What Sustainability Recession?

Author

Tim Mohin
July 25, 2025

What’s in this week’s newsletter:

  1. Research shows budgets and ROI are holding strong despite political headwinds

  2. ICJ rules that a healthy planet is a human right, a landmark ruling that could reshape climate litigation

  3. EPA to end fight against climate change, a leaked plan would undo the ‘endangerment finding’

  4. EFRAG releases 2025 State of Play for CSRD-aligned reporting

  5. SBTi pauses net zero standard for fossil fuels, and releases financial institutions standard

John Elkington dubbed this year the “sustainability recession.” One thing worth remembering is recessions always end. There are early signs that the sustainability recession is ending, and the practice is emerging more focused, agile, and pragmatic. 

The majority of surveys and corporate research released this year have busted the myth that sustainability is ‘woke’ and an expense to shareholders. In a great post from Adam Elman this week, he shared some studies showing that sustainability budgets are being maintained or increasing, and that business leaders are seeing positive ROI on sustainability. 

I have highlighted some of his evidence here, as well as some of my own favorites:

This is just a snapshot of the recent research showing that sustainability and business value are synonymous. But, in this moment, demonstrating the value of our work has never been more important.

In the public sphere, support for government action on climate change has never been stronger. In the UK, a recent survey found that 89% of the public support climate action. In the U.S., the Trump Administration plans to scrap programs like Energy Star (which helps consumers select energy efficient appliances) are meeting with resistance from the public and industry. Commercial building owners, in particular, are trying to save the program as it helps them save billions of dollars a year in energy efficiency. 

There’s no denying that sustainability is going through a crisis, and the recession may not have bottomed out yet. Recent research from Trellis found that 70% of experts think the sustainability backlash is intensifying. However, the data shows that investment in corporate sustainability programs is continuing, and businesses won't abandon it in the long run. We are closer to the bottom of the cycle than the top, and my view is that the sustainability industry will learn from this pullback to emerge stronger than ever.

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2. ICJ: A Healthy Planet Is A Human Right

In one of the world’s largest climate cases, the International Court of Justice (ICJ) ruled on Wednesday that a “clean, healthy and sustainable environment” is a human right.

The case decided by the UN’s highest court, although not legally binding, will have global implications for climate litigation. It could open the door for countries impacted by climate change, including small island nations like Vanuatu - which brought the case to the ICJ, to litigate against larger nations to force more climate action. 

The court's advisory opinion, which ICJ President Yuji Iwasawa relayed in a 2-hour readout, found that countries that fail to meet their obligations under international climate treaties are in breach of international law and that "States must cooperate to achieve concrete emission reduction targets.”

This is an important precedent for over 3,000 pending climate lawsuits. It could also play a role in upcoming negotiations at COP30, spurring more investment to mitigate climate damage in vulnerable areas. 

3. EPA To End Fight Against Climate Change

One sign the sustainability recession may not have bottomed out yet, and in stark contrast to the ICJ ruling, the U.S. Environmental Protection Agency (EPA) is planning to end its fight against climate change.

The plan, seen by the NYT, seeks to repeal key scientific findings that give the US Government authority to regulate greenhouse gas (GHG) emissions,  The plan is to reverse the 2009 “endangerment finding” that the “six greenhouse gases taken in combination endanger both the public health and the public welfare of current and future generations.” The finding, which was created in response to the lawsuit Massachusetts v. EPA, provides the legal basis for the EPA to regulate GHG emissions.

Environmental law professor (and my former EPA colleague) Vicki Arroyo said, “The White House is trying to turn back the clock and re-litigate both the science and the law,” adding that the evidence that climate change is harmful is “overwhelming and incontrovertible.” If the finding is reversed, it will end the US government limits on GHG emissions from tailpipes, power generation, industrial plants, and other sources. Of course, any changes will be litigated. 

4. EU Sustainability Reporting State of Play 2025

Just as the European Financial Reporting Advisory Group (EFRAG) is preparing to reduce the data points in the European Sustainability Reporting Standards (ESRS) by as much as two-thirds, it has released a review of initial reports. A few interesting insights stood out among the 656 reports issued under the Corporate Sustainability Reporting Directive (CSRD):

  • Datapoints: Very few companies (10%) had material data points across all topics.

  • Length of Reports: The majority of reports were less than 115 pages. 

  • Climate Transition Plans (CTP): More than half of companies (55%) issued a CTP, one of the points of contention in the Omnibus.

The ESRS State of Play for 2025 was overall good news for sustainability reporting. It demonstrated that businesses focused on truly material issues and did not create massive documents reporting thousands of superfluous data points.

In the Omnibus simplification package, one of the main sticking points is determining the scope of companies that should be included in CSRD reporting. Friend of the newsletter Andreas Rasche released some excellent research showing that increasing the number of in-scope companies (from those with 250 employees to those with 500 employees) would “find a balance between lowering the cost burden and retaining impactful sustainability reporting.”

While the dust has not settled on the first round of simplification under the Omnibus yet, the EU is preparing Omnibus 2.0. This time, the focus will be on simplifying waste, circularity, and industrial emissions regulations. They are currently seeking input through a Call for Evidence, open until September 22nd. 

5. SBTi Pauses Net Zero Fossil Fuel Standard

Three fossil fuel energy groups left a Science-Based Target Initiative (SBTi) advisory group developing an oil and gas-specific net-zero standard. The defections happened when it became clear the standards would bar new oil and gas fields.  

In what SBTi claimed to be an unrelated move, the group decided to pause the development of its oil and gas standard, citing “capacity considerations.” Shell claimed they withdrew because the draft standard did not reflect societal realities, and they would only support a standard that “provides companies with sufficient flexibility” to become net zero by 2050.

The SBTi did release a Financial Institutions Net Zero Standard. The standard already has 135 companies with aligned goals. It requires financial institutions to phase out new fossil fuel financing by 2030 at the latest. Also, the standard requires financial institutions to disclose exposure to deforestation, and provides them an option to gather and report on the net-zero alignment of customers.

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer. 

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