on people and the environment. Starting early helps companies realise these benefits, regardless of any regulatory delays or uncertainties.

A step toward broader compliance

For many companies, batteries represent only one of many categories of procured goods. Strengthening due diligence processes in this area now can create a solid foundation for complying with upcoming regulations such as the CSDDD, which will require a more comprehensive supply chain due diligence approach.

Integration with other EUBR sustainability requirements

The EUBR due diligence obligations link closely with other compliance requirements – such as carbon-footprint declarations, recycled-content reporting and the digital battery passport. These rely on consistent product and supplier data structures. Starting now allows firms to design data systems that serve multiple compliance purposes instead of patchwork fixes later.

Complexities companies may encounter

• Transparency varies widely across minerals: Cobalt supply chains are better understood than lithium, nickel, or graphite, while mining operations remain particularly opaque.
• Fragmented data ownership: Relevant data may sit with different teams across the organisation, slowing analysis. Clear data governance and collaboration are essential.
• Complex value chain mapping: Traceability requires significant effort, supplier trust, and data cleaning as upstream information is often incomplete or inconsistent.
• Extensive scope of risk issues: The EUBR covers a wide range of human rights and environmental risk issues. Assessing impacts associated with these risk issues across minerals and value chain stages is resource-intensive and ideally requires stakeholder consultations. Desk-based research and third-party datasets can help, but they often only indicate the likelihood of adverse impacts – not their severity.
• Supplier engagement to address impacts: Identifying risks isn’t enough — companies must work with suppliers on corrective actions, training, and monitoring.
• Partnerships beyond Tier 1: Real visibility into smelters, refiners, and mines usually requires partnerships with NGOs and local stakeholders, especially to address sensitive issues like child labour in ASM.

How Anthesis can help

While the EUBR introduces new regulatory requirements, the principles of human rights and environmental due diligence are long established. For over a decade, we have supported leading companies on their due diligence journeys, applying a proven suite of tools and methodologies:

• Digital tools: Our suite of digital tools, such as Compliance Suite, is uniquely positioned to help companies trace their battery supply chains and collect supplier data to support compliance needs.
• Proven methodology for value chain mapping and risk / impact assessment: Our tried-and-tested methodology draws on extensive experience conducting Double Materiality Assessments (DMAs), in-depth, on-the-ground Human Rights Impact Assessments (HRIAs) and Supply Chain Risk Assessments.
• Actionable risk management frameworks: We design and implement comprehensive Risk Management Frameworks to provide clear, actionable steps for addressing identified risks. Our approach ensures that due diligence processes are aligned with regulatory due diligence requirements, proportionate to the severity of impacts, and embedded into day-to-day operations.
• Policy development with practical implementation: While many organisations offer support in developing policies and supplier codes of conduct, ensuring that a policy is practical and implementable requires deep knowledge of organisational processes and hands-on implementation experience. We bring this expertise to all our projects.
• Supplier engagement: Collecting supplier data to support compliance requires close collaboration. Sending data requests without clearly communicating the benefits of accurate reporting and effective risk management often results in low response rates. We have extensive experience in supplier engagement – building capacity, setting goals, developing action plans and conducting ongoing monitoring to evaluate and track progress.

With operations and value chains for many businesses spanning the globe, due diligence for addressing human rights and mitigating associated risks is becoming both more critical and more challenging. With regulatory mandates becoming more common and consumer expectations rising, strengthening human rights due diligence processes is now a key business imperative.

The Human Rights team at Anthesis recently conducted a two-day supplier site visit in Rio de Janeiro, Brazil, as part of a Human Rights Risk Assessment for a global energy client. Below we explore their key takeaways, and what actions businesses can start taking to meet today’s human rights requirements and expectations.

On-site assessment and key takeaways

While conducting their assessment, our expert human rights consultants engaged directly with workers and managers on the ground, getting to know the ins and outs of daily operations. They also reviewed internal policies and processes already in place and conducted analyses to identify potential gaps.

The assessment highlighted three valuable lessons for any business:

1. Worker voices are essential: Speaking directly with employees reveals the realities of day-to-day operations—insights that are often missed in corporate reporting. These conversations can uncover both positive practices, like respectful treatment, fair scheduling, and safety protocols, as well as areas for improvement, including excessive overtime, lack of grievance mechanisms, or unclear communication channels. Participatory approaches in Human Rights Risk & Impact Assessments (HRRIAs) ensure that worker perspectives are not only heard but actively shape the outcomes. This aligns with international standards like the UNGPs, which stress the importance of stakeholder engagement in due diligence processes.
2. Management buy-in is key: Human rights cannot be effectively embedded without the support and understanding of management. Managers are the bridge between policy and practice. When they are trained and engaged, they become advocates for responsible business conduct, helping to identify risks early and implementing solutions that are both practical and sustainable. Building buy-in and internal capacity through tailored training programs and leadership engagement strategies can be vital, ensuring that human rights are not siloed within sustainability teams but are integrated across departments.
3. Everyday practices matter: Human rights risks often manifest in the small, routine aspects of work: how shifts are scheduled, how feedback is given, or how safety gear is distributed. These micro-interactions can either reinforce dignity and respect rights, or contribute to systemic issues. They also reveal where workers feel most valued, such as being consulted on changes or recognized for their contributions. On-the-ground assessments like the one we completed in Brazil go beyond checklists to observe and understand these daily dynamics. By focusing on operational realities, businesses can uncover hidden risks and identify opportunities to improve worker well-being and organizational culture.

These insights reflect a broader truth: human rights risks are often subtle, systemic, and deeply embedded in business operations. Addressing them requires more than compliance. Instead, it demands a strategic, proactive approach.

The business case for human rights

Respecting human rights, and addressing related gaps and risks, is both a moral and a business imperative. Companies that fail to identify and mitigate human rights risks face reputational damage, regulatory penalties, and operational disruptions. Conversely, those that lead in this space build trust, strengthen stakeholder relationships, and enhance long-term resilience.

A recent study by the United Nations Development Programme (UNDP), “Human Rights vs. Competitiveness: A False Dilemma”, found that companies strengthening their human rights performance experience tangible financial benefits, demonstrated through clear links to operational profitability and investor valuation.

Additionally, the global landscape is shifting toward mandatory due diligence and reporting. Modern slavery legislation and the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) require businesses to “know and show” how they manage human rights impacts. Likewise, civil society and consumers are also scrutinizing companies’ social impact claims more closely than ever.

What businesses can do

To meet these expectations, businesses should:

• Develop and embed human rights policies aligned with international frameworks such as the UN Guiding Principles on Business & Human Rights (UNGPs), ILO Conventions, and OECD Guidelines.
• Conduct Human Rights Risk & Impact Assessments (HRRIAs) to identify, prioritize, and mitigate risks across operations and supply chains.
• Engage stakeholders meaningfully, including workers, communities, and suppliers, to understand lived experiences and build trust.
• Train leadership and teams to recognize and respond to human rights issues.
• Monitor and report progress transparently, using frameworks like GRI and IFC Performance Standards.
• Integrate social impact measurement to assess and improve performance across products, services, and programs.
• Implement responsible sourcing and supply chain due diligence, especially beyond first-tier suppliers.

These actions not only help businesses comply with evolving regulations – they also contribute to a more equitable and resilient future.

How Anthesis can help

Anthesis offers a comprehensive suite of Human Rights & Social Impact services designed to help organizations navigate this complex landscape. From strategy development and stakeholder engagement to field research, training, and impact measurement, our team brings deep expertise and practical tools to support businesses at every stage of their journey.

Whether you’re conducting a human rights assessment, designing a social impact program, or preparing for regulatory compliance, Anthesis can help you embed ethical values into your operations and thrive in a world where social responsibility is central to business success.

When it comes to implementing net zero targets, Emerging Markets and Developing Economies (EMDEs) face a unique challenge: how do we define a Paris-aligned target that reflects both ambition and fairness? The principle of ‘Common But Differentiated Responsibilities’ in the Paris Agreement recognises that developed economies should decarbonise faster, while EMDEs balance emissions reduction with economic growth. Yet, most current frameworks ignore this nuance.

Today, general partners (GPs) often default to the Science Based Targets initiative (SBTi) for defining Paris-aligned targets. However, SBTi does not incorporate the concept of “fair share” contributions – targets that account for historical emissions and capacity to act. This omission risks creating unrealistic and unfair expectations for EMDE-based companies and could even trigger capital outflows from these regions as investors chase easier wins elsewhere.

Why does fair share matter? Historically, developed economies have contributed the bulk of greenhouse gas emissions. Expecting EMDEs to decarbonise at the same pace ignores this reality and undermines equity. For portfolio companies, this means that applying the same reduction targets globally is neither practical nor justifiable.

Scaling targets with country pathways

To address this, we propose a methodology that scales SBTi-level reductions using well-accepted, country-level emissions pathways. We have based this proposal on data from the Network for Greening the Financial System, or NGFS. NGFS provides granular data on national emissions trajectories under a Net Zero 2050 scenario. By comparing these pathways for developed economies and EMDEs, we can calculate a ratio that adjusts SBTi targets to reflect fair share contributions.

For example, an NGFS net zero pathway shows Cameroon’s emissions increasing by 6.3% between 2025 and 2030. A company operating there should therefore aim to limit its emissions increase to this level, rather than pursue reductions that ignore local realities. This approach aligns with the Net Zero Investment Framework (NZIF) guidance and ensures targets are both credible and achievable.

In practical terms, nothing really changes at the GP level – general partners are still expected to ensure that portfolio companies are “managed in alignment with net zero.” The difference is that the bar for meeting this standard has been adjusted: the criteria are now more flexible for individual portfolio companies, taking into account the specific contexts and regions in which they operate.

Scope 3 & beyond: a nuanced approach

Scope 3 emissions remain a sticking point, especially in EMDEs where data availability is limited. Our recommendation is pragmatic: exempt small and medium-sized businesses from Scope 3 reduction targets for now, focusing instead on measurement as a first step. For large companies, targets should apply but be adjusted using the same fair share principles applied to Scope 1 and 2 emissions.

High-impact sectors, however, are a different story. Under NZIF, sectors such as transport, power generation, cement, steel, and agriculture, forestry and fisheries (AFF) are classified as “high impact” due to their significant greenhouse gas emissions and systemic influence on the transition (see NZIF high impact material and material sector mapping). For these industries, more ambitious Scope 1,2 and 3 targets may be necessary, and SBTi’s standard guidance, including sector-specific guidance, should serve as the baseline.

The bigger picture: opportunity for investors

Two-thirds of global energy-related emissions, and 95% of emissions growth, come from EMDEs. This is not just a challenge; it’s an opportunity. By tailoring targets to local realities, GPs can identify high-potential investment opportunities in areas such as renewable infrastructure, distributed energy, and efficiency improvements – areas where practical deployment and scale-up can deliver both climate impact and commercial returns. This approach can also help GPs deepen partnerships with portfolio companies. Crucially, adopting credible, context-sensitive approaches can also attract increased funding from LPs, who are seeking robust, Paris-aligned strategies that demonstrate both ambition and fairness.

Ultimately, investors who understand the importance of differentiated pathways can play a pivotal role in real-world decarbonisation. By educating clients and advocating for fair share-based targets, fund managers can justify larger mandates and tell a compelling impact story.

How Anthesis can help

Achieving net zero is a global effort, but it cannot be achieved with a one-size-fits-all approach. Incorporating fair share principles into target-setting is not only equitable and fair, but also essential for real-world impact.

Anthesis is proud to have supported the Science Based Target Initiative (SBTi) to develop dedicated guidance for the private equity industry. Written in partnership with an expert advisory group of over 30 private equity firms, the guidance helps private equity firms set and reach science-based targets across their operations and investments to work towards sustainable private equity.

We work with firms around the world, providing end-to-end SBT and net zero consulting support to fit unique contexts. At Anthesis, we view the process of setting Science Based Targets not merely as a checkbox, but as a transformative business journey.

In today’s market, value creation extends beyond mainstream financial metrics.

Investors demand credible ESG performance, regulators mandate sustainability disclosures, and public stakeholders demand transparency. As a result, ESG is no longer a siloed, perception-driven exercise but is now strategically embedded in business planning, delivering measurable value under financial, regulatory, and competitive pressures.

Following ‘The Cost of Silence’, we now turn to its counterpart: what do companies gain when actively integrating ESG principles into value creation strategies?

ESG action does not replace traditional strategic growth and value creation strategies —it enhances them.

It’s not about sacrificing profits for purpose or inventing new sources of value; ESG principles help reveal value that has always existed. They force firms to rethink value creation as a dynamic, systemic process linked to broader ESG topics, rather than a series of isolated levers. Environmental considerations uncover operational inefficiencies, social factors align with talent and culture strategies, and governance underpins execution across all areas.

This article explores how recognising and measuring these connections can translate into practical value creation and solidify the synergy between sustainability and financial performance.

Traditional vs ESG-aligned value creation approaches

Unlocking long-term value by tackling hidden operational inefficiencies

Traditional operational value creation seeks maximum efficiency from existing assets and processes, often by cutting discretionary expenses, renegotiating supplier contracts, consolidating facilities or automating manual processes. While effective for short-term margin improvement, they risk creating a “race to the bottom,” undermining long-term value.  

 An ESG-aligned approach broadens the lens by examining how resources like energy, water, and labour are sourced, consumed, and wasted across the value chain. This exposes hidden costs — from energy loss and emissions hotspots to supply chain vulnerabilities — that may be absent from financial statements but have a material impact on future performance.

By addressing systemic inefficiencies through energy audits, waste assessments, and supply chain analysis, companies can reduce costs while also building resilience to climate and resource risks. A recent study by the UNDP, for example, found that organisations that actively mitigate climate-related supply chain risks realise measurable improvements in economic performance alongside reduced emissions. This shift reframes efficiency as both a financial and sustainability imperative.

Anthesis helps companies design, implement, and scale operational ESG initiatives. Examples of our support include unlocking £1.8m in energy-related savings for JLL; reducing 17,550 kg of food waste per year for Righteous Gelato without major capital investment; and helping over 3,500 suppliers cut production costs and reduce waste through a circular supply chain platform with Tesco Exchange.

From efficiency to engagement – how purpose transforms performance

There are multiple value-creation levers that align with social priorities such as health and safety (H&S) and diversity, equity and inclusion (DEI). Traditional talent & culture value creation relies on extrinsic motivators – KPIs, performance reviews, and financial incentives – to drive employee productivity. While these mechanisms can improve efficiency, they often reduce employees to resources, overlooking how culture and purpose drive long-term engagement and innovation.

An ESG-aligned approach builds on these levers by also activating intrinsic motivation. A purpose-driven culture creates performance advantages that profit-only structures cannot match. When employees see their work tied to meaningful goals, such as reducing environmental impact or creating positive social outcomes, they bring deeper commitment, creativity, and collaboration. Research from Great Place to Work shows that organisations with clear purpose and values achieve stronger outcomes in revenue growth, innovation, and employee engagement.

Rather than asking only what people deliver, companies should also focus on why they choose to contribute, unlocking lasting organisational value. This requires a clear organisational purpose and create engagement programs that connect daily work to meaningful impact.

Anthesis supports organisations by designing tailored sustainability strategies that embed behavioural and cultural change from the outset. Our work with the Billington Group purpose platform engaged 2,000+ employees, with over 90% purpose-driven within six months, and Yorkshire Valley Farms’ purpose-driven strategy achieved 3.4x higher social media engagement.

Technological enablement

Among the many governance value creation levers, technology enablement stands out as it rarely operates in isolation. Traditionally, the focus is either operational efficiency, through automation, or commercial growth, through new digital services and markets.

An ESG-aligned approach applies these same capabilities into sustainability. Internally, digital ESG tools help companies systematically capture complex non-financial data and simplify reporting Externally, ESG systems originally developed for internal compliance, are increasingly becoming marketable assets, transforming ESG technology from a cost of doing business into new sources of revenue and competitive advantage.

Technology has evolved from an external disruptor to a core value creation lever and ESG is following a similar trajectory. Companies that embed ESG into digital strategy from the outset position themselves to monetise sustainability data and capabilities as market demand accelerates.

Anthesis helps organisations achieve this by designing and implementing digital solutions,  including  ESG data collection with Anthesis Mero across 300+ Grupo Éxito stores, implementing Anthesis RouteZero to track and document emissions, supporting Belu Water in demonstrating carbon neutrality in line with PAS060, and developing Reckitt’s Sustainable Innovation Calculator, completing life cycle assessments in under 30 minutes and 700 product analyses.

Redefining market growth

Traditional growth strategies target market expansion through new geographies, products or acquisitions to capture market share and increase revenue. Yet this assumes a narrow definition of markets, where value is determined only by buyers, sellers, regulators, and intermediaries.

An ESG-aligned approach reframes markets as living ecosystems, shaped by a broader set of stakeholders. Regulators impose evolving compliance requirements; communities influence brand reputation; employees drive innovation; and institutional investors reward sustainable performance with higher exit multiples. Strong ESG performance not only reduces risk but also enables access to new customer segments, premium pricing, and entry into markets with stricter sustainability standards, with recent research showing, for example that consumers are willing to pay more for products and services that demonstrate clear sustainability credentials.

In today’s environment, markets reward authenticity, sustainability, and responsibility, not just scale. Companies that analyse their strategic landscape through this enhanced ESG lens uncover growth opportunities that traditional approaches miss.

Anthesis has supported clients in this shift, such as supporting Energy Capital Partners (ECP) by delivering UK Plastic Waste Market Assessments, evaluating UK ESG regulations, infrastructure capacity, market pricing and key players to pinpoint growth opportunities and regulatory risks. This informed a market expansion strategy aligned with sustainability trends and long-term value creation.

Realising the ROI of ESG

It is clear that companies that identify where ESG can amplify existing levers, set targets, and design initiatives are best positioned to deliver both financial and meaningful impact.

An ESG strategy translates principles into measurable initiatives, aligns them with business priorities, and embeds sustainability into decision-making rather than treating it as a silo. We partner with organisations to model the financial ROI of ESG initiatives, build business cases, and implement programs that deliver measurable performance outcomes.

For organisations unsure where to start, Anthesis provides the expertise and tools to develop and implement ESG strategies that are actionable, scalable, and measurable, ensuring sustainability drives real value creation.

Exiting a portfolio company today requires more precision and preparation than ever. With valuation pressure high and buyers increasingly focused on resilience and long-term performance, differentiation has become essential. For general partners, exit is the opportunity to demonstrate both a company’s current value – its ability to manage risk and compete effectively today – and its future potential to unlock additional value under new ownership.

Environmental, Social, and Governance (ESG) narratives can be an effective tool in conveying this full value story of a company’s current position and how it can continue to grow responsibly.

A strong ESG narrative can:

• Broaden your buyer universe
• Differentiate a portfolio company in a competitive process
• Strengthen valuation positioning

Without integrating ESG at exit, much of a company’s hard-earned progress and potential may go unrecognised, and value could be left behind. Below, we outline key strategies for building ESG narratives to exit portfolio companies that are ESG-ready, ESG-enabled, and ESG-driven.

Tailoring ESG to the exit context

The way ESG features in an exit depends on its commercial relevance, the company’s maturity, and the sponsor’s goals. While there’s no one-size-fits-all approach, we tend to see exit strategies fall into three general categories, depending on whether the portfolio company is:

1. ESG-Ready: Focusing on demonstrating strong ESG risk management and readiness
2. ESG-Enabled: Utilising ESG themes to strengthen the broader investment story
3. ESG-Driven: Leveraging ESG as a differentiator that is central to the value story, unlocking new categories of buyers

These are not rigid stages, but flexible approaches that can be right-sized to the deal context, company profile, and buyer expectations.

ESG-ready: foundational preparedness

Demonstrating that ESG risk management and governance systems are in place and functioning effectively today.

When ESG is not a defining feature of the company’s investment thesis, the focus should be on demonstrating competence. This means ensuring the company can respond credibly to ESG-related questions, that key documentation is organised, and that ESG does not become a source of delay or surprise during diligence.

This often involves identifying the ESG topics most likely to arise in buyer conversations, compiling relevant data and materials (such as policies, compliance records, or emissions data), and preparing management to speak confidently to these areas. The emphasis is on transparency, organisation, and credibility, providing buyers confidence in the company’s risk management and governance practices.

The value of this approach lies in demonstrating that the company manages its risks systematically and proactively – giving buyers confidence in the stability, credibility, and quality of governance across the organisation. Even for companies still developing their ESG programs, strong organisation, transparency, and credible governance can go a long way in building buyer confidence.

ESG-enabled: integrating supporting themes

Integrating ESG as part of the broader business story, balancing today’s strengths with tomorrow’s opportunities.

For companies that have made measurable ESG progress, there’s an opportunity to position those improvements as contributors to commercial success and resilience. Rather than creating a standalone ESG section, this approach weaves ESG throughout the business narrative, using sustainability to strengthen priority exit themes such as operational efficiency, risk reduction, or customer and workforce engagement.

This could include highlighting strong safety culture as a sign of operational discipline, responsible sourcing as a lever for customer retention, or leading energy efficiency practices as a driver of cost control. These elements show not only how the company is performing today, but also how it is thinking ahead, proactively addressing ESG issues that buyers, regulators, and customers will increasingly expect.

Crucially, this approach should balance what has been achieved to date with what remains on the table. For example, if a company has improved data collection or energy management systems, it can highlight how the next owner could further capitalise on that by differentiating products based on unique sustainability attributes or certifications.

We’ve seen this approach work especially well when there is a credible voice within management, someone who can connect ESG performance to the company’s financial and operational story and articulate what continued progress could look like.

ESG-driven: key elements of differentiation

Positioning ESG as a strategic differentiator and value driver for targeted buyers.

For some companies, ESG is not peripheral – it’s core to their market positioning or buyer appeal. These are often businesses where sustainability is built into the product, supply chain, or brand, or where the buyer pool includes impact funds, strategic investors, or Article 9 funds.

Here, exit preparation is more intensive. It involves aligning management and sponsor perspectives, quantifying impact (such as carbon reductions, product efficiency, or workforce outcomes), and producing investor-grade materials that establish a central theme or focus for the Commercial Information Memorandum (CIM).

For instance, Anthesis supported a company producing insulating materials for apparel. Sustainability was central to its value proposition, so the challenge was to present that value credibly. By quantifying the downstream benefits of its products and developing a CIM-ready ESG deck, the sponsor successfully crafted a growth narrative built around sustainability differentiation – positioning the business as both resilient and scalable in a decarbonising market.

The strongest ESG stories at exit are data-backed, forward-looking, and aligned to business fundamentals, showing how the company can continue to unlock ESG-linked value under new ownership.

The bottom line

Exits are harder than ever, and differentiation is everything. ESG, when approached strategically, can help demonstrate that a company is managing its risks effectively, is differentiating itself among peers, and is positioned for future growth.

The art lies in striking the right balance between what’s been achieved and what’s still possible – highlighting current resilience and governance while framing credible opportunities for future value creation.

Whether that means demonstrating readiness, integrating ESG as a supporting theme, or positioning it as a central differentiator, a well-structured ESG narrative helps sponsors tell the full story of value creation.

The European Union’s Deforestation Regulation (EUDR) is more than another compliance requirement. It’s a defining test of how effectively companies can connect sustainability ambition with operational and legal readiness.

Recent EUDR updates from the European Commission – including revised implementation timelines and transitional reliefs – may appear to ease immediate pressures, but they don’t change the strategic reality.  

For senior sustainability leaders, this moment demands more than technical awareness. It requires mobilising the C-suite and board to understand the profound implications of EUDR on legal exposure, market access, and nature-related risk across global value chains. 

The direction of travel is clear: every business that places forest-linked commodities or their derivatives on the EU market will soon need verifiable proof that their products are deforestation-free and legally produced. And the window for preparation is narrowing. Building the systems, supplier relationships, and governance frameworks required for traceable, compliant supply chains takes time, and leadership.  

Leadership that translates between regulatory change and enterprise strategy: grasping both compliance risk and the opportunity to lead in resilient, deforestation-free sourcing. Below is a clear breakdown of who must act, what must be done, and when it must happen – shaping a framework for no-regrets actions to shape your EUDR Compliance Roadmap. 

Why this matters – and why now 

The EUDR represents a major regulatory shift: it mandates that a broad suite of commodities and derived products placed on the EU market – including those your business might source, sell or manufacture – must be proven deforestation-free (i.e., not produced on land deforested after 31 December 2020) and legally produced in origin countries.  

Why this matters

• Legal/compliance risk – failure to comply can lead to blocked access to the EU market, penalties, and reputational damage. 
• Supply-chain risk – many agricultural and forest-linked commodities are embedded in global value chains; if you source cattle, cocoa, coffee, soy, palm oil, rubber, timber, or derivatives you must ask: “Could my product be traced to deforested land or illegal production?”  
• Strategic opportunity – companies that get ahead of this can build differentiated credentials on sustainable sourcing, strong traceability, and resilience. Waiting is not an option. 

Recent changes

The European Commission has recently put forward a proposal to amend the EU Deforestation Regulation (EUDR), intended to smooth implementation and ease administrative burdens – but not to postpone the overall direction of travel. 

Crucially, the proposed delay applies only to small and micro operators, not to larger companies. Under the updated timeline: 

Primary operators (medium and large companies) 

• They will maintain the obligation to submit due diligence declarations when placing products on the EU market. 
• The regulation will enter into force on 30 December 2025, with a six-month grace period without checks or penalties, allowing for a gradual transition. 

Primary operators that are micro or small enterprises from low-risk countries 

• They will only need to submit a single, simplified declaration in the EUDR IT system. 
• Implementation is postponed until 30 December 2026 (compared with the originally planned 30 June 2026). 

Traders or downstream operators (of any size) 

• They will no longer be required to submit due diligence declarations. 
• They will only need to collect the declaration code provided by their supplier and transmit it to their client. 

These changes aim to make the process more agile and efficient, while ensuring the traceability and transparency needed to achieve the EUDR’s core objective: eliminating deforestation associated with products placed on the EU market. 

The proposal still needs to be approved by the European Parliament and the Council before entering into force, and debate and adoption are expected before the end of the year. 

Shape your EUDR compliance roadmap 

Many companies may be tempted to wait for all the pieces (country risk classification, industry guidance, the IT registry) to fall into place.  Avoid that trap: 

• Core obligations are already in effect (the law is in force). Delay is only in application date. Supplier engagement, audits, and tracing must commence now. 
• Supply-chain complexity is real: gathering geo-coordinates, verifying land-use histories, aligning downstream products will take months (or years). The closer you are to the deadline, the higher the cost and disruption. 
• Early movers will benefit: companies that shape their sourcing now will build resilience, avoid being squeezed by last-minute compliance, and set the standard for future-fit procurement. 

Eight no-regrets actions to prepare 

This regulation will reshape how global supply chains operate. As a leader, you can either respond reactively and scramble for compliance – or lead proactively, reshape your supply chain for resilience and sustainability, and gain a competitive edge. 

1. Mobilise now and act at speed. The deadlines (30 December 2025 for large/medium companies; 30 June 2026 for micro/small enterprises) are fast approaching. Build internal alignment and resource plans immediately. 
2. Own it from the top. Treat deforestation-free compliance as a strategic business imperative – not a niche sustainability task. Assign executive sponsorship and embed accountability across procurement, legal, and ESG teams. 
3. Consolidate traceability data. Map and maintain an up-to-date database of the geographic origin of all relevant raw materials and products, capturing geolocation and supplier information to meet EUDR due diligence requirements. 
4. Assess and prioritise deforestation risk. Conduct spatial and supply-chain risk assessments to identify high-risk sourcing areas, using verified data sources and geospatial tools to guide supplier engagement and monitoring. 
5. Strengthen supplier collaboration. Work directly with suppliers – especially smallholders and high-risk producers – to improve the quality, accuracy, and accessibility of traceability and legality data. 
6. Review and adapt due diligence systems. Ensure systems can flex with evolving EUDR requirements, differentiate by country risk classification, and integrate seamlessly with IT reporting and audit mechanisms. 
7. Integrate into core strategy. Embed traceability, deforestation risk management, and supplier engagement into corporate sustainability, ESG, and responsible sourcing strategies – linking progress to executive KPIs. 
8. Use the transition wisely. The EU’s proposed relief periods and phased implementation offer time to prepare – use this runway to pilot systems, close data gaps, and strengthen supplier readiness rather than delay action. 

In navigating the complexities of EUDR and translating this roadmap into tangible EUDR compliance actions, you don’t have to go it alone. Anthesis experts stand ready to guide you – from mapping exposures and building traceability systems to strengthening supplier engagement and embedding deforestation-risk management into your business strategy.  
 
Whether your company is just beginning to assess exposure or advancing toward full traceability, Anthesis can help you navigate the next steps with clarity and confidence. As recognized delivery partners of the Accountability Framework initiative, Anthesis brings global best practice, technical expertise, and industry-specific support tailored to your business challenges and priorities.

Contact us

Our Nature experts work with global leaders to translate regulation into action and ambition into advantage. Start the conversation with us to shape your deforestation-free roadmap and turn compliance into a catalyst for lasting sustainability leadership. 

Climate and nature are inseparable, with intertwined impacts on business, society, and daily life. However, most companies still analyse and report on climate and nature separately, creating blind spots in corporate strategy and resulting in sourcing, investment, and land use decisions that are based on an incomplete picture of the risks involved. By integrating climate and nature risks, companies can instead leverage a more comprehensive foundation for resilience and can gain a competitive edge in an uncertain future.

From frameworks to foresight: Using TCFD and TNFD together

The consequences of a fragmented approach to climate and nature risks can be significant. Climate risks like extreme weather events and the transition to a low-carbon economy can accelerate biodiversity loss and ecosystem degradation. In turn, degraded ecosystems weaken natural defenses against physical risks like flooding or drought, amplifying sourcing and supply chain disruptions for businesses dependent on critical commodities. When climate and nature risks compound each other, assessing them separately creates gaps and dangerously underestimates true exposure.

Integrated assessments of both climate and nature can work to close these gaps. The Task Force on Climate-related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD) are complementary frameworks for assessing and disclosing the financial impacts of climate-related and nature-related risks and opportunities, respectively.

TCFD helps organisations disclose the financial impacts of physical risks (extreme climate events) and transition risks (policy, technology, market, and reputation) from climate change, while TNFD addresses nature-related risks, including ecological dependencies and impacts, through tools like the LEAP (locate, evaluate, assess, prepare) approach. Importantly, TNFD highlights the ecosystem services that businesses and their supply chains rely on to grow commodities or maintain continuity in their operations, like pollination, water regulation, soil fertility, and disease control, which are often missing in traditional climate risk models.

By integrating TCFD and TNFD, companies can move beyond compliance to strategic foresight, recognising how climate and nature changes interact and compound financial impacts across operations, supply chains, and markets.

Compounding climate and nature risks in action: commodities

Climate risk assessments have become more common as financial reporting becomes mandatory, yet many companies still overlook the equally critical, and interlinked, nature-related risks. Deforestation, biodiversity loss, and water stress are not only nature issues – they amplify climate-related disruptions – and assessing climate and nature risks separately can create specific blind spots in sourcing, land use, and resource planning. Integrated assessments are therefore no longer a niche consideration, but a strategic imperative.  

At Anthesis, we support clients in developing integrated assessments that holistically combine climate and nature risk analysis for reporting and planning, uncovering critical, interacting blind spots. Beyond operations, we also assess how climate change may affect commodity yield, pricing, and productivity across plausible futures.

For example, consider a multinational food and beverage company sourcing soy:

• A standalone climate assessment might show that the region faces future water stress from drought, flagging a moderate risk to supply.
• A regulatory review may flag new deforestation-free sourcing laws or disclosure requirements.
• A separate nature assessment might flag that same region for high rates of deforestation.

An integrated analysis reveals the critical insight these silos miss: deforestation (a nature risk) is eroding the ecosystem’s ability to retain water and regulate local climate. This amplifies the financial and operational impact of the projected climate-driven droughts (physical risk) and exposes the company to compliance and market-access risks from emerging deforestation-free laws (transition risk).

This compounding effect reveals a far greater threat of supply chain disruption and price volatility than either analysis would suggest alone. With integrated foresight, the company can shift from reactive risk management to proactive strategy, enabling smarter, more resilient sourcing and capital investment decisions.

The limits of current frameworks and the power of integration

Increasing water stress on soy crops is a physical climate risk, but its residual effects create nature risks: reducing water availability, crop yields, and biodiversity. These impacts disrupt supply chains, increase production costs, and threaten long-term resource security. Soy expansion is a major driver of deforestation, which destroys habitats, reduces pollinators, and weakens natural buffers against floods, landslides, and water stress. New regulations like the EU Deforestation Regulation add transition risks by limiting market access for soy linked to deforestation.

Viewed separately, these risks understate true exposure. And while TCFD and TNFD provide structured outlines to identify, assess, and disclose these risks, their true power lies in integration. Integrated risk assessments reveal how climate, nature, and policy pressures interact, enabling companies to anticipate systemic disruptions and make better sourcing, investment, and resilience decisions.

TNFD extends TCFD by focusing on the ecosystems and ecosystem services that businesses rely on to function: pollination, water regulation, soil fertility, and more. As an added benefit, aligning with both frameworks not only  meets regulatory and investor expectations under CSRD, SB 261, and ISSB, but also helps companies build adaptive strategies in a world shaped by dual environmental crises and expanding disclosure mandates.

For example, in the food sector, soy expansion upstream drives deforestation and water stress, creating exposure for processors and traders. Downstream, consumer goods companies and retailers face reputational damage and market-access risks if deforestation-linked soy is embedded in their supply chains. Similarly, in the apparel sector, cotton production depends on water-intensive upstream processes, while brands downstream are vulnerable to both physical supply shocks and rising scrutiny over nature impacts.

Bringing the value chain into focus

While the TCFD and TNFD share structural similarities (governance, strategy, risk management, and metrics), there are important differences. Climate risk analysis  benefits from decades of scientific modeling and standardised data, while nature risk evaluation in the corporate context is newer and less harmonised. TCFD, though foundational, is not sufficient on its own: it does not explicitly consider nature-related dependencies and impacts that may pose material financial risks across supply chains, operations, and valuation. For investors and businesses seeking resilience, long-term value creation,  and regulatory alignment, especially under frameworks like the CSRD and the emerging ISSB–TNFD convergence, integrating climate and nature risk is not optional, but essential.

Importantly, value chain analysis is now a regulatory mandate, not just good practice, CSRD and ISSB both require companies to examine upstream and downstream dependencies and impacts. For sectors heavily reliant on commodities like soy, cocoa, or cotton, integrating ingredient risk screening is critical. Dual analysis is also required: understanding risks to the business (like drought affecting soil fertility and crop yields) and risks from the business (like deforestation and biodiversity loss driven by sourcing practices). Tools such as TNFD’s LEAP approach help structure this assessment, capturing both dependencies on nature and impacts to nature, and translating them into financial and strategic terms.

This raises important questions for companies: How does your business connect the dots between climate and nature? Full integration requires a deliberate effort to link nature dependencies (like healthy soil, pollinators, or water availability) with climate hazards (like drought or floods), and then to quantify how those compounded effects translate into operational and financial risk. This is the work that moves companies from compliance to resilience.

Businesses that proactively integrate climate (TCFD) and nature (TNFD) can:

• Address systemic risks: Recognising climate change and nature loss as systemic threats to the global financial system.
• Improve transparency: Enhancing disclosure of interconnected environmental risks and opportunities.
• Enable better decision-making: Providing investors and executives with data that drives smarter capital allocation.
• Drive sustainable outcomes: Catalysing the shift to a more sustainable, resilient economy.
• Anticipate disruptions: Identifying compounding risks and value chain vulnerabilities before they materialise.
• Build resilient strategies: Creating forward-looking plans grounded in a complete risk picture.
• Meet regulatory and investor expectations: Aligning with CSRD, ISSB, and other regimes increasingly requiring integrated climate-nature risk.

Both frameworks are critical to ensuring that financial markets properly value environmental risks and incentivise responsible corporate action. Businesses that proactively incorporate climate and nature into their risk management practices can better anticipate market shifts, address investor concerns, and unlock opportunities for sustainable innovation and natural resource preservation. By understanding the full spectrum of environmental risks and opportunities, companies can not only enhance resilience but also secure long-term competitive advantage.

From insight to action

As climate-related risks become more widely assessed, it’s increasingly clear that nature risks are deeply connected yet often overlooked. Companies that treat them in isolation risk missing blind spots in strategies, especially as environmental disruptions compound across supply chains, assets, and markets. A unified approach that integrates climate and nature risks goes beyond compliance, offering a competitive edge through forward-looking value creation and resilience. Businesses that proactively align with TCFD and TNFD can anticipate market shifts, meet investor expectations, and capitalise on opportunities for sustainable innovation – all while protecting the natural systems their operations depend on.  

At Anthesis, we help companies move from insight to action through integrated climate and nature risk assessments tailored to their value chains. Our approach combines geospatial and financial analysis to identify location-specific exposure, quantify impacts under different scenarios, and prioritise strategic responses. Whether the goal is to meet regulatory requirements, safeguard continuity, or evaluate investment trade-offs, we provide the data, tools, and guidance to turn risks into resilience. By aligning with both TCFD and TNFD, we enable clients to future-proof operations and build competitive advantage in an increasingly risk-aware marketplace.

Becky Willan

CEO – Leadership & Change

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Becky Willan

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Download the Purpose Gap Report

After years of progress, the Purpose Gap is back.

Our research reveals 61% of people now say their company’s actions don’t match its purpose statements – up from 52% in 2024. For the first time since we began reporting in 2022, the Purpose Gap is widening.

As external pressures mount, many organisations are pulling back from purpose-led initiatives.

But not all. A growing minority are doubling down, embedding purpose into culture and operations. The share of employees who see full alignment around purpose has jumped from 22% to 35%. These organisations aren’t just surviving – they’re outperforming. And we have the figures to prove it.

This report shows where purpose is thriving, where it’s faltering, and how teams can learn from purpose leaders to turn it into a strategic advantage.

Consider this: 91% of employees say purpose is important. Yet only 7% of organisations are delivering purpose well.

Is yours one of them? Or is it time to close the Gap?

Climate change is now recognised as a systemic financial risk, causing regulators and standard setters alike to accelerate the development of disclosure and accountability frameworks. This expanding global assortment of climate regulations – CSRD, CSDDD, RD 214/15, PPN 06/21, LCI, SB 261, AASB S2, and more – reflects a global push to ensure corporate transparency, protect economic stability, and align private capital with decarbonisation goals.

The question now becomes: how do these regulations impact corporate emission reduction targets and associated strategies?

In this article, we provide context for navigating this evolving regulatory environment and unpack how emerging rules are shaping corporate approaches to voluntary target setting. We explore what’s required, what’s optional, and, most importantly, how companies can strategically align compliance obligations with credible, forward-looking emission reduction goals.

The current state of target setting within regulatory frameworks

Until recently, most climate regulations focused on disclosure—requiring companies to measure, report, and govern climate-related risks and opportunities. In that context, emission reduction targets typically appeared in two ways:

1. Reporting requirement: Companies disclose their targets if they exist, and
2. Strategic context: Companies explain how they intend to meet those targets or how they will transition to a low-carbon economy.

However, several regulations, notably those in Europe, now explicitly require companies to set emission reduction targets. For example, firms in scope of CSDDD must set science-based, time-bound absolute reduction targets for Scopes 1-3, with a 2030 milestone and five-year reviews to 2050. The UK’s Procurement Policy Note (PPN 06/21) obliges suppliers on large government contracts to publish a Carbon Reduction Plan with clear targets. Spain’s Royal Decree 214/2025 mandates targets for large companies.  Further, for sectors facing material climate risks—such as banks, insurers, and asset managers—target setting is fast becoming a de facto regulatory baseline rather than an voluntary practice.

Target setting within key regulations

Below, we break down key pieces of legislation by region and their connection with emission reduction target setting. Note that regulations are frequently updated or changed. This information is current as of September 2025. Further, the EU Omnibus Proposal may change the information below.

For a quick snapshot, the table below summarizes the key regulations, their regional scope, and the extent to which they require emission-reduction targets.

EUROPE

1. Corporate Sustainability Reporting Directive (CSRD)

Context

CSRD makes sustainability information a mandatory, audit-ready part of corporate reporting in the EU, backed by the European Sustainability Reporting Standards (ESRS). Climate change has a special consideration across sustainability topics and companies shall disclose a detailed explanation if this topic is deemed not material. CSRD does not mandate behavior, only how and what to report.

Target requirements

Companies must disclose whether they have set GHG reduction targets across Scopes 1-3, the base year and trajectory (including 2030 and 5-year milestones until 2050), and whether those targets are science-based and compatible with 1.5°C-aligned pathways. Furthermore, companies must report on whether they have a transition plan for climate change mitigation covering targets, actions, financing, relation to overall business planning, and annual progress.

Scope

Phased application covers large EU companies and certain non-EU firms with significant EU activity, with mandatory assurance and digital tagging; Member States will enforce penalties.

Explore our CSRD Resources

2. Corporate Sustainability Due Diligence Directive (CSDDD)

Context

CSDDD ties corporate due diligence to human rights and environmental impacts in operations and supply chains. It also contains obligations around climate action.

Targets requirements

Firms in scope must set science-based, time-bound absolute reduction targets for Scopes 1-3, with a 2030 milestone and five-year reviews to 2050, aligned to the Paris Agreement and EU climate neutrality goals. However, the EU Omnibus process may remove the need to develop and implement a transition plan. Both the European Commission and the EU Council suggested removing the requirement to implement a transition plan, while proposing to keep the requirement to develop one. However, according to the European Parliament’s draft position, the climate transition planning requirements should be removed from the CSDDD scope altogether.

Scope

Current thresholds target very large companies (e.g., >1,000 employees with turnover >€450M, and franchisors with >€22.5M in turnover); breaches can trigger significant penalties and civil liabilities, up to 5% of turnover. Note that these thresholds could increase further as a result of the EU Omnibus process. For example, the European Parliament is proposing to raise them to more than 3,000 employees and a global net turnover of over €450 million, while the EU Council is proposing thresholds of more than 5,000 employees and a global net turnover of over €1.5 billion.

Explore our CSDDD Resources

3. RD 214/2025 Spain’s GHG Reduction Plan regulation

Context

Royal Decree 214/2025 strengthens Spain’s carbon-reporting framework, elevating national obligations on carbon footprint calculation and mitigation planning. It requires GHG calculation and reduction plans for companies and public sector organisations.

Targets Requirements

Requires large companies to calculate and establish GHG reduction targets for scope 1 and 2 from 2026, and scope 1, 2 and 3 for public sector organisation from 2028. Companies must set targets in 5 years periods and be in line with the Paris Agreement and EU Regulation. Companies must also disclose and make public the measures implemented and plans to achieve the targets.

Scope

Applies to large companies (for GHG calculation and targets for scope 1 and 2 only) and State departments (for GHG calculation and scope 1 and 2 targets starting in 2025 and scope 3 in 2028).

Access our FAQ on RD 214/2025 (in Spanish)

4. UK’s Procurement Policy Note (PPN 06/21) 

Context

PPN 06/21 requires suppliers bidding for major UK central government contracts to demonstrate climate action, embedding net zero alignment into public procurement.

Targets requirements

Suppliers must commit to achieving net zero by 2050 and publish annual GHG emissions data (Scopes 1 and 2, and a subset of Scope 3). Bidders must provide a Carbon Reduction Plan that sets out measures and milestones toward achieving their net zero target, updated regularly and aligned with procurement requirements.

Scope

Applies to contracts awarded by central government departments, executive agencies, and non-departmental bodies valued at £5 million or more per year.

5. Switzerland Ordinance on Climate Disclosures

Context

The ordinance requires large companies to be transparent on the climate impact of their activities on the climate and the impact of climate change in its activities, including developing a climate transition plan with GHG reduction targets aligned with Swiss climate goals.

Targets requirements

Companies will be required to report on climate-related disclosures aligning with the Task on Climate-related Financial Disclosures (TCFD). In particular, companies will be required to develop a transition plan in line with Swiss climate goals with quantitative targets and disclosures of methods and standards used.

Scope

Applies to public companies, banks and insurance companies with >500 employees and >CHF 20 million in assets or >CHF 40 million in turnover. Note that the thresholds and/or the requirements of the regulation may change as the Federal Council is revising the ordinance because of the EU Omnibus proposals and the requirements are paused for all companies.

North America

6. SB 261 (Climate-Related Financial Risk Disclosures)

Context

CA SB 261 is part of California’s package to force corporate climate transparency at the state level, focused on climate-related financial risk reporting. It mandates a biennial disclosure of climate-related financial risks.

Targets requirements

SB 261 itself does not prescribe specific emission reduction targets, but it requires disclosure of climate-related financial risks and adopted measures to reduce and adapt to those risks. One of the important reporting recommendations in the two standards accepted (TCFD and IFRS S2) is the GHG reduction targets disclosure. No third-party assurance is required.

Scope

Applies to companies with >$500M in revenue that “do business” in California.

Explore our SB 261 Resources

7. Canada’s Standard on the Disclosure of Greenhouse Gas Emissions and the Setting of Reduction Targets

Context

The standard requires large government contractors to join the Net Zero Challenge (NZC) or an equivalent initiative or standard, including the establishment of targets and identification of mitigation strategies.

Targets requirements

To comply with the NZC minimum requirements, government suppliers are expected to set a long-term net zero target by 2050 and at least 2 interim targets. Furthermore, the regulation requires these companies to also identify mitigation strategies to achieve the targets, as well as reporting their GHG inventories and climate-related disclosures based on TCFD.

Scope

Applies to government suppliers of individual contracts of more than $25 million, that are not government agencies, military or emergency contracts.

Australia

8. Australian Sustainability Reporting Standard: Climate-related Disclosures (AASB S2)

Context

AASB S2 is Australia’s first mandatory climate-related financial disclosure standard, effective for annual reporting periods beginning on or after 1 January 2025. It aligns with the ISSB’s IFRS S2 but is designed to work as a standalone climate-only standard. AASB S1, covering broader sustainability topics, remains voluntary.

Targets requirements

While AASB S2 does not mandate specific GHG reduction targets, it requires entities to disclose any climate-related targets they have set, along with the metrics used to track progress toward those targets—whether voluntary or regulatory. This forms part of its “Metrics and Targets” pillar.

Under the “Strategy” pillar, entities must describe how they plan to manage climate-related risks and opportunities, including the existence and details of any transition plan, such as assumptions, dependencies, actions, and resource allocations. Entities are also required to conduct climate-related scenario analysis, including at least one 1.5°C-aligned scenario and one “higher-warming” scenario to assess resilience.

Scope

AASB S2 applies to entities subject to the Corporations Act’s sustainability reporting regime. Reporting is phased: Group 1 entities (largest listed companies and large financial institutions) begin from 1 January 2025, with others phased in through mid-2026 and mid-2027. The standard covers climate-related governance, strategy, risk management, and metrics & targets across Scopes 1, 2, and 3.

Explore our AASB S2 Resources

Contact us

Whether you’re just starting your sustainability journey or advancing toward science-aligned targets, Anthesis is here to help you navigate emerging climate rules and build resilient, credible action plans.

How to prepare for EPR

Learn more about the steps you can take to prepare for EPR regulations.

Extended producer responsibility (EPR) is an actively evolving regulatory tool that requires producers, importers, and distributors to be responsible for the end-of-life management of their products. One prevalent focus for EPR regulations around the world is on packaging. EPR programmes for packaging are currently being rolled out across the United States, and laws are also evolving in Canada and Europe.

If you sell a product that is in a package – as most are – then you may be affected by EPR legislation, which often defines producers broadly as the entity that places the packaging in the market, including both brands and importers.

EPR regulations are often implemented into national or sub-national legislation, and requirements often vary greatly between countries, jurisdictions, and schemes. Find out more about the current state of packaging EPR across North America and Europe, and what you need to know about upcoming changes.

The new PRI Sustainability Value Creation framework is designed to support investors in embedding and leveraging sustainability to drive financial outcomes.

Building on this, investment teams shouldn’t treat sustainability value creation levers differently from levers that focus on proven strategies like:

• Operational efficiencies
• Performance reporting
• Capital structure optimisation
• Talent management
• Digital transformation.

ESG should be thought of as an integrated strategy that enhances the core business plan and supports long-term, strategic growth.

Here’s why the integrated ESG approach matters

Not all management teams respond to initiatives labelled as ‘sustainability’ – even when growth drivers are clearly demonstrable. Unfortunately, it can be the case that key stakeholders disengage at the mention of ESG.

This article explores how sustainability directly enhances value generation strategies, creating a powerful synergy between sustainability and financial performance. Instead of treating ESG factors as separate considerations, successful investors use them to serve as operational enablers that amplify conventional PE value creation levers.

Transparent performance reporting for exit readiness

The strategic imperative

Communicating strong performance and business value to the market and potential investors is high on the agenda of all management and sell-side teams.

ESG reporting frameworks are increasingly being used to:

• Showcase sustainability performance
• Demonstrate compliance with ESG investing criteria
• Quantify value creation during exit readiness
• According to the PRI, portfolio companies that embed sustainability can achieve a 6–7% multiple uplift at exit.

This uplift is only realised if ESG progress is clearly communicated to investors. For example, through investment memorandums and reports. Done well, this reporting provides tangible proof of value creation that complements traditional financial metrics.

Operational strategies for margin expansion

Direct cost savings through ESG

Sustainability initiatives can deliver direct cost savings that enhance traditional margin expansion efforts. 

The PRI has estimated that sustainability-linked value creationcan lead to a 6% cost optimisation and accelerate margin expansion and reduce volatility in returns, through:

• Energy efficiency improvements
• Waste reduction programmes
• Supply chain resilience

Key sustainability-linked operational levers should be integrated into margin expansion thinking and result in reduced energy costs of production, reduced transportation costs, and reduced waste disposal costs. These environmental improvements create immediate bottom-line impact without requiring trade-offs with financial performance.

Revenue growth amplification

Value-based pricing & market expansion

Credible and well-substantiated sustainability claims boost traditional revenue growth strategies, such as value-based pricing and market expansion. Product certification or product development creates substantial competitive advantages, with sustainable consumer goods commanding a 28% price premium and achieving 55% higher market share growth compared to conventional alternatives.

This directly supports PE firms’ organic growth objectives while expanding addressable markets.

Building loyalty and trust

In both B2C and B2B contexts, robust ESG practices:

• Show how ESG credentials become essential for winning new business and retaining existing clients.
• Enhance customer trust and reduce reputational risk while building long-term customer loyalty
• Enable companies to increasingly prioritise sustainability criteria in product and supplier selection

Supply chain optimisation

Addressing cost pressures

Cost pressures remain a top concern for many organisations, with recent research showing that 83% of procurement professionals identify inflationary pressures and rising commodity prices as their primary external challenge.

Integrating traditional supply chain management

Typical supply chain management programmes aim to reduce sourcing costs and volatility while mitigating operational risks that could impact cash flows. Sustainable supply chain interventions are no different and should be considered an integral part of supply chain optimisation for any business. Initiatives such as improved transparency, knowing your baseline, risk management, and supplier engagement are all sustainability value levers that create more predictable cost structures and reduce volatility in financial performance.

Capital structure optimisation

Unlocking lower cost capital

Reducing the cost of debt and improving access to funding are core components of capital structure optimisation. Sustainability-linked finance (such as Sustainability Linked Loans, or debt financing with sustainability ratchets baked in) is becoming a critical tool for investors to funnel capital towards the transition to net zero by influencing more sustainable practices, such as emissions reduction or target setting.

PE firms should consider and support portfolio companies to unlock access to capital while lowering debt costs through sustainability-linked financing mechanisms.

Beyond the investment team

Investor relations teams should also be aware of the integration of ESG with mainstream private equity value levers and how these vary significantly by geography, reflecting different market conditions and stakeholder expectations. According to PRI’s research, the regional variations are defined as follows:

• Europe: European investors emphasise customer-focused ESG initiatives that drive revenue growth, particularly sustainable product offerings responding to strong consumer demand for environmental responsibility.
• North America: North American investors prioritise risk management and cost-linked ESG drivers, focusing on operational efficiency and trust-building initiatives while facing challenges in demonstrating clear financial linkages.
• Asia-Pacific: APAC investors concentrate on social initiatives, particularly employee engagement and health and safety programs that drive both revenue and cost benefits.
• Africa: African investors emphasise community engagement and environmental cost-efficiency measures that support local economic development while reducing operational costs.

This integrated thinking helps frame ESG considerations as enhancing rather than existing alongside, or as a competing priority, to mainstream strategic growth drivers and value creation activities. ESG creates compound value through operational excellence, strategic positioning, and financial optimisation, working in concert with ambitious leadership teams.

The strategic framework

This integrated thinking helps frame ESG considerations as enhancing rather than existing alongside, or as a competing priority, to mainstream strategic growth drivers and value creation activities.

ESG creates compound value through operational excellence, strategic positioning, and financial optimisation, working in concert with ambitious leadership teams.

Anthesis has the global expertise and capability to support your portfolio across a wide range of strategic growth levers through embedding ESG. Our team of experienced ESG strategists has worked with companies of all sizes and sectors to develop ESG strategies that are designed to be embedded into the overall business operations and seamlessly embraced by their key stakeholders.

Whether you’re looking to embed ESG strategy across your entire portfolio or optimise specific value creation levers, we can support your team in turning sustainability into measurable financial outcomes.

Contact Us

Speak with our experts and discover how we can support you in creating impactful, purpose-driven communications for your brand.

In July 2025, the Science Based Targets initiative (SBTi) released its updated Financial Institutions Net Zero (FINZ) guidance, marking a significant step forward for the sector and arriving just as early adopters of the previous guidance reach their 5-year target review horizon. The guidance also presents greater alignment with other frameworks, such as the Net Zero Investment Framework (NZIF).

In this article, we outline how and when companies should leverage this updated guidance for target setting, summarise the key points about the new standard’s requirements for climate ambition and reporting, and outline what this all means for financial institutions.

How and when to leverage the new guidance

Companies are encouraged to start applying the new guidance as soon as practicable, but a phase-in period has been proposed. Either the FI Near Term (FINT) or the new FINZ guidance may be used for companies looking to set targets until December 2026. SBTi suggests:

Redefining climate ambition

SBTi has redefined climate ambition in its FINZ guidance, with more stringent requirements on certain sectors, namely the fossil fuel, transport, industry, energy, and real-estate sectors. The latest guidance introduces the concept of portfolio segmentation – four segments are used to define target-setting requirements and climate ambition:

• Segment A: Fossil fuels (coal, oil, gas).
• Segment B: Transport (air, maritime, land); Industrial (steel, cement); Energy (power generation); Real estate (residential and commercial buildings); Forest, land and agriculture (FLAG).
• Segment C: Other sectors (not listed in segments A or B).
• Segment D: Subset of activities in emissions-intensive sectors and other sectors. This includes private equity, venture capital and private debt in non-fossil fuel sectors with <25% ownership or no board seat, as well as funds of funds.

SBTi’s updated guidance introduces clearer criteria for how financial institutions should treat different types of assets on their journey to net zero. Assets are now categorised as either “in transition” (shifting toward lower-carbon operations), “climate solutions” (assets that directly support decarbonisation, such as renewable energy), or already in a “net zero state”.

For “in transition” assets, the guidance includes an Implementation List of approved benchmarks and third-party methodologies that institutions can use. This expands options for demonstrating portfolio alignment, which previously were limited to either using the ITR methodology or having SBTi-validated targets.

Unlike earlier drafts of the guidance, the final version does not require financial institutions to demonstrate that their portfolio is making progress towards the targets they have set. Institutions must still report their own progress annually and renew targets at the end of each near-term cycle (set at five years). However, there is no requirement to show that portfolio companies are delivering on the targets they have set, as is required in NZIF. In practice, this means financial institutions can meet the standard by ensuring companies set targets, without being responsible for how quickly those companies achieve them.

Climate ambition requirements also depend on the location of assets – financial institutions with assets in developing economies have longer timelines to bring those holdings into alignment, recognising regional differences in transition pace.

As with previous guidance, SBTi mandates that companies make certain over-arching strategic commitments to align with climate goals. These have been expanded with the addition of a commitment to monitor and phase out deforestation and land conversion from the portfolio, as well as to conduct and publish a deforestation assessment by 2030. Requirements for ending new finance to fossil fuel assets and divesting from fossil-fuel related assets remain similar to those outlined in the near-term guidance and are in alignment with coal phase-out by 2030 for OECD countries and 2040 for the rest of the world. The guidance also makes clear that offsets or carbon credits cannot be used to meet near- or long-term decarbonisation targets. Only residual emissions at the point of net zero can be neutralised.

Increased climate reporting expectations

Alongside these ambition requirements, SBTi FINZ also raises expectations for climate reporting and transparency. This includes requirements to report:

• Scope 1 & 2 financed emissions for segments A, B, and C. This was previously only required where companies were setting portfolio coverage targets on an emissions coverage basis. Reporting requirements are stricter if targets are set based on the share of emissions covered rather than the share of assets. If setting portfolio coverage based on emissions coverage, investors must also include segment D activities in their financed emissions statement.
• Scope 3 financed emissions for automotive, coal, oil & gas, and real-estate assets, as these are deemed to be “high impact” sectors. From 2030, Scope 3 financed emissions must be included for all assets.
• Exposure to fossil fuel-related activities and related GHG impacts. This includes a new requirement to report a ratio of fossil fuel financing relative to renewable energy financing.

Addressing private equity concerns

During the consultation period, key concerns raised by private equity firms included the need to maintain the 24-month post-investment grace period for portfolio companies to be integrated into targets, as well as the looser requirements around minority investments (<25% ownership or no board seat). SBTi has honoured these concerns by classifying private equity, venture capital, and private debt of private corporates and SMEs in non-fossil fuel sectors with <25% ownership or no board seat as segment D, on which the least stringent requirements are placed. Segment D assets are only required to be included in near-term targets if the target coverage of segment A-C assets is <67%, but it must be phased in to targets from 2040.

What this means for financial institutions

The new FINZ guidance is currently in a period of transition and will take a while to be adopted more widely in the sector given a phase-in timeline of December 2026. The target-setting tools and associated documentation are not yet published, and there is a generous transition period to prepare key elements of new target-setting requirements, notably portfolio GHG accounting.

The guidance provides increased flexibility in defining climate alignment targets, which is intended to make internal implementation more straightforward. However, this flexibility may also lead to slight discrepancies in target ambition, as it is not always obvious from the standard SBTi target language how ambitious a target really is.

While it will be a few months before the first FINZ-aligned targets start to be validated and published, Anthesis is already supporting clients in navigating the new guidance and the implications for their businesses. The practice of setting SBTs enables companies get on track and future-proof growth, and is one of the best practices for publicly communicating a company’s commitment to limit the effects of climate change. At Anthesis, we view the process of setting Science Based Targets not merely as a checkbox but as a transformative business journey.

Singapore has joined other major global markets in pushing for clearer disclosure of climate risks and opportunities to implement mandatory climate reporting aligned with the International Sustainability Standards Board (ISSB). These disclosures will improve consistency and align corporate practices with global standards, as investors, regulators, and stakeholders demand greater transparency. Climate reporting requirements will be phased in between FY2025 and FY3032 to eventually cover both Singapore Exchange (SGX) listed companies and large non-listed companies.

Whether your organisation falls under Group 1 (reporting from January 1, 2025) or is voluntarily aligning with stakeholder and supply chain expectations, these new standards are likely to affect you. This article answers the most common questions on how to prepare for mandatory climate reporting to the ISSB standards in Singapore, helping you understand the requirements and take your next steps on climate-related financial disclosures.

What are the ISSB standards for climate and sustainability reporting in Singapore?

In 2023, the ISSB, established by the International Financial Reporting Standards (IFRS) Foundation, published a set of standards for sustainability disclosures. These standards were informed by and consolidated several other sustainability disclosure and reporting frameworks, establishing a global baseline for consistent and transparent sustainability reporting aimed to enable investors to make decisions informed by financially material sustainability-related risks and opportunities.

In line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the previous best practice framework for climate-related financial disclosures, the ISSB standards are structured through four key disclosure areas:

1. Governance: Processes for monitoring and managing climate- and sustainability-related risks and opportunities.
2. Strategy: Identification of risks and opportunities affecting long-term business strategies.
3. Risk Management: Methods for identifying, assessing, and mitigating climate and sustainability-related risks.
4. Metrics and Targets: Disclosure of GHG emissions and climate and sustainability-related performance targets.

IFRS S1 – sustainability-related – sets out how companies should disclose governance, strategy, risk management, and metrics related to sustainability risks and opportunities beyond just climate, building on the TCFD framework. In Singapore, IFRS S1 is not mandatory, except for climate-related aspects. For example, companies must disclose climate risks and opportunities that could affect cash flow, financing, or capital costs.

IFRS S2 – climate-related – is mandatory in Singapore and sets out how companies must disclose climate-related risks and opportunities that could affect cash flow, financing, or capital costs in the short, medium, or long term. IFRS S2 subsumes and builds upon the recommendations of the TCFD.

Learn more about the ISSB International Sustainability Standards Board (ISSB) from the IFRS.

Who is required to report?

All listed companies on the Singapore Exchange must report, with Straits Times Index constituents leading the way, followed by other listed issuers in phases. Large non-listed companies with at least S$1 billion in revenue and S$500 million in assets are also required to report.

Singapore ISSB implementation timeline

The latest update by the Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX RegCo) in August 2025 introduces an extended timeline for most reporting requirements. This phased approach is aimed at giving companies adequate time to build internal reporting capacity and adapt to ISSB standards.

Despite the extended timeline, it is notable that the regulators have maintained the requirements for all listed entities to report Scope 1 and 2 emissions, and for the larger issuers to report Scope 3 emissions for larger issuers by FY2026, This signals a clear focus on driving accountability and transparency on decarbonisation, even as companies are given more time to prepare for other aspects of sustainability reporting.

Due to the latest announcement, the climate reporting timeline is:

• FY2025: All listed issuers must begin disclosing Scope 1 and Scope 2 GHG emissions. This requirement remains in place for all companies, regardless of market size or STI status.
• FY2026: Mandatory Scope 3 emissions reporting begins for larger listed issuers, with smaller issuers following based on readiness assessments. No changes announced to this timeline.
• FY2029: External limited assurance will be required for Scope 1 and Scope 2 emissions disclosures by all STI and non-STI constituent listed companies. 
• ISSB-aligned disclosures:
  • STI constituents: FY2025
  • Non-STI listed issuers with market cap ≥ S$1 billion: FY2028
  • Non-STI listed issuers with market cap < S$1 billion: FY2030
• Large non-listed companies (≥ S$1B revenue and ≥ S$500M assets): FY2030

This phased approach maintains Singapore’s direction of travel toward consistent and decision-useful ESG disclosures, while acknowledging operational readiness differences across the market. 

Are there penalties for non-compliance?

Yes, there are penalties for non-compliance with mandatory climate-related reporting requirements.

For listed companies, failure to meet disclosure obligations under the SGX rules can lead to regulatory actions by SGX RegCo, such as:

• Warnings or reprimands
• Requirements to make additional disclosures
• Fines or sanctions in severe cases

For large non-listed companies, specific penalty frameworks under the upcoming mandatory climate-related disclosure rules are still being clarified, but non-compliance may result in regulatory scrutiny or reputational risk.

Even where not fined, failure to comply can damage investor confidence, affect access to finance and/or new markets, and harm market reputation.

What are the assurance requirements?

• Listed companies will need to obtain limited assurance over their Scope 1 and Scope 2 greenhouse gas (GHG) emissions from FY2029 onwards.
• Large non-listed companies will follow similar assurance requirements when their mandatory reporting begins in FY2032.

This limited assurance means an independent third party reviews the reported emissions data to provide moderate assurance on its reliability, helping strengthen trust and credibility with investors and stakeholders.

Why is Singapore implementing sustainability reporting?

The cornerstone of Singapore’s sustainability agenda is the Singapore Green Plan 2030, launched in 2021. This plan sets ambitious goals such as achieving net-zero emissions by 2050 and is deeply aligned with the United Nations’ 2030 Sustainable Development Agenda and the Paris Agreement. ESG reporting is a practical tool to measure progress toward these national and international goals, ensuring both public and private sectors contribute meaningfully.  

Sustainability reporting is also being implemented to increase transparency, align with global standards, and help companies manage climate-related and broader ESG risks and opportunities.

While financial reports reflect past and present performance, sustainability reports provide insight into future risks and opportunities, giving investors and stakeholders a fuller picture of a company’s financial prospects and the quality of its management. Companies that are able to demonstrate they are ahead in their decarbonisation journeys and understand the impact on their business of climate-related risks and opportunities stand to benefit from increased innovation, access to new markets, customers, and financing.

By following these steps, companies can meet regulatory expectations while strengthening resilience, managing climate risks, and enhancing their appeal to investors in a low-carbon economy.

What to detail in the Sustainability Report  

Companies must prepare and publish an annual sustainability report that includes mandatory climate-related disclosures, structured around four pillars:

1. Governance – Board and management roles in overseeing and managing climate-related risks and opportunities.
2. Strategy – How climate risks and opportunities affect the business model, strategy, and financial planning over the short, medium, and long term.
3. Risk Management – Processes for identifying, assessing, and managing climate-related risks, and integration into overall risk management.
4. Metrics and Targets –
   • Scope 1 and Scope 2 GHG emissions (mandatory)
   • Scope 3 GHG emissions (mandatory, phased in with reliefs)
   • Industry-specific metrics (based on SASB standards)
   • Climate-related targets, transition plans, and progress

How to submit the report

• In Singapore, IFRS S2 climate disclosures must be included within the company’s annual sustainability report, filed through SGXNet, alongside the annual report.
• Reports must follow IFRS S1 principles: materiality, consistency, and connectivity to financial statements.
• The reporting period must match the financial year of the annual report, and both must be published at the same time.
• Scope 1 and 2 GHG emissions require external assurance (Scope 3 phased in).

When to submit the report

Listed companies will submit their sustainability report alongside their financial statements, in line with existing reporting timelines. Where external assurance has been conducted, the sustainability report may be issued separately, but no later than five months after the financial year-end.

Note the SGX has an expectation that large issuers will be required to report on Scope 3 GHG emissions and thus the content in their climate reporting will be aligned with the climate-related requirements in the IFRS Sustainability Disclosure Standards for CY26.

Preparing for compliance to mandatory climate reporting

1. Conduct a gap analysis of current ESG and climate reporting practices against SGX and ISSB (IFRS S2) requirements.
2. Develop an actionable roadmap to address gaps, set priorities, and prepare for upcoming disclosure deadlines.
3. Enhance data collection and governance systems to accurately track GHG emissions, including Scope 1 and 2, and prepare for future Scope 3 reporting.
4. Build capacity and awareness across the board, executive, and management levels to strengthen governance and accountability.
5. Conduct scenario analysis to identify key climate-related risks and opportunities, covering both short- and long-term impacts.
6. Engage stakeholders across departments to ensure disclosures are complete and aligned.
7. Seek expert support and external assurance to navigate complexity and obtain limited assurance over GHG data where required.

Sustainability Reporting Grant

The Sustainability Reporting Grant (SRG) is a Singapore government initiative that supports large companies (with revenues above S$100 million) in preparing their first sustainability reports aligned with ISSB standards. It co-funds up to 30% of eligible costs, capped at S$150,000, covering consultancy, assurance, tools, and training. The grant, administered by Enterprise Singapore and the EDB, aims to help businesses meet upcoming mandatory disclosure requirements.

What are the benefits of sustainability reporting?

Key benefits of sustainability and climate-related reporting aligned with ISSB standards (IFRS S1 and S2).

• Global alignment: Positions Singapore companies alongside global peers, meeting international benchmarks for sustainability reporting.
• Consistency and clarity: Provides a standardised framework, helping companies understand strengths, gaps, and areas for improvement.
• Investor transparency: Gives investors clear insights into climate risks, opportunities, and sustainability performance.
• Stronger governance: Improves board and management oversight of climate risks and opportunities.
• Sustainable performance: Enhances risk management, fosters innovation, builds resilience, and embeds sustainability into business strategy.
• Stakeholder trust: Strengthens credibility with regulators, investors, and customers by demonstrating meaningful climate action.
• Better data and insights: Using digital tools to manage disclosures improves data quality, reporting efficiency, and informed decision-making.
• Strengthen cross-team collaboration: Reporting takes input from teams across the business, creating stronger alignment across functions and building a more integrated, resilient business.

Need support with climate or sustainability reporting in Singapore? Anthesis can help

As established climate experts globally and in APAC, we offer advice based on years of experience on reporting to regulatory standards and frameworks such as ISSB, ESRS, ASRS, CSRD, and many more, to manage your climate risks, seize opportunities, and drive compliance and sustainable performance across your business now and into the future. We’ll help discover efficiencies, create stakeholder value and increase your positive impact.

Officially licensed by:

Anthesis Consulting Group Ltd. licenses and applies the IFRS® Sustainability Disclosure Standards and the SASB® Standards in our work.

The European Union’s Forced Labour Regulation (FLR), adopted on 19 November 2024, bans the sale, import, and export of goods produced through forced labour across all 27 EU Member States.  Goods found to have forced labour in their supply chains may be withdrawn, destroyed, or barred from the EU market.

The regulation applies to all companies, regardless of size, industry, or location, and covers both physical and online sales targeting EU consumers.

Regulators will expect that companies have strong due diligence processes as part of their overall management systems to identify, mitigate, and remediate forced labour risks. Before launching a full investigation, regulators will request information on the business’s due diligence processes. Demonstrating effective due diligence can lead regulators to decide not to initiate a full investigation into potential violations of the forced labour prohibition.

The EU’s Forced Labour regulation -what do businesses need to know?

The FLR officially applies from 14 December 2027. From this date, any product linked to forced labour at any stage of production – from raw material extraction to final manufacturing – will be barred from the EU market.

To understand the impact of the FLR, it is important to place it in the wider context of what forced labour entails. The International Labour Organisation (ILO) defines forced labour as “all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily.”

Forced labour is a form of modern slavery which, while not having a universally agreed-upon definition, includes conditions of exploitation that a person cannot leave. In the context of labour, these terms are often used interchangeably. The scale of forced labour and modern slavery is significant. The Walk Free Foundation’s Global Slavery Index estimates that 50 million people were living in modern slavery in 2021, with 28 million in forced labour. Women, children, migrant workers, and minority groups are disproportionately affected.

Despite its prevalence, forced labour is not always easy to detect. Coercion can be subtle, and workers may fear reprisals or may not recognise that their conditions are unlawful. At the business level, opaque supply chains and cost-cutting efforts can obscure risks, particularly in sectors where informality is common or there is weak oversight. These risks can be further exacerbated by states’ inadequate enforcement of laws.

The ILO lists 11 indicators of forced labour – such as restriction of movement, isolation, and withholding of wages – which can help identify victims and instances of forced labour. These indicators may manifest in ways not immediately obvious to businesses. For example:

• Subcontractors – supplier subcontracting chains can be complex and opaque, making it difficult for businesses to know the true conditions under which workers are employed, with cost-cutting pressures sometimes increasing the risk of forced labour.
• Hidden roles – workers in informal or unregulated positions, such as waste pickers or seasonal labourers, are often overlooked by oversight mechanisms and therefore highly vulnerable.
• Undervalued roles – women in informal or gendered roles face disproportionate risks of exploitation that conventional monitoring systems frequently miss.

Forced labour can also be systematically enabled or imposed by state authorities, under the guise of poverty alleviation, security measures, or labour transfer programmes.

The compliance issue – why businesses must act now on forced labour

Under the EU FLR, each EU Member State must designate competent authorities – i.e. a state regulator – to oversee compliance. If forced labour is confirmed, authorities may order products to be withdrawn, destroyed, or recycled. Goods may only be reintroduced once the forced labour link has been fully eliminated.

It is important to note that the EU FLR does not impose new due diligence obligations beyond existing EU and national laws. However, before launching an investigation into a potential incidence of forced labour, authorities will request information on the economic operator’s due diligence efforts, which is in line with the UN Guiding Principles on Business & Human Rights (UNGPs). ​

If a company can show at an early stage that it has strong due diligence processes in place, regulators may decide there is no need to open a full investigation at that point – though authorities can return to the case later if additional concerns arise, highlighting the importance of ongoing risk management. Evidence of proactive mitigation may protect companies from investigation. This means companies should embed forced labour risk management into ESG and human rights frameworks, building strong and effective systems that:

• Identify and assess forced labour risks across supply chains.
• Implement policies and procedures to prevent risk of forced labour.
• Establish grievance and remediation mechanisms aligned with UNGPs.
• Continuously monitor and improve practices to ensure compliance and protect workers.

Global regulatory trends in forced labour

With this step, the EU joins other major economies that have also taken measures to address forced labour in supply chains. The United States implemented the Uyghur Forced Labor Prevention Act in 2022, Mexico’s ban on imports produced wholly or partly through forced labour came into effect in 2023, and Canada’s Forced and Child Labour in Supply Chains Act followed in 2024.

Taken together, these developments highlight a clear global trend: companies must ensure their supply chains are free from forced labour or risk losing access to key markets.

Need help understanding your risk?

We have a team of human rights leaders passionate about supporting organisations on addressing forced labour risks in their supply chains.

Amid accelerating climate, biodiversity, and resource challenges—coupled with intensifying regulatory and stakeholder pressures—the agri-food sector holds a pivotal role in driving sustainable transformation.

Across the entire value chain—from primary production through packaging, transportation, and distribution—each stage presents opportunities to optimise performance while delivering transparent, accountable sustainability outcomes.

The global agri-food sector faces a dual challenge: ensuring quality, traceability, and regulatory compliance, while responding to consumers increasingly demanding transparency regarding product origin and sustainability credentials. The perishable nature of many raw materials—requiring cold chains and tight operational deadlines—transforms each stage into a potential critical control point without adequate visibility and management systems.

While many agri-food companies worldwide are integrating sustainability considerations into their business models, significant opportunities remain to develop more structured and systematic ESG approaches that drive measurable performance across environmental, social, and governance dimensions.

ESG evaluation as a strategic driver in the agri-food chain

ESG criteria have evolved from reputational add-ons to core business strategy components, particularly in sectors where environmental and social impacts are most significant. Today, the agri-food sector faces multifaceted challenges: greenhouse gas emissions, intensive water use, soil degradation, animal welfare concerns, precarious working conditions during cultivation and harvesting, and dependence on chemical inputs. Combined with growing consumer pressure, this demands traceability, ethics, transparency, and genuine commitment from brands.

To address this complexity, companies increasingly turn to platforms like EcoVadis, which enables standardised evaluation of suppliers’ environmental, social, and ethical performance. These tools provide visibility into practices and risks associated with third-party partners. It’s no longer sufficient to apply good practices within organisational boundaries—companies must take decisive action to prevent, mitigate, and remedy social and environmental risks linked to their operations, products, and services.

EcoVadis in agri-food: a new approach to supplier management

EcoVadis is a global ESG evaluation platform covering more than 21 criteria across environment, labour practices, ethics, and sustainable procurement, based on recognised standards including ISO 26000, UN Global Compact, GRI, and OECD guidelines.

Beyond being a control mechanism, EcoVadis offers sector comparability, monitoring dashboards, benchmarking capabilities, and action plans that help suppliers improve their sustainability performance. Leading companies increasingly require suppliers to undergo evaluation through this platform, sometimes establishing it as a prerequisite for maintaining business relationships or accessing specific product categories.

This approach delivers multiple strategic objectives:

• Supply chain visibility: enables understanding of suppliers’ ESG performance and risk detection before impacts or conflicts arise.
• Stakeholder transparency: EcoVadis results are shareable, allowing tangible demonstration of sustainability commitment to consumers and investors.
• Regulatory compliance: tools like EcoVadis help meet current and future regulations, including the European Corporate Sustainability Due Diligence Directive (CSDDD), French Duty of Vigilance Law, and Corporate Sustainability Reporting Directive (CSRD) requirements.
• Long-term partnership building: the evaluation focuses on improvement rather than punishment, fostering more structured and collaborative buyer-supplier dialogue.

EcoVadis’ key strength lies in its adaptability. Evaluations adjust to each company’s sector, size, and location—particularly relevant in agri-food, where small rural cooperatives coexist with large industrial groups with global reach. A traditional olive oil producer faces different requirements than a multinational food logistics company.

This flexibility enables broader participation while offering realistic, progressive sustainability roadmaps. Rather than imposing rigid standards, EcoVadis supports companies within their specific contexts, helping elevate practices and consolidate more responsible and resilient value chains.

Advantages for suppliers

For agri-food suppliers—producers, input manufacturers, transporters, cooperatives—EcoVadis evaluation may initially generate concerns. The process requires information gathering, questionnaire completion, and documentation to support practices.

However, the benefits far outweigh the efforts:

• Clear performance diagnosis: evaluation reveals company sustainability maturity levels and identifies critical improvement areas.
• Continuous improvement framework: reports with recommendations help prioritize actions, implement improvements, and demonstrate progress in successive evaluations.
• Market access enhancement: strong EcoVadis scores open opportunities, as many large companies only engage or renew suppliers meeting minimum ratings.
• Enhanced reputation and trust: independent evaluation provides credibility with clients, partners, financial institutions, and public administration.
• Future regulatory preparation: documented and evaluated processes increasingly support European legislation compliance.

Additionally, evaluated suppliers can share scores with multiple clients from the same platform, optimising effort investment

Keys to successful EcoVadis implementation

For both evaluation requesters and recipients, these recommendations can make the difference:

• Progress Communication: Sharing results and implemented actions reinforces reputation and demonstrates leadership.EcoVadis as a Lever for Transformation
• Cross-functional Engagement: Sustainability, quality, procurement, and human resources must work in coordination.
• Strategic Preparation: Prepare documentation, review existing policies, and adapt procedures as necessary rather than improvising.
• Commitment to Continuous Improvement: Achieving an acceptable score once isn’t sufficient—demonstrating ongoing progress matters most.
• Supplier Support: Leading companies generate positive impacts by helping suppliers improve rather than demanding performance without offering support.

EcoVadis as a transformation catalyst

Beyond simple rating assignment, EcoVadis drives structured ESG risk and opportunity management, enabling companies to identify improvement areas and prioritise them based on value chain impact. In a sector as fragmented and diverse as agri-food—where small producers coexist with large distributors—the standardisation and transparency this tool provides are essential for aligning objectives and building stakeholder trust.

Examples of sector improvements include:

• Implementation of efficient water use policies and pesticide reduction in agricultural operations
• Development of health and safety protocols in processing plants
• Introduction of social and environmental clauses in subcontractor and local cooperative contracts
• Enhanced traceability and documentation of ethical and environmental practices

The ability to compare sector performance not only fosters competitiveness but also drives the adoption of more sustainable and innovative models, including circular economy approaches and regenerative agriculture.

How Anthesis drives impact

Anthesis Spain is a strategic training partner of EcoVadis, the world’s leading business sustainability ratings provider. Strategic training partners are formally accredited to help companies complete sustainability assessments, review results, and improve practices across Environment, Labor and Human Rights, Ethics, and Sustainable Procurement.

Strategic training partners are carefully selected based on experience and expertise, completing rigorous training on EcoVadis methodology and evaluation processes. To obtain this accreditation, partners must demonstrate deep knowledge of local environmental, ethical, and human rights regulations and challenges, while having completed the EcoVadis assessment for their own organisation.

As a strategic training partner, Anthesis is trained and authorised to:

• Provide consulting services helping suppliers interpret scorecards and Corrective Action Plans, supporting implementation of improvements and sustainability practices throughout supply chains
• Train and support suppliers in understanding EcoVadis methodology and completing assessments
• Help buyers understand how EcoVadis assessment can benefit their business and supply networks

Emerging markets – nations that are progressing through rapid growth and industrialisation – represent increasingly attractive opportunities for corporate global expansion. At the same time, governments, financial institutions, and consumers across such markets in Latin America, Africa, and Asia are driving a shift toward more sustainable economic models to accelerate growth, respond to growing investor interest, and align with global regulatory developments. Credible environmental, social, and governance (ESG) strategies can therefore be powerful enablers for companies looking to enter these new markets and to grow their business.

This article will explore three ESG-related opportunities in emerging markets:

1. Access to ESG-linked financial instruments
2. Unmet demand for sustainable products and services
3. Regulatory harmonisation

We’ll also examine how companies with robust ESG strategies may be better positioned to successfully enter these markets.

Greater access to sustainable finance incentives

Governments and financial institutions in emerging markets have recently introduced a range of sustainability-linked financial instruments to attract investment and incentivise companies to pursue ambitious sustainability objectives. Among these is the fast-growing sector of sustainability-linked loans (SLLs), offering preferential terms such as potential interest rate reductions or increases, depending on the borrowers’ performance against predefined ESG performance targets (e.g., emissions reduction or gender equity).

The market for SLLs in emerging markets has expanded significantly, growing by nearly 60% between 2017 and 2021, and the adoption of SLLs is expected to continue accelerating, with the Asia-Pacific market leading at a projected compound annual growth rate (CAGR) of 27.8% through 2033. This growth is fueled by heightened awareness of climate risks, expanding public regulations on sustainable finance, and increasing technical assistance and investment from Development Finance Institutions (DFIs).

Notable SLL examples include the International Finance Corporation (IFC)’s $85 million loan to Precious Shipping Limited (PSL) in Thailand, tied to freshwater-use reduction targets for its vessels, and a $30 million loan to the Izmir Water and Sewerage Administration (IZSU) in Turkey, linked to a gender equity target of hiring at least 300 women in industries in which they are underrepresented. Similar financing arrangements have also been rolled out by multi-lateral development banks such as the African Development Bank and the Asian Development Bank.

Companies with robust ESG strategies supported by clear KPIs and measurable sustainability performance targets are best positioned to secure SLLs, as they effectively fulfill the eligibility requirements set by issuers. These strategies not only demonstrate alignment between business and sustainability objectives but also reflect strong internal performance management and mature performance relative to peers. This strategic positioning also supports market entry in regions where sustainable development is a national priority.

Unmet demand for sustainable products

Consumer preferences have long played a pivotal role in emphasising the business value of ESG, particularly in regions like the EU and North America. Recent research indicates that the demand for sustainable products is similarly rising in other parts of the world, especially in emerging markets across Asia, Latin America, and Africa. Consumer segments such as “zero-wasters” are now actively seeking sustainable product alternatives in these regions, signaling a shift toward more conscious consumption.

Additionally, another report found that over 80% of survey respondents in emerging markets indicated they care about the sustainability of products such as leisure travel, laptop computers, and apparel. Companies such as Kärcher are recognising this trend and strategically aligning their business expansion to respond, investing in the growth of sustainable and efficient cleaning technologies and addressing the growing demand for “green cleaning” in countries such as India.

Presently, this growing consumer demand in emerging markets remains unmet, as barriers such as unclear sustainability labelling still deter purchasing behavior. Companies that can identify and address these challenges are well-positioned for growth. For companies who do not yet have clearly articulated products or services related to sustainability, the development of an ESG strategy can help focus effort and investment into product innovation related to ESG that aligns with a company’s values, core competencies, and responds to evolving consumer expectations.

Regulatory harmonisation

Driven by rising investor and trading partner expectations for transparency, country-level ESG regulations in emerging markets have expanded and aligned with leading global frameworks and standards. For example, Brazil’s adoption of the ISSB standards integrates key elements from both the TCFD and SASB, signaling a shift toward internationally harmonised reporting. Similarly, Rwanda’s green taxonomy is deliberately structured to align with the TCFD and GRI frameworks, ensuring consistency in climate-related and broader sustainability disclosures. Aligning with global ESG frameworks is also expected to accelerate in emerging markets as global investors and companies continue to advocate for streamlined standards to reduce reporting and compliance complexity.

Companies with robust ESG strategies are well-positioned to recognise and respond to these shifts. By proactively aligning with foundational frameworks such as ISSB, TCFD, SASB, and GRI, they can embed regulatory readiness into their operations, reducing the cost of compliance that is often tied with expanding into new markets. This forward-thinking approach not only facilitates smoother market entry but also enables companies to meet growing expectations for transparency and performance measurement from regulators, investors, and other key stakeholders. Ultimately, a strong ESG strategy equips businesses to navigate multiple stakeholder demands simultaneously, enhancing trust, reducing regulatory risk, and creating competitive advantage in both domestic and international markets.

While increasing political and economic shocks have caused markets in North America and Europe to retreat and slow down on their sustainability agendas, some other regions such as Asia and Latin America are viewing these shocks as opportunities to accelerate their sustainability efforts. A recent survey revealed regional differences in attitudes toward sustainability, as 91% and 71% of respondents in North America and Europe, respectively, reported backlash against the sustainability agenda in their countries, while only 38% in Asia reported similar sentiments. Coupled with the continued development of mature financing instruments, unmet consumer demand, and increasing regulatory harmonisation, ESG has evolved beyond a resilience strategy and into an opportunity for business growth and value.

How Anthesis can help

At Anthesis, we specialise in guiding organisations to develop and implement robust ESG strategies or refresh existing strategies to keep pace with change. Our team of global experts can support your company to develop ESG programs and strategies that support entry into emerging markets through regulatory horizon scans, mandatory reporting readiness, materiality assessments, and stakeholder engagement. We are experts at identifying and mitigating ESG-related risks, uncovering opportunities for innovation through ESG, and making the business case for sustainability.

For more information about how our ESG advisory services can support expansion into emerging markets, please get in touch using the form below.

In the race to limit global warming to 1.5°C, businesses are under increasing pressure to reduce their greenhouse gas (GHG) emissions. But what if companies could go beyond just shrinking their carbon footprints and actually become part of the climate solution?

Traditional GHG inventories focus solely on the emissions a company causes through its operations and value chain, but they may overlook the positive climate impact of the solutions a company provides. Reporting avoided emissions fills this gap by capturing how a company’s products or services help reduce emissions in society compared to a reference scenario. This enables organisations to demonstrate their contribution to global decarbonisation, prioritise high-impact innovations, and provide a forward-looking metric that reflects their role in enabling a low-carbon future – something GHG inventories alone cannot reveal.

What are avoided emissions?

There are different definitions for avoided emissions but one of the most used is from the World Business Council for Sustainable Development (WBCSD): “The estimated difference in full life cycle GHG emissions that result from a scenario with a solution in place, compared to a reference scenario without the solution when reference scenario emissions are higher” and where the reduction needs to occur in another actors’ direct emissions.

Note that, in contrast, the GHG Protocol currently does not require that emissions reductions are in another party’s direct emissions. Solutions that can generate avoided emissions can be classified in intermediary solutions (or enabling solutions) and end-use solutions.

Accounting approaches for GHG inventories and avoided emissions are fundamentally different. A corporate GHG inventory contains data on the historical GHG emissions of a company’s value chain (Scope 1, Scope 2 and Scope 3 emissions using inventory accounting). Avoided emissions, on the other hand, are calculated as the difference between two scenarios.

In some cases, avoided emissions will overlap with a company’s scope 3 emissions. For instance, a company that introduces a product that is more efficient in the use phase will see a reduction in its scope 3 – category 10 (use of sold products) emissions, but could also claim the difference between the life cycle emissions of the two generations of products as avoided emissions.

Frameworks for credible reporting

To ensure integrity and avoid greenwashing, there are three main guidance documents for accounting and reporting avoided emissions:

• Guidance on Avoided Emissions – Helping business drive innovations and scale solutions toward Net Zero (WBCSD 2025);
• Avoided Emissions & Climate Investing: A Guide for Investors and Businesses (WBCSD 2025); and
• Estimating and Reporting the Comparative Emissions Impacts of Products (The GHG Protocol 2019).

To measure avoided emissions, the GHG Protocol offers a flexible, product-level comparative framework that is based on life cycle assessment (LCA). In contrast, WBCSD proposes a more comprehensive step-by-step calculation framework.  A company should report avoided emissions only under a certain set of criteria defined by the GHG Protocol and WBCSD:

1. Climate Action Credibility: The company must have a comprehensive GHG inventory and a science-based climate strategy.
2. Climate Science Alignment: The solution must align with 1.5°C pathways.
3. Contribution Legitimacy: The solution must have a direct and significant decarbonising impact.

In all cases, avoided emissions must be reported separately from a company’s carbon footprint and cannot be used to claim carbon neutrality. Transparency is key: companies must disclose methodology, third-party verification, overlaps with and any potential rebound, and side effects.

Who benefits from reporting on avoided emissions?

Reporting avoided emissions is most useful to capture positive GHG impacts that are not already captured in a company’s GHG inventory, especially when a company will report higher emissions in their Scope 1 emissions to provide solutions that reduce another party’s direct emissions.

Many companies that report their corporate GHG inventories do so because their operations inherently produce emissions – often as a result of manufacturing, transporting, or selling goods that fulfill a specific function in the global economy. However, there is another category of companies whose primary role is to enable the functioning and transformation of that economy. These are the recyclers, waste management firms, next-generation materials startups, clean tech innovators, digital optimization platforms, and infrastructure providers for renewable energy and electrification. While their own emissions may appear modest or even misleadingly high under traditional Scope 1, 2, and 3 accounting, their true climate value lies in the emissions they help others avoid. These enablers are the backbone of decarbonisation, yet their contributions are often invisible in standard GHG inventories.

Another case where reporting avoided emissions becomes interesting is in cases where a company would see an increase in its reported GHG emissions, despite the net effect of a given change being to reduce total GHG emissions. This can occur, for example, by increasing product longevity. This is where avoided emissions become essential—not just as a metric, but as a recognition of their catalytic role in accelerating the net zero transition.

How Anthesis can help

Anthesis can support organisations in reporting and leveraging avoided emissions by integrating this forward-looking metric into broader decarbonisation and net zero strategies. Recognising that traditional GHG inventories do not capture the positive climate impact of low-carbon solutions, Anthesis can help clients quantify and communicate how their products, services, or projects reduce emissions in society compared to conventional alternatives.

Through tailored consulting, life cycle assessments, and scenario modeling, Anthesis can enable companies to identify high-impact opportunities, validate claims with scientific rigor, and align with frameworks such as the WBCSD guidance. This empowers businesses not only to demonstrate their contribution to global decarbonisation but also to drive innovation, attract investment, and differentiate themselves in a climate-conscious market.

In today’s private equity landscape, ESG is a strategic lever for value creation, risk management, and differentiation at exit. Investors and stakeholders are increasingly scrutinising a company’s ESG credentials, seeking evidence of responsible business practices and long-term resilience. For portfolio companies, this means that effective ESG positioning can directly influence valuation and buyer interest. But building a credible ESG story isn’t something that comes together in the final year of ownership; it requires consistent tracking, action and engagement throughout the investment lifecycle.

The growing role of ESG in exit valuations

As ESG expectations mature across the market, performance and transparency are increasingly influencing how investors assess value. A strong ESG track record can enhance investor confidence, differentiate the business and in some cases, command a premium at valuation, or at least mitigate discount risk.

ESG-related risks and opportunities are now core components of acquisition due diligence, often becoming focal points in transaction discussions. A company that can demonstrate progress, maturity and intent stands to benefit from smoother deal execution and fewer red flags during the diligence process.

According to the PRI’s Sustainability Value Creation report, firms that effectively embed ESG into their investment strategies can achieve up to 6-7% uplift in exit multiples, alongside a 6% increase in revenue, underlining the direct financial upside of integrating sustainability.

This shift is being driven by a combination of factors, including increasing regulatory scrutiny, reputational concerns and mounting pressure on institutional investors to demonstrate responsible investment practice. As a result, ESG is no longer just a risk filter, but a signal of quality and future readiness in the eyes of many buyers.

Build ESG into the value creation plan from day 1

The foundation of a strong ESG exit narrative is laid early in the investment lifecycle. At Anthesis, we engage with portfolio companies from the outset to drive meaningful progress, typically through ESG Onboarding as part of the 100-day plan, followed by regular ESG reviews throughout the hold period. Tracking the right metrics from day one allows companies to build a credible, data-backed narrative of progress and value creation throughout ownership, something that cannot be done in the final months before a transaction.

Key metrics will vary by sector and business model, but certain indicators tend to carry weight across most exit processes. These metrics include:

• Decarbonisation and energy efficiency gains
• DEI data reflecting workforce stability and inclusive culture
• Supply chain transparency, which speaks to risk mitigation and ethical practices
• Regulatory compliance improvements
• Employee engagement scores
• Evidence of governance maturity demonstrating clear ESG oversight and accountability

By embedding these metrics into regular reporting and board discussions, companies not only improve internal decision-making but also ensure they are well-positioned to meet buyer expectations with confidence and clarity.

Strengthening ESG positioning through vendor due diligence

For companies approaching exit, a dedicated vendor ESG due diligence (VDD) can be a powerful way to validate and communicate progress, identify gaps, and proactively address buyer expectations. Just as financial, legal, and commercial advisors are engaged to guide the deal process and navigate complex diligence requirements, Anthesis helps companies prepare for increasingly detailed ESG data requests and communicate their sustainable performance with clarity and credibility. By assessing the company’s current ESG profile, identifying material risks and opportunities and helping to prepare investor-grade documentation, the process strengthens internal alignment and ensures leadership is well-prepared for ESG-related discussions in buyer meetings.

Anthesis’ ESG vendor due diligence approach:

1. Discover

We start with a comprehensive desktop review of ESG documentation, including policies, reports, surveys, certifications, and performance data. This establishes a foundational understanding of ESG maturity and disclosure.

2. Engage

We benchmark ESG practices against selected peers using publicly available data. We also conduct management interviews to validate findings, fill data gaps, and explore material ESG risks and opportunities.

3. Focus

Where applicable, we assess alignment with SFDR Principal Adverse Impact (PAI) indicators and identify areas of strength or concern. Site visits can provide on-the-ground ESG insight.

4. Prepare

We deliver a tailored report summarising key ESG findings, clearly aligned to your needs and transaction timeline. Additional corrective action planning supports pre-deal improvements on priority ESG issues.

How Anthesis can support

An ESG-ready exit offers a strategic advantage, not only helping differentiate the company in a crowded market, but also expanding the pool of potential acquirers, particularly among ESG-conscious corporate and institutional investors who are actively seeking resilient, future-fit businesses.

Compelling ESG stories aren’t built in the final years of ownership. They are the result of early intention, consistent tracking and strategic preparation. For portfolio management teams, the message is clear: start early, measure what matters and prepare thoughtfully in the lead-up to a transaction.

If your business is planning an exit in the near future, Anthesis can help you identify gaps, sharpen your ESG positioning, and showcase your achievements to investors. We also work with companies across the entire investment lifecycle, from ESG onboarding and annual reviews during the hold period to tailored exit preparation. Our support includes guiding management teams through increasingly detailed ESG data requests, presenting sustainable performance credibly, and producing investor-grade materials.

Contact us to learn how we can help you navigate this critical phase with confidence.

What’s happened?

On the 31st of July 2025, the European Financial Reporting Advisory Group (EFRAG), the body appointed by the European Commission to prepare technical standards for reporting against the Corporate Sustainability Reporting Directive (CSRD), published a much anticipated draft of the revised European Sustainability Reporting Standards (ESRS). This follows the release of its Progress Report in June 2025. The consultation on the draft standards will be open until the 29^th of September 2025.

The overarching aim is to simplify the standards, reduce complexity, and improve usability. In Anthesis’ view, the draft has made meaningful progress toward these goals.

What’s next?

The draft standards are now open for consultation, and EFRAG will organise outreach events throughout September and October to gather feedback from stakeholders.

Once the consultation closes on the 29^th of September 2025, EFRAG will use the input to inform its technical advice to the European Commission, due by the 30^th of November 2025. While the guidance may still evolve, the current draft offers a clear indication of EFRAG’s direction of travel.

How does this fit within the broader CSRD changes?

The ESRS revisions form part of the broader EU Omnibus Simplification Package, introduced in February 2025, which included a commitment to revise the standards.

While the ‘stop the clock’ amendment has delayed reporting deadlines for many companies, other regulatory components, including scope and disclosure requirements, remain under proposal. The EU Council’s latest proposal (21^st of June 2025) supports EFRAG’s efforts to streamline the ESRS.

Key features of the ESRS

The ESRS are a set of reporting standards used to meet the requirements of the CSRD. While the CSRD sets out reporting requirements and obligations, the ESRS provide the framework and methodology for reporting.

The ESRS are made up of two cross-cutting standards (ESRS 1 and ESRS 2) and 10 topic standards. The topical standards are divided into Environmental (ESRS E1-E5), Social (ESRS S1-S4), and Governance (G1) categories, and are only mandatory where they are material to the organisation. Materiality is determined through a Double Materiality Assessment, which supports stakeholders to understand both the organisation’s impacts on people and the environment, as well as the material financial impacts of sustainability matters on the organisation.

Key proposed changes

EFRAG has published several helpful documents alongside the public consultation survey, including detailed logs of amendments for each standard. These are useful for understanding the proposed changes quickly.

What should you do now? 

While this draft is subject to change, the direction of travel is set, and ESRS simplification will happen.

For organisations entering Year 2 of CSRD reporting
While there may be limited opportunity to respond to the proposed simplification in your next report, you can align with its intent. Focus on developing strategies to manage your IROs and that you are reporting on how they align with the actions you’re taking, the metrics and KPIs you’re using, and your performance.

For companies with a two-year delay
There is time to prepare, but plenty to do ahead of the deadline. If you haven’t already, start your double materiality assessment now, using the draft revised ESRS as a guide. Doing so gives you time to collect data, close gaps, and shape an integrated sustainability strategy ahead of the FY2027 deadline.

Organisations that have already finalised their Double Materiality Assessment 
Begin preparing for a gap analysis focused on at least three core ESRS: E1 (Climate), S1 (Own Workforce), and G1 (Business Conduct). Analysis of existing reports from Wave 1 companies shows that all reported on these three standards, making them a logical and low-risk starting point. By concentrating on the mandatory quantitative disclosures within these ESRS, companies can gain time, maintain momentum, and avoid over-engineering early-stage reporting efforts. You may also choose to extend this approach to other clearly material topics, applying the same focused methodology.

Although the reporting deadline has been pushed back, using this time to make continuous improvements will enable more mature and robust disclosures by 2028. With a realistic roadmap and clear alignment from top management, you’ll be in a stronger position to secure the necessary budget and cross-functional time commitments, especially as ESG managers cannot deliver this alone.

Do you want to receive key sustainability reporting updates? Subscribe to our sustainability reporting newsletter here.

How Anthesis can help

At Anthesis, we help clients go beyond compliance to unlock the full value of sustainability reporting.

Our approach ensures your CSRD disclosures:

• Reflect your unique risks and opportunities
• Are decisions useful for internal and external stakeholders
• Support governance, performance, and long-term impact

With 1,400+ sustainability experts across climate, human rights, supply chain, finance, and beyond, we bring deep technical know how, regulatory insight, and a proven ability to implement change.

Whether you’re starting your CSRD journey or preparing your second report, we can help you bridge the gap between materiality and action.

The EU’s Packaging and Packaging Waste Regulation (PPWR), published in February 2025, introduced an EU-wide restriction on Per- and polyfluoroalkyl substances (PFAS) in food-contact packaging, set to apply from 12 August 2026. The PPWR also addresses substances of concern (SoCs) and recycled content, both of which may have implications for PFAS content in other types of packaging. In this article, we explore the PFAS requirements introduced by the PPWR, and what they mean for your business.

What are PFAS?

PFAS are a large group of chemicals that have been widely used in various industry and consumer applications since the 1950s.  PFAS are particularly valued for their water and grease resistance and thermal stability, making them useful in many packaging applications such as fast-food wrappers, pizza boxes, microwave popcorn bags, and takeaway containers. PFAS can also contribute to chemical resistance and, in some cases, enhanced oxygen barrier performance, such as in pharmaceutical blister packs. As a result, PFAS are present in a wider range of packaging materials and functional layers than might be immediately apparent.

Often referred to as “forever chemicals”, PFAS are persistent in the environment and can move throughout ecosystems, resulting in numerous pathways of exposure. Exposure to certain PFAS has been linked to a number of health risks, and some PFAS are associated with high global warming potentials. Governments have been taking steps to regulate PFAS use, with the goal of reducing human exposure and release into the environment.

PFAS under the PPWR

Different organisations use different definitions for PFAS. In the context of the PPWR a wide definition is used:

What PFAS requirements does the PPWR introduce?

Article 5 of the PPWR introduces a restriction on PFAS in food-contact packaging, effective 12 August 2026. In the context of the PPWR, food-contact packaging is packaging that is intended for food contact or that is already in contact with food. This includes disposable packaging for filling at point of sale, such as single-use cups used to serve takeaway beverages.

The PPWR sets three PFAS limits in food-contact packaging:

• Individual non-polymeric PFAS detected by targeted analysis: 25 ppb
• Total non-polymeric PFAS detected by targeted analysis: 250 ppb
• All PFAS, including polymeric PFAS: 50 ppm

Packaging manufacturers must provide technical documentation showing compliance with this restriction. If total fluorine exceeds 50 ppm, suppliers must, upon request, provide evidence indicating how much of that fluorine is from PFAS and how much from non-PFAS.

What future implications might PPWR developments have for PFAS in packaging?

In the coming years, some additional provisions under the PPWR may become relevant for the PFAS content of food-contact packaging, and/or other packaging.

Substances of concern

Article 5 of the PPWR stipulates that the Commission should consider measures to address substances of concern (SoCs), such as restrictions on their use. Producers and users of non-food packaging should be aware that some PFAS will be considered SoCs under the PPWR, and the use of these PFAS in non-food packaging may be restricted in the future.

The PPWR uses the definition of SoCs from Article 2(27) of the Ecodesign for Sustainable Products Regulation (ESPR). Based on this definition the following PFAS are SoCs under the PPWR:

Recycled content

Article 7 of the PPWR sets targets for recycled content in plastic packaging. Recycled material can contain PFAS. As they work to increase recycled content, producers of food-contact packaging must remain compliant with the PPWR’s PFAS threshold, and producers of non-food packaging should be aware of any new SoC thresholds.

Digital marking

Article 12 of the PPWR provides for the use of digital marking technology to convey certain types of information. By 1 January 2030, this technology will be required to identify SoC content in packaging. Where the packaged product requires a digital product passport (DPP), for instance under the ESPR, this packaging data should be contained in the DPP.

What should you do now?

There are several steps companies can take to prepare for the PFAS requirements under the PPWR:

1. Identify PFAS hotspots

Companies should begin by reviewing their portfolio to identify likely PFAS hotspots. This can be done by scanning for characteristics and functions commonly associated with intentional PFAS use, such as grease- and moisture-resistance. The PPWR does not differentiate between intentionally added and non-intentionally added PFAS in determining compliance, so companies should also identify common sources of non-intentionally added PFAS, such as recycled paper and cardboard. Given the short timeline, hotspots can be prioritised in the next steps.

2. Collect PFAS data

Suppliers of packaging materials should check whether PFAS in their portfolio fall within the PPWR’s definition.

• If the total fluorine in their product is expected to exceed 50 ppm, they should perform total fluorine analysis. If total fluorine does exceed 50 ppm, they should determine the amount of total fluorine from PFAS and be prepared to provide this information to downstream users upon request.
• If non-intentional PFAS is likely, such as in recycled cardboard, suppliers should consider performing targeted analysis to verify if their products are compliant with the 25 and 250 ppb thresholds.

Users of packaging materials should reach out to their suppliers to ask if they know of any PFAS in their materials and if they perform targeted PFAS tests and/or total fluorine analyses.

3. Develop a Mitigation Strategy

Finally, companies should develop a strategy for mitigating their risk of PFAS exposure and for complying with the PPWR, including:

• Performing an alternatives assessment, with particular attention to ensuring that the alternatives do not hinder recyclability.
• Developing best practice guidance for transitioning to sustainable packaging.

How Anthesis can help

Anthesis can assist both suppliers and packaging manufacturers in reviewing their portfolios and advising on compliance with the PFAS requirements in the PPWR. Our digital solutions enable the collection and management of all relevant supply chain and portfolio data. We have extensive expertise in food contact materials, packaging, and chemicals regulations, including supporting our clients with:

• Tracking relevant PFAS regulations in sectors and geographies specific to their products and evaluating their likely impact on business.
• High-level PFAS hot-spotting of product portfolios to better target supplier engagement strategies.
• Detailed supplier engagement using our Anthesis Compliance Suite platform to assess product & packaging portfolio’s for the presence of PFAS.
• Assessing PFAS from a Life Cycle Assessment perspective.
• Identification and assessment of alternatives to PFAS.
• Summarising and responding to tactical questions on reporting.

We can also provide support with recent national measures, such as PFAS restrictions in France and Denmark and North American PFAS reporting obligations, as well as horizon scanning and preparedness for upcoming measures, such as the expected EU-level universal PFAS restriction.

Whether you’re seeking regulatory clarity, safer alternatives, or strategic planning, Anthesis is here to help you stay ahead of the evolving PFAS landscape.

The Science Based Targets initiative’s (SBTi) recent release of the version 2.0 draft of the Corporate Net-Zero Standard adds another layer to the ever-growing stack of sustainability standards, frameworks, and climate nuances that practitioners must navigate.

The rapid and extensive changes transforming the sustainability landscape—including evolving regulations and increasingly complex reporting standards—pose significant challenges, even for the most experienced sustainability professionals striving to uphold their sustainability commitments while maintaining strategic clarity.

Still, SBTi remains a top-tier standard that drives innovation and climate impact reduction within a business while bolstering brand image.

In this article, we explore both the benefits and hurdles of setting SBTi-validated targets to help you decide if they are a strategic fit for your business.

Reasons for SBTi-validated targets

Let’s start with the good. SBTi is still one of the best, if not the best, and most robust emission reduction target-setting standards available for the business sector. Other frameworks, such as Business Ambition for 1.5°C and the Race to Zero campaign, or ISO Net Zero and the Oxford Principles, are either signatory-based or represent a collection of best practices, respectively. They do not serve the function of setting discrete, measurable, time-bound corporate emission reduction targets. SBTi’s standards are one of the only frameworks that serve this niche.  

Key benefits of setting SBTi-validated targets include:

1. Recognised, standardised, comparable targets supported by external validation
2. Reduced target-setting loopholes
3. Holding the line internally
4. Supported by science and industry-specific research
5. Validity across raters and rankers
6. Specific benefits for small and medium-sized enterprises
7. Keeping companies accountable

1. Recognised, standardised, comparable targets supported by external validation

When you set an SBTi-validated target, your customers, peers, investors, and other stakeholders have instant assurance that your target is robust and aligned with the latest climate science and your company has gone the extra step of obtaining SBTi’s seal of approval. Further, by joining the group of 8,500+ companies that have already set SBTi-validated targets, you have the ability to quickly assess how your progress stacks up against your competitors and peers in a standardised and comparable way.

2. Reduced target-setting loopholes

The SBTi framework helps prevent companies from obfuscating emissions growth or focusing on less materially significant emissions sources when setting targets. Specifically, the forthcoming version 2.0 draft standard, although more complex, is purposefully designed to promote a “right action” approach, ensuring that target-setting drives meaningful and high-impact climate outcomes.

3. Holding the line

Choosing to set SBTi-validated targets means that your target ambition (i.e., how much you must reduce and by when) is firmly grounded in the latest scientific consensus.  A common challenge for sustainability practitioners is the progressive dilution of climate commitments during internal negotiations with operational and executive teams. Often, without a starting point or line in the sand, targets are framed solely around what is achievable, rather than what is also aligned with science. Pursuing an SBTi-validated target helps sustainability leaders set this boundary internally and reduce complexity during target implementation.

4. Supported by science and industry-specific research

On a global scale, the science is clear: we must reduce emissions 50% by 2030 and achieve net-zero by 2050 to preserve a habitable planet. Embedded within those overarching targets, however, lie numerous important nuances that shape how we approach climate action on the ground. SBTi has undertaken the laborious work of translating complex climate science into clearly defined standards that account for nuances such as variations in sector-specific approaches, the calibrated role of carbon offsets, and acceptable base years for target setting.  Below, we’ve explored how some of these nuances play out within SBTi’s standards.

• Unique Sectoral Approaches: As an example, the energy sector plays an outsized role in driving the climate transition. Achieving net-zero globally necessitates that the energy sector decarbonise more rapidly than other sectors, thereby serving as a springboard for other sectors to decarbonise.  Likewise, the forestry, land, and agriculture (FLAG) sector holds a distinct responsibility in carbon sequestration and atmospheric regulation. Consequently, target-setting methodologies for the energy sector differ significantly from those applied to the FLAG sector, reflecting their respective climate impacts. Choosing to set a SBTi-validated target ensures that your emission reduction goals are tailored specifically to your business context and industry.
• Carbon Offsets: Similarly, carbon offsets carry specific nuances in how they can be applied within an emission reduction target. Internally, organisations often face significant challenges in achieving consensus on the appropriate role of carbon offsets within their sustainability programs. By choosing to set SBTi-validated targets, companies align their positions with the most recent scientific guidance and best practices regarding the role of carbon offsets.

In sum, SBTi has translated complex climate science into a tangible, explicit standard that incorporates critical nuances, effectively distilling scientific insights into practical frameworks for guiding credible climate action. This means organisations don’t need expert-level climate knowledge to set credible, science-aligned emissions reduction targets.

5. Validity across raters and rankers

An SBTi-validated target often enhances an organisation’s performance across leading disclosure and rating platforms, including CDP, DJSI, and Ecovadis. These programs generally award higher scores to companies that adopt emission reduction targets validated by an independent third party and standardised to a recognised science-based framework, compared to those with unvalidated or internally defined targets. Consequently, setting SBTi-validated targets strengthens credibility and comparability in sustainability reporting and benchmarking.

6. Specific benefits for small and medium-sized enterprises (SMEs)

If you qualify as an SME, there is a reduced fee and reduced complexity in target-setting with SBTi. We strongly recommend SMEs obtain SBTi validation as there is a low barrier to entry to securing the highest seal of approval.

7. Keeping companies accountable to their commitments

With voluntary requirements to disclose emissions progress annually and a database that tracks and denotes current target validation status (as well as companies that have withdrawn their commitments), SBTi validation can help companies stay on track.

Reasons against SBTi validation

Taking all the benefits into account, there may still be some challenges your business may wish to consider before pursuing SBTi-validated targets.

Common hurdles to setting SBTi-validated targets include:

1. Cost to commit
2. Cost to maintain
3. Updates and stricter requirements
4. Regulatory uncertainty

1. Cost to commit 

Securing official SBTi validation typically involves a fee ranging from approximately $10,000 to $25,000 (USD), depending on whether you are submitting near-term targets alone or alongside net-zero targets. Additional expenses frequently arise from engaging external consultants to interpret SBTi standards, ensure full compliance with rigorous criteria, and navigate the diverse methodologies, timelines, and sector-specific requirements integral to an SBTi-aligned target. Depending on the level of internal capacity versus consultant involvement—which can range from light advisory support to comprehensive end-to-end guidance—total costs often range from $15,000 up to $250,000, and are dependent on various factors include company size and unique needs.

2. Cost to maintain

After SBTi validation, ongoing annual maintenance is required. Beyond regularly updating your greenhouse gas inventory and disclosing your progress, which is standard practice for most established sustainability programs, you must also manage base year adjustments. This includes accounting for changes in methodology, mergers, acquisitions, or divestitures that may affect your emissions baseline. For companies with two or more years of GHG Protocol-aligned inventories, this process is typically familiar. However, organisations undergoing frequent structural changes or anticipating significant methodological shifts should be prepared for additional base year maintenance efforts. Furthermore, companies wishing to maintain an active SBT must also conduct a mandatory five-year review to revalidate their target. While reviewing targets regularly is surely good practice, the burden and cost of additional validation could be another potential obstacle.

3. Upping the ante

SBTi regularly updates its standards, requirements, and validation process to enhance rigor and reflect the latest global emissions reduction progress, as well as insights gained from corporate climate action. For example, in July 2022, SBTi discontinued acceptance of Scope 1 and 2 targets aligned with well-below 2°C pathways in order to accelerate decarbonisation efforts and address the stagnation in global emissions reductions. The draft version 2.0 net-zero standard further rules out some target-setting practices that were previously allowed. These changes and shifts can make staying up-to-date and maintaining the business case for SBTi challenging.

4. Regulatory uncertainty

Regulatory uncertainty around disclosing emission reduction targets has become a heightened concern of many organisations in recent years. While most current regulations focus on emissions and climate risk disclosure, some emerging laws – such as New York’s Fashion Sustainability and Social Accountability Act and earlier drafts of the SEC’s climate disclosure rule – also involve the disclosure of emission reduction targets.

Meanwhile, greenwashing lawsuits are increasing, especially in the realm of consumer protection. High-profile lawsuits against companies like H&M, JBS, and Volkswagen underscore legal risks tied to false or misleading environmental claims that misrepresent a company’s or product’s sustainability impact. It’s important to note, however, that there is little evidence to suggest that companies face legal risks solely for voluntarily committing to reduce their emissions –the vast majority of lawsuits in this space pertain to consumer protection and green claims.

Regulatory developments remain in flux, exemplified by the SEC’s March 2025 decision to end its defense of climate disclosure rules, which has left federal climate disclosure regulation in legal limbo, increasing uncertainty for organisations navigating this space.

Other considerations

When designing and implementing sustainability programs, it is essential to consider both the broader environmental context and the evolving expectations for corporate ambition. The following points highlight key factors that can influence the effectiveness and integrity of target setting beyond SBTi-validated targets.  

• Planetary Boundaries: The SBTi focuses on greenhouse gas emissions and atmospheric impacts, not on other critical planetary boundaries like freshwater use, land-system change, or biodiversity loss. Several of these boundaries have already been surpassed or are approaching critical tipping points. When setting emission targets, it’s critical to avoid shifting environmental burdens from one area to another within their decarbonisation roadmaps.
• Ambition Beyond Minimums: The SBTi sets a 42% reduction target for Scope 1 and 2 emissions by 2030, but the Paris Agreement calls for a more aggressive 50% reduction. Many countries have missed their Nationally Determined Contributions, highlighting the urgency for faster cuts. Companies should strive to exceed SBTi targets—especially for emissions directly under their control—to meaningfully contribute to achieving global net-zero goals.

The bottom line

Deciding to pursue SBTi-validated targets is a key step in a company’s sustainability strategy. It’s important to assess how the standard aligns with your business goals and where it may pose limitations. Grounded in science, the SBTi offers a credible, consistent framework aligned with global climate goals. However, the financial costs, ongoing effort, and need to keep up with evolving criteria require careful evaluation of your organisation’s capacity and readiness.

Ultimately, companies must balance the value of external recognition against their internal priorities and capacity. If your company is equipped with the resources and ambition to lead on climate action, SBTi validation can help demonstrate credibility and drive meaningful progress. Alternatively, beginning with science-aligned internal goals and preparing for future validation may be more practical. Target-setting is a driving force for progress rather than a task to complete—start where you can, stay informed, and continuously evaluate the tools and frameworks that best support your sustainability journey.

Focus on building a foundation with complete, accurate GHG emissions data, realistic reduction plans, team collaboration, and systems designed to evolve with future demands. In essence, choose the path that moves your organisation forward—always remembering that starting early amplifies your impact on global climate efforts and fortifies your company’s long-term resilience.

How Anthesis can help

Anthesis supports companies pursuing or renewing SBTi-validated targets, ensuring these targets remain credible, ambitious, and aligned with the latest climate science. Through this process, we help mitigate climate risks and prepare your business for future relevance and resilience in a net-zero economy.

We also assist organisations throughout their decarbonisation journeys, offering comprehensive support across inventory development, target-setting, revalidation, and implementation. Additionally, we guide companies in investing in high-quality carbon removal projects.

For companies not currently pursuing SBTi-validated targets, we provide support to achieve internal and strategic alignment on alternative climate goals, ensuring you have the data, roadmaps, and resources needed to take actionable next steps.

There are numerous complementary strategies that effectively address a company’s climate impact and help mitigate climate and nature risk, both alongside and beyond science-based targets.  These include renewable energy strategies, product life cycle assessment and the implementation of circular business models, supplier engagement and supply chain due diligence, and enhanced nature, biodiversity, and water stewardship.

As we cross the midpoint of 2025, it is clear to all that some of the ground upon which ESG and sustainability have been built in recent years has shifted as businesses, investors and advisers seek to navigate political and regulatory uncertainty in Europe and North America.  

It feels as though sustainability is at a crossroads. The momentum of recent years, when sustainability appeared to have gone mainstream, has given way to regulatory dilution and rollbacks, growing political uncertainty in Europe and North America, cautious use of language, and shifting economic outlooks. Together, these factors are leaving businesses increasingly hesitant and paralysed in their investment decisions.

However, it is not all doom and gloom, and on closer analysis, the apparent crises are perhaps more nuanced, with geographical differences, a focus on action rather than disclosure and talk, more relatable language, and increased emphasis and maturity around the value derived from sustainability. ESG is adapting and evolving to respond tactically to current challenges, but it is not going away, and strategically, the direction of travel appears to remain unchanged. 

As we look ahead to the second half of 2025, Matt Smith, Anthesis Technical Director for Transactions & Sustainable Finance, explores several key trends from the first half of 2025 that are informing and shaping how private equity is approaching ESG and sustainability. 

What’s changing? 

Regulatory uncertainty

At the beginning of the year, the general consensus was that the momentum around ESG disclosures continued to build and heighten. In Europe, this momentum has been tempered by the impact of February’s Omnibus Simplification Package, which affected sustainable reporting and due diligence requirements. Meanwhile, EU discussions are ongoing for a second Omnibus package, referred to as the Content Directive. Partly a response to recent political shifts that have deepened the divide between ESG sceptics and supporters across the United States and Europe, the initiative aims to streamline EU regulations, reduce administrative burdens, and strengthen the global competitiveness of EU companies.

For some companies, this has clearly brought relief and breathing space, while for others, including many GPs, it has been a disappointing roll-back, undermining effort and momentum, particularly around improving the quality of ESG data and basis for action and value creation. In other jurisdictions, however, momentum remains with Australia launching its sustainable finance taxonomy in June, and there continues to be increasing focus on transition finance globally, particularly within Asia. Perhaps reflecting this complex situation, the UK continues to develop its Sustainability Reporting Standards (SRS), launching its consultation in June, while announcing in July that it has dropped plans to implement a UK Green Taxonomy.

Taken as a whole, the trend over the past six months reflects a sustained focus on sustainable finance, but increasingly within the framework of efforts to simplify and streamline financial regulation, while also prioritising growth and competitiveness. Certainly, companies will need to closely monitor the evolving situation, not only in relation to future regulations such as CSRD or CSDDD, but also proposed future changes to existing sustainable finance regulations, such as SFDR.   

Greenhushing 

Communication has always been a key component of sustainability, being necessary to create change and engage with the myriad of stakeholders to raise awareness, as well as being a key lever for driving financial outcomes and brand differentiation. However, with increasing scrutiny of statements and actions from all sides, particularly in relation to ESG, the trend of ‘greenhushing’, holding back on credible sustainability claims for fear of backlash, appears to have gained further momentum so far this year, despite most companies still pursuing important initiatives. While this is, on the one hand, an understandable risk mitigation strategy, it also poses a risk in itself, as silence can come at a cost, especially for companies whose value creation is closely tied to ESG and sustainability action.

To investigate this, in our latest report, The Cost of Silence, Anthesis explores whether communicating ESG efforts delivers real financial and reputational return. After analysing 500+ companies across 16 industries, the answer is overwhelming clear: 

• Strong environmental performance links to stronger financial performance. 
• 15 out of 16 industries saw reputation boosted by sustainability perception. 
• Brands that communicate sustainability take clear leadership positions. 

Access the Cost of Silence report to find out more.

Using these findings, companies can prove the value of their sustainability strategies, build a competitive edge, and make a stronger internal case for investment. However, it is acknowledged that companies will need to manage any perceived pressure to change in a nuanced way and develop a tailored strategy for their specific circumstances. 

Language 

Closely linked to communication is language and during the first half of the year, the use of language around ESG has come under increasing focus. The term ‘ESG’ has been an obvious source of contention, with some companies and investors rebranding their ESG efforts under less emotive terms such as ‘sustainability’ or ‘responsibility’ or ‘resilience’.  

We have also observed attempts to make language more relatable. As a sector and profession steeped in jargon and an ever-growing list of acronyms, we must recognise that our message, and the rationale for action, can sometimes be lost on the audience. Adapting to make the risks and opportunities relatable is therefore crucial, as is the need to be led by action rather than language – disclosure is not decision-making; communication is not commitment.  

Consistent with changes in communication and language, we have also observed tactical changes in the framing of actions, with a focus on resilience and a link to long-term operational durability and risk management. Less on pledges and labels and more on pragmatic fundamentals to address operational instability, risks and value creation. Again, language can be considered tactical, and adjusted to reflect the current landscape, while still helping to ensure leadership and progress toward necessary strategic goals continue.  

What’s holding strong? 

ESG in transactions

Despite some of the challenges we have observed, the focus on ESG as a driver of value creation when considering acquisitions and exits remains strong. An increasing number of PE clients are requesting vendor due diligence (VDD) as a means of demonstrating strong ESG performance. ESG VDD is also helping to communicate the link between sustainable practices and resilience to enhance financial returns, increase valuations, and enhance access to capital from ESG-focused investors, while reassuring buyers with a low-risk, future-proof investment. 

As part of this healthy activity, we have also seen an increasing number of PE firms considering IPO as a potential exit route. This is bringing a focus on baselining current performance and positioning and the development of strategies and roadmaps to help investments prepare themselves for pre- and post-IPO.   

A final observation regarding transactions is the growing perception of an increasing number of exit failures over the past six months, often influenced by economic and geopolitical uncertainty and ongoing disparities in market outlook. In this environment, Anthesis notes that conducting robust ESG due diligence, alongside other critical workstreams, has become more essential than ever. Our guidance would be to act on expert advice and insights, ensure you take appropriate time on due diligence, and allow yourself enough time for exit preparation to address areas of weakness.   

Anthesis news: Anthesis and Wallbrook maintain top rankings in the 2025 Chambers and Partners Guide

We are proud to announce that Anthesis and Wallbrook, part of Anthesis, have once again been recognised as leading firms in the 2025 Chambers and Partners Guides, achieving top-tier rankings across multiple practice areas. The rankings are based on independent research, and most importantly, direct feedback from clients. This year, Anthesis has been named one of only three ESG providers globally to achieve a Band 1 ranking in the Environmental, Social and Governance (ESG) Risk category. 

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Alex Lewis

Anthesis Director & Revolt Co-founder

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We hear it often from across the sustainability community: teams are increasingly having to work harder to demonstrate the value and impact of their efforts. Meanwhile,  we are hearing less from the businesses themselves around their sustainability agendas.

With ESG initiatives facing increased scrutiny, it’s now more important than ever to understand where sustainability can deliver measurable value. It’s a moment of challenge, but also one of huge opportunity.

Now, with our new report The Cost of Silence, we have new and compelling research to respond decisively. Based on three years of data across 500 companies and 16 sectors, this analysis shows that environmental action isn’t a nice-to-have – it goes hand in hand with commercial performance.

The report shows a clear correlation between environmental action and business performance:

• Companies with strong environmental performance see a 6% higher EBITDA than their peers
• Up to 31% of the reputational advantage held by market leaders comes down to how they are perceived on environmental issues
• And yet, 79% of companies are still risking that advantage – either by overstating their efforts or staying far too quiet about them

A 6% performance advantage is not a matter of ideology, it’s a strategic priority. As such, the choice to remain silent can no longer be considered a neutral decision. When done right, sustainability is a lever for financial growth and a cornerstone of reputation. This report gives business leaders the evidence they need to act boldly and speak with confidence.

More than a collection of metrics, this report outlines a clear approach for establishing focus, crafting effective messaging, and mitigating the risks of greenwashing or greenhushing. For anyone responsible for sustainability, reputation, growth – or all three – this is essential reading.

Contact us

Speak with our experts and discover how we can support you in creating impactful, purpose-driven communications for your brand.

Many businesses in the EU are grappling with what the CSRD Omnibus changes mean for them. Some are trying to work out how to make the most of the two-year extension and are eagerly awaiting the changes to the ESRS standards due in November 2025.

However, many more – approximately 35,000-44,000 (75-94%) – are set to fall out of scope depending on where the thresholds land. This article is for those newly out-of-scope companies that are now facing a critical question: What should we do next?

A new opportunity for voluntary reporting

Until very recently, best practice sustainability reporting has been largely driven by voluntary disclosures. The CSRD and ESRS raised the bar on disclosure and consistency, but arguably not on narrative or communications. In contrast, voluntary reporting offers more flexibility and innovation in sustainability storytelling. But companies are left with an array of frameworks, rankers and raters to consider, not least the ESRS’s own voluntary standard.

As a result, companies that fall out of scope have a huge opportunity to take back control of their reporting strategy, maintaining momentum while reporting more creatively and meeting the needs of their specific stakeholders.

Continue: Don’t lose the progress you’ve made

Even if the regulatory pressure has eased, the investments made to prepare for CSRD reporting shouldn’t go to waste. Many businesses have already strengthened their data management systems, internal controls, and sustainability governance.

While regulatory pressure may be reduced, this strong data management supports high-quality reporting, better decision making through improved insights, and confidence in data that can lead to the increased transparency many stakeholders are looking for. A solid data and reporting framework remains a competitive advantage and can support access to capital, market positioning, and supply chain partnerships.

The double materiality process has also become the new normal. Done well, it can provide deeper insights into materiality, which supports improved decision making and action plans, while integrating sustainability management more deeply into the organisation, ultimately creating business value.

CSRD has also elevated sustainability and sustainability reporting to more senior levels in the business, supporting improved governance as well as increased resource and budget allocation. This means there is a significant opportunity to use this momentum and make the case for improved sustainability activity and reporting, even without the regulatory driver.

Plan: Build a fit-for-purpose reporting strategy

Without a regulatory mandate and amid the flexibility to report to various standards, rankers and raters, or none at all, a systematic reporting strategy is a valuable tool for prioritising disclosures, managing data, and strengthening governance.

A reporting strategy should be led by four key questions:

1. What other regulation is coming your way?
   With over 40 countries in the process of making the International Financial Reporting Standards (IFRS) sustainability standards a requirement for some companies, and other sustainability regulations abounding, there may still be regulatory ESG requirements affecting your reporting. Understand what’s ahead and whether your business may fall into scope down the line.
2. What are stakeholders looking for?
   What information are customers, employees and investors looking for from you? Consider the questions you get in supplier questionnaires, RFPs, investor calls, or employee engagement surveys. Which ratings and benchmarks do your stakeholders value? 
3. How ambitious are you?
   Are you aiming to lead the pack or simply keep pace with your peers? Be realistic about where the business wants to be; otherwise, you will be pushing against a locked door.
4. How much time do you have?
   Let’s be honest, creating an annual report and responding to a number of raters can be a full-time job. Which is fine, if there is a dedicated sustainability reporting role or consultancy budget. But if reporting is part of a role, be realistic about what can be achieved alongside other priorities.

Choose your frameworks wisely

Once you’ve answered the above, you need to consider which reporting frameworks to align to, comply with or complete. Some key options to consider are:

• ESRS VSME Standard: Even if exempt from CSRD, companies may still be asked for sustainability data by larger business partners that remain in scope. The EU has developed a voluntary reporting standard for SMEs, which may serve as a practical template for responding to such requests without being overburdened.
• IFRS Sustainability: While the International Sustainability Standards Board (ISSB) has so far released only two IFRS standards, the growing number of countries considering mandating their use signals their rising importance in corporate reporting strategies. Built on frameworks such as SASB, TCFD, and CDSB, these standards offer a strong foundation for investor-focused sustainability disclosure.
• GRI: GRI is far from obsolete, especially as it complements the IFRS Sustainability Standards by offering an impact perspective alongside IFRS’s financial focus. In fact, some jurisdictions are rumoured to be looking at mandating this pairing. As a comprehensive and long-standing framework, GRI has recommended that the ESRS better align with its established standards under the EU Omnibus. In summary, GRI remains a strong starting point for sustainability reporting.
• CDP: Trusted by both customers and investors, CDP remains the leading platform for comparable sustainability disclosure and benchmarking. With its strong alignment with other frameworks, particularly the ISSB, CDP can help companies maximise the value of their reported data and serve as a stepping stone toward broader reporting readiness.
• EcoVadis: Businesses often rely on EcoVadis to evaluate their supply chain partners, asking selected suppliers to complete an online questionnaire within a defined timeframe. If your customers use EcoVadis as part of their assessments, aligning with this framework can be a strategic way to meet expectations and strengthen commercial relationships.

Act: Make reporting a catalyst for action

Finally, and possibly most importantly, is deciding what level of reporting will support the greatest action. The right level of reporting can create a powerful balance of evidence, accountability, and resources to support efficient reporting and strong, meaningful change. Too much can distract from delivering on the valuable initiatives that will lead to improved sustainability performance. Finding this balance is critical. Depending on your material impacts, you may consider setting climate targets to build long-term resilience, addressing food waste, enhancing circularity, or developing a strategy to combat modern slavery.

In summary, falling out of scope of the CSRD isn’t the end of the road; it’s a chance to redefine your sustainability reporting on your own terms. Continue building on the foundations you’ve laid, plan with intention, and act in ways that support real, lasting change.

At Anthesis, we help companies navigate this turning point, building smart, focused reporting strategies that drive both credibility and action. Get in touch to find out more about how we can help.

In recent months, major global corporations have been quietly backtracking on their public commitments towards addressing the waste and pollution crisis and delivering a circular economy for plastics. Petrochemical companies have abandoned plans to develop advanced recycling capabilities, beverage brands have stepped away from reusable & circular packaging objectives, and many others are withdrawing from voluntary initiatives in jurisdictions around the world.

Criticism has unsurprisingly followed on multiple fronts: activists are accusing brands of greenwashing, media outlets are holding brands to account for failure to deliver, and environmental advocacy organisations are lamenting the impact on developing much-needed collaborative solutions. Amid the inevitable crescendo of outrage that accompanies such actions in the digital age, it is worth taking a moment to reflect on progress in the seven years since the ‘Blue Planet effect’ started to shift global opinion about the impact of plastic waste and pollution on our world.  

The Circular Transition: How We Got Here

Within the past couple decades, the confluence of climate change and environmental awareness with our increasingly connected and digital world gave communities and consumers increased opportunity to speak out against the environmental impacts of companies and businesses. As the volume of plastic waste piled up and the flow of plastic into our oceans grew exponentially, consumers were increasingly voicing their disgust to a global audience. With the contemporary amplification of social media and digital communication, the message carried far and wide, and the reputational damage to those brands most commonly identified in global pollution studies was keenly felt.

Highly exposed brands responded by going into damage control. They were forced to acknowledge and confront their contribution to the problem – the evidence was impossible to deny. But in reality, few had considered packaging within the remit of their broader sustainability initiatives – packaging was a ‘must have’, and plastic was cheap, efficient and, in the larger scheme of things, was thought to be relatively inconsequential.  

That lack of understanding underpinned the establishment of voluntary initiatives in jurisdictions around the world to tackle the packaging and plastics circularity questions. Ahead of the curve, the Ellen MacArthur Foundation led the way in 2016, releasing the New Plastics Economy study and then, in 2018, signing up major global brand HQs to the Global Commitment. Signatories committed to a set of targets calibrated to deliver a circular economy for plastics. Localised initiatives soon emerged to support the delivery of aligned objectives at a jurisdictional level and voluntary initiatives like the Plastics Pact began to proliferate. In addition to focused reduction and elimination of problematic plastics, targets circulated around the key pillars of design, recycling, and end-markets, set to be delivered on by 2025.

It is variations on these targets from which many companies are now pulling away, but the reasons are many and varied and exist all along the circular plastics value chain.

Upstream | Reduction and Elimination

Without question, some progress has been made, particularly in jurisdictions where regulatory frameworks have supported the achievement of objectives. For example, the targeted elimination of problematic single use plastics has led to bans of plastic items such as drinking straws, cotton buds, lightweight shopping bags, and disposable food service packaging in multiple jurisdictions. Similarly, the use of Polyvinyl Chloride (PVC), which has recognised environmental impacts during production, but often also in disposal, has been virtually eliminated in many jurisdictions, with only a few medical applications remaining. Expanded Polystyrene (EPS), with its high propensity to become fugitive in the environment, is likewise targeted for phase out in many jurisdictions.

Upstream | Design

The transition to recyclable, reusable, or compostable packaging has also been reasonably successful, but in some areas more than others. For example, significant material innovation has occurred in a relatively short space of time. Recyclability has been improved by design through the shift towards more recyclable polymers such as Polyethylene Terephthalate (PET) and other polyolefins, the reduction in the use of problematic dyes and pigments, and the shift towards soluble inks. Design has also been simplified to eliminate complex material constructions that present barriers to recycling, and to produce higher purity recycling outputs. Tethered bottle caps, for example, are now reducing the volume of closures that end up as litter.

While all this is positive, it assumes access to a recycling pathway for the material to enter in the first place. The truth is, in many places, this remains aspirational.

So, while recyclability by design has made significant gains at the upstream end of the circular plastics economy, it remains a somewhat one-sided achievement, particularly where the absence of collection, sortation, and recycling end markets for recovered material means that material is still likely to end up in non-circular disposal pathways – incineration, waste-to-energy, and landfill.

‘Theoretical’ recyclability is still no guarantee that the material will even be recovered, let alone recycled. And that’s not a scenario limited to emerging economies – mature economies also have gaps in downstream recovery and reprocessing capabilities with many legacy systems inadequately equipped to achieve the increasingly sophisticated levels of sortation and reprocessing required.

Another outcome of the design targets was to drive a shift towards reusable packaging, as opposed to recyclable. While much attention has been given to investigation into new business models, minimal change has been achieved on a global level. Despite wide acknowledgement that reusable systems must be consumer-centric and require standardisation, scale, and shared infrastructure to achieve genuine impact, many businesses continue to invest in small, time-bound, isolated trials and pilot programmes. Spawning the quote ‘more pilots than Heathrow’, these solo initiatives have often produced less-than-convincing outcomes, negatively impacting business confidence to make the switch.

Additionally, reuse models are often regarded as disruptors to the normal (i.e., highly optimised one-way patterns of retail business), so they are often placed outside the normal traffic flow in-store. This means that customers have to engage in new behaviours in order to create success. As a result, many trials do not attract consumers and are so time-limited that they can’t embed the necessary behaviour change required from consumers to embrace and continue purchasing in reusable packaging. While some markets have had a measure of success, reuse still only represents a small fraction of the packaging mix globally, despite the enormous impact it can deliver for material efficiency and circularity.

The world is looking to markets such as Germany – with its long-standing reusable beverage container systems – and France – with cross-category reusable packaging systems like Loop gaining traction – where reusable packaging is mandated by regulation, to see how it can be done.

And then there was compostable packaging – the silver bullet that was going to solve all our packaging waste problems. It looked great on paper, and all of a sudden, everything was being converted to compostable materials: shopping bags, mail satchels, food packaging, and more. It quickly became apparent, however, that we didn’t have access to the downstream composting systems we needed to process this material. Even if the capacity existed to process all of our organic waste in composting facilities, adding the immense volume of packaging materials circulating in the global economy into that mix would have eclipsed that balance very rapidly, leaving those materials with no better outcome than the materials they were replacing. While compostable packaging has found a niche in supporting the recovery of organic and food waste, it’s not quite been the saving solution that everyone was hoping for.

Downstream | Raising Recycling Rates

The target of achieving a 70% recycling rate for plastics by 2025 was a challenge from the outset, and the emergence of co-mingled recycling didn’t help. Even in the most well-equipped markets, overall recycling rates for packaging have been low and typically driven by the value in recovered fibre, metal, and glass. Plastic recycling rates languished around the now infamous 9% figure, primarily due to the poor quality and often highly contaminated nature of materials coming through the system, and a lack of sophisticated sortation capabilities to segregate the materials as required.

This was further exacerbated by a rapid shift to lightweight, flexible packaging, which was leveraged to capitalise on gains in relation to resource utilisation and supply chain emissions. Less material meant less weight and less space, resulting in lower emissions moving product to customer. Despite these benefits, the transition posed a significant obstacle for achieving the 70% recycling target, as an increasing volume of plastics entering the market were now constructed of complex and mixed materials, and were less recyclable than the materials they replaced.

Even if they were recovered, these materials offered little value for recyclers and struggled to find end markets. This became apparent with the collapse of Australia’s twelve-year-old Redcycle scheme in 2022. It was revealed that the front-of-store soft plastics recovery program had been stockpiling recovered materials, in the absence of a suitable end-market destination. Safety breaches resulting from this stockpiling led to the closure of the program and intervention from the Australian government to address the soft plastics challenge directly.

While designers have worked to eliminate complexity from the packaging landscape, gaps in downstream capacity have continued to pose problems in achieving circularity.

Still, a number of potential downstream solutions have emerged in recent years, and capacity building has been identified as key. Recovering more material volume and improving the sortation of plastic fractions can increase the quality and value of recycling feedstocks and drive efficiencies vital to ensuring system viability.

High specification material recovery facilities (MRFs) are a significant unlocker to improving material segregation. New technologies such as digital barcoding and robotic sortation have shown promise to dramatically enhance the identification and separation of plastic fractions and reduce contamination.

Unfortunately, new technology is expensive. In many jurisdictions, governments are focused on other priorities that take precedence over incentivising investment in waste management infrastructure. Meanwhile, public companies are typically focused on increasing shareholder wealth, making expensive voluntary investments in sustainable practices somewhat unpalatable.  

Limitations in recycling systems globally have also posed a barrier to meeting the 70% recycled target. From an overall environmental perspective, mechanical recycling has been demonstrated through Life Cycle Assessment (LCA) to be a more favourable pathway for plastics, when compared with alternatives including incineration, waste-to-energy, or advanced recycling options. Many plastics in the market, however, require additional treatment prior to mechanical recycling to eliminate pigments and other materials that are added during plastic production. Furthermore, the highly bespoke and commercially sensitive nature of plastic production, and the myriad chemical compounds that may be used to meet a customer’s packaging requirements, make it challenging to demonstrate the removal of such additives when many recipes are regarded as corporate secrets by packaging converters.

This is likely to change in coming years, as increased scrutiny is placed on green chemistry and transparency within the plastics supply chain, but this opaqueness has resulted in much of the recovered plastic being downgraded into lower value applications or converted into entirely different products – for example, PET bottles being recycled into synthetic fabrics. Ironically, PET is the only mechanically recycled polymer that has been granted both EFSA and US FDA approval for use in high-value food grade applications, yet a significant portion of the recovered material is diverted to non-packaging uses.

Downstream | Building End Markets for Recycled Plastics

This leads conveniently to the final target of 30% recycled content in all plastic packaging. A significant quantity of the packaging placed on the market is to protect and deliver food and drink products safely to the consumer. We have seen that PET is currently the only mechanically recycled polymer that is approved for use in food-grade packaging but there is still a lot of food packaged in other polymers, most particularly rigid Polypropylene (PP) and High-Density Polyethylene (HDPE), and flexible Low-Density Polyethylene (LDPE). While these polymers can be mechanically recycled into packaging for non-food applications, such as personal or household care products and new pallet wrap, they are effectively excluded from use in high-grade food or near-food applications. This means that brand owners often have no option but to include 100% virgin material in food packaging, if they choose – often for very good reasons – to use a polymer other than PET.

Advanced recycling technologies offer an option, but these too face a range of challenges. Many of these technologies are capable of deconstructing plastics to their base polymers or even further into the precursor monomers. By eliminating all other compositional elements, the recovered materials are effectively ‘virgin-adjacent’ and suitable for reconstruction into new plastics for high-quality uses. Theoretically, this offers manufacturers the opportunity to incorporate this material into new packaging as a recycled content component, but hurdles exist. The cost of content produced through advanced recycling technologies is typically significantly higher than that of mechanically recycled content. This raises the cost of packaging significantly and, in a market where virgin material prices are significantly lower, there is little incentive for businesses to invest in this content, compromising the viability of the technology.

Additionally, it has been widely acknowledged that advance recycling technologies are energy intensive and can produce difficult-to-handle byproducts, dependent on the feedstocks used in the process. While these technologies have been promoted as a solution for hard-to-recycle materials (e.g., flexibles, mixed polymers, etc.), operators articulate a preference for clean, segregated materials targeting sources emerging from commercial and industrial sources, rather than post-consumer sources. In reality, most advanced recycling technologies have a significantly lower tolerance for the type of material emerging from the consumer goods sector, due both to contamination rates and complex construction, as with subsequently preference materials emerging from B2B sources, leaving post-consumer materials to downgraded applications.

The prohibitive cost has also been exacerbated by competition from the aviation industry, seeking to purchase the outputs from some advanced recycling processes to produce Sustainable Aviation Fuel (SAF). Diverting advanced recycling outputs to fuel severely restricts the forward circularity of those materials suitable for processing through these technologies. At the same time, this maintains a high price for the small volumes of material being produced, moving it out of reach for many packaging customers.

Adding another layer of confusion and uncertainty is the inconsistent approach to accounting processes for recycled content emerging from advanced technologies, and whether these materials are accepted by regulators in recycled content declarations. The variable acceptance of Mass Balance in reporting frameworks globally, combined with the higher cost of advanced recycling outputs, has resulted in many businesses deferring decisions – both around investment in recycling capacity and sourcing advanced recycled content – while awaiting clarity.  While there are few limitations to utilising polymers from advanced recycling sources in virgin reduction initiatives, questions remain in some jurisdictions around its acceptance in recycled content declarations. The result being that while some capacity has emerged in recent years, with a number of developments springing up in Europe in particular, the lack of access, feedstock inconsistency, uncertainty around utility in recycled content declarations, and uncompetitive pricing have severely limited the uptake of advanced recycled content.

Signals from the fossil fuel industry in the past year, have further cast doubt on the viability of advanced recycling technologies as a solution to the plastics crisis. The quiet withdrawal of commitments to develop advanced recycling infrastructure from a number of major global petrochemical companies is perhaps a product of the lack of uptake on recycled materials emerging from these processes, particularly when the primary market for the virgin materials produced by many of these companies remains incredibly cheap and available to packaging users. It could also be argued that the unabated global appetite for fossil fuels and petrochemicals reduces the motivation for these companies to address improved recycling technologies. As long as that situation remains, a rapid transition to new technologies is unlikely to materialise any time soon.

Circularity: Where To From Here?

Many participants around the circular plastics value chain have done a lot since committing to targets, but all can and must do more. While few of these hurdles are insurmountable in achieving circularity, we are still stuck in a recycling mentality, because we feel that we understand what that looks like and we can probably envisage how to make it happen.  But circularity remains something of an esoteric concept for many.

Three things have become very clear in the years since plastics targets were first proposed:

1. The global landscape for plastics and plastic packaging is incredibly complex and there are myriad players contributing to that complexity in virtually every marketplace worldwide.
2. Voluntary targets laid the foundations for circularity and are now giving way to mandatory measures, in response to the growing urgency of the issue. Without these voluntary commitments and close monitoring of progress towards those objectives, the evolution of the circularity dialogue would be have been significantly slower. While some targets may have not been delivered within the nominated timeframe, they have focused industry attention, helped to unpack the challenges to a profound level of understanding, and built a rich knowledge base that has benefited the entire global plastics value chain
3. Removing the obstacles preventing the shift to plastics circularity is not the sole responsibility of one participant in the value chain. Collaboration is key, because all participants in the value chain have some role to fulfil in enabling the transition. Without action from all the players, the circle will never be closed.

Extended Producer Responsibility (EPR) and other incoming regulatory frameworks around the world will drive brands to fund this shift by ensuring that they are reducing and optimising packaging material use, exploring new and more economical delivery models, and covering the costs of recovery and recycling for the packaging materials they do place on the market.

Governments, however, must ensure that revenues from these regulatory models are appropriately ring-fenced and directed to support the capacity building needed to meet the demands of the market. This includes incentivising the development of advanced technologies to ensure high-grade plastics circularity is possible. While elimination by design will improve resource efficiency, plastics use is still predicted to grow, particularly in rapidly developing markets, as populations become more affluent and consumption increases.

Plastics producers and convertors must seek to incorporate more recycled or alternative materials in packaging, to build non-fossil-based end-market demand for sustainable content – including recycled plastics – and provide a degree of certainty to investors seeking to build capacity. Ensuring transparency on the content and construction of plastics, including those ingredients that are currently shielded by corporate secrets provisions, can also enable recyclers to understand exactly what they have in their hands and ensure that the materials are safe and suitable for new applications.

Exciting potential exists in the downstream side of the circle. Well-incentivised investment in new technologies, right along the downstream value chain, could ensure higher quality sortation, separation, and consolidation of purer material fractions, producing higher quality mechanically recycled plastics. Improvements in the deconstruction of materials, both through mechanical (delamination, deinking, etc.) and advanced reprocessing (pyrolysis, gasification, solvation, etc.), coupled with a clearer understanding of plastics compositions can facilitate more material being treated for high-quality mechanical recycling, while ensuring capacity exists for more advanced reprocessing of the balance.

Again, government has an important role to play in calibrating market settings to favour sustainable options.

It is the role of government to ensure that the carrots and the sticks are appropriately positioned to favour the sustainable outcome, and business will respond to price signals through the lens of profitability and the social licence to operate. As the cliché goes, ‘necessity is the mother of invention’.  

An additional driver is the global focus on plastics through the Intergovernmental Negotiating Committee for an International Legally Binding Instrument (Treaty) to end plastic pollution, including in the marine environment. While the final scope of Treaty remains unclear, the agreement is likely to influence the global approach to this issue in coming years. Negotiations are on-going, but after INC-5(.1) in South Korea in November 2024 and INC 5.2 scheduled in Geneva in July 2025, a growing body of proactive UN Member States have amplified the call for a robust and enforceable accord that will address plastics from a whole lifecycle perspective, from extraction through to disposal. Unquestionably, the targets that emerged back in 2018, which reflect mitigation opportunities in the higher levels of the waste hierarchy, have provided a strong foundation for the shape of the draft treaty. It is hoped that the final instrument will continue with this holistic approach, to close gaps in the circle, and to ensure that all economies are adequately financed to facilitate the transition. And the reality is that once a Treaty is agreed, these types of voluntary, locally-calibrated targets may well be back on the table at a global level.

It is clear that responsibility for delivery of these targets lies across a complex network of players, and no one link in the chain can solve the whole problem. For businesses that have committed to targets they find themselves unable to deliver, it is fair to say that while progress has been made, some responsibility continues to lie with them, to continue improving system inputs and becoming a customer for the recycled outputs. But as discussed, all the participants in the circular value chain, and the governments that shape the circular economy landscape, have work to do to build the foundations that will deliver plastics circularity. And given what’s on the horizon from a regulatory perspective, dropping the ball entirely may not be in the best interests for businesses this far along the path.

How Anthesis Can Help

Anthesis understands the reputational impact that this type of exposure can have, with both your customers and your stakeholders. We can help you to understand the hotspots where internal action can bring you closer to meeting your existing targets and how long that might take; we can help you to celebrate the achievements that your business has made towards target objective, but also help articulate the story behind those hurdles that are beyond your control. If you’re business is feeling the heat from your target commitments, our Packaging and Purpose teams are at your disposal, and we would welcome the opportunity to support you through the process of managing your target reset.

Packaging Targets & Public Commitment Strategy

We support businesses in building strategy to address and manage packaging related commitments and targets through exposure review, target realignment, and identification of drivers and barriers.

Our approach consists of:

1. Target Review: Reviewing and aligning existing packaging commitments across the business, and conducting a horizon scan in relevant jurisdictions for future circularity policy, infrastructure developments, and potential obstacles to target delivery.
2. Ideation: Facilitating a collaborative and focused workshop with key internal stakeholders – guided by Anthesis’ expertise – to identify priorities and opportunities for “off-track” commitments.
3. Strategic Direction: Providing detailed recommendations for business actions and communication opportunities based on existing commitments, their current status and obstacles to delivery, and workshop findings.
4. Telling the Story: Developing targeted internal and external communication strategies that are relevant to each commitment, celebrating successes and addressing the risk factors identified.

Many companies have struggled, often due to barriers outside their control, to deliver on their packaging targets – and exposed businesses are finding themselves managing reputational risk. Anthesis can support you in building a tailored strategy for addressing this risk and taking the next steps in delivering on your packaging commitments.