🇺🇸🇪🇺 July 2025 ESG & Sustainability Policy Briefing:

From EU regulatory rollback to U.S. greenhushing and strategic energy shifts, ESG enters a phase of recalibration under rising pressure

As the global economy faces a rapid energy transition and surging electricity demand driven by AI and electrification, both governments and corporations are accelerating changes in sustainability strategies. The following key developments from July 2025 reveal a widening gap between ESG commitments and execution, as regulatory, political, and commercial dynamics reshape the landscape.

🏛️EU Policy Shift: Omnibus reforms and ESRS delays raise concerns over governance and climate alignment

The European Ombudsman has formally challenged the European Commission over its “Omnibus I” proposal, which seeks to roll back corporate sustainability reporting obligations under the CSRD, CSDDD, and the Taxonomy Regulation. The Ombudsman cited the lack of public consultation, climate consistency assessments, and impact analysis, criticizing the Commission for rushing internal review in only 24 hours.

Meanwhile, the Commission also adopted “quick fix” amendments to the ESRS, allowing first-wave companies (reporting since 2024) to delay disclosure of Scope 3 emissions, biodiversity, and value chain workforce data until 2026. The application of CSRD to SMEs—originally scheduled for 2026–2027—has also been frozen. Together, these moves reflect a strong shift toward reducing corporate compliance burdens and slowing the rollout of EU sustainability rules.

🏦Finance: HSBC becomes first major UK bank to quit NZBA, triggering investor concern

HSBC has exited the Net-Zero Banking Alliance (NZBA), becoming the first major UK bank to do so. While it maintains a public commitment to net-zero by 2050, the move follows a series of decisions that have drawn scrutiny: the bank postponed its 2030 operational net-zero goal to 2050, removed its Chief Sustainability Officer from its executive committee, and triggered investor activism during its May 2025 AGM.

The exit aligns with a broader wave of U.S. and Canadian bank withdrawals amid political backlash against ESG. A coalition of investors representing $1.6 trillion AUM has urged HSBC to reaffirm its climate commitments. NGOs warn that the move sends “a deeply concerning signal” that could undermine global climate finance progress.

📊Corporate Strategy: U.S. companies invest steadily in ESG—but go quiet amid political pressure

According to EcoVadis’ 2025 U.S. Business Sustainability Landscape Outlook, 87% of U.S. companies with $1B+ in revenue are maintaining or increasing ESG investments, and 89% plan to boost spending on ESG tech tools such as supply chain traceability and carbon management platforms.

However, greenhushing—the practice of reducing public ESG communication—has surged. 31% of companies are increasing ESG investments while communicating less, and another 8% have stopped discussing sustainability publicly altogether.

Despite this, 65% of executives say sustainable supply chains are a competitive advantage, and 47% of C-suite leaders warn that rolling back ESG oversight could disrupt global supply chains and fuel inflation. ESG, increasingly, is seen as a risk management and resilience tool, not just a compliance obligation.

🔋Energy Transition: GM and Redwood team up to turn used EV batteries into AI-era energy storage systems

As electricity demand skyrockets—U.S. data centers alone are projected to consume 12% of national electricity by 2028—General Motors (GM) and Redwood Materials have announced a new agreement to repurpose used EV batteries and new modules into flexible, fast-deployable energy storage systems.

Redwood, founded by Tesla’s former CTO JB Straubel, operates a closed-loop battery material supply chain in the U.S. and recently launched “Redwood Energy,” a division focused on supporting AI data centers and industrial electrification.

This partnership supports U.S. energy security, rare earth circularity, and supply chain independence, while also extending GM’s battery strategy beyond EVs and into the resilience-driven storage market.

🔚Conclusion:

As of mid-2025, ESG and sustainability agendas are undergoing a strategic recalibration, marked by:

• Regulatory rollbacks in the EU challenging climate integrity and procedural legitimacy
• Financial institutions reassessing ESG alliances amid political and legal risk
• Corporations doubling down on ESG investments but reducing public disclosure
• Rapid growth in AI and electrification fueling demand for grid-scale storage and circular material solutions