Sustainability in 2025: How SMEs in Switzerland and the EU can navigate complexity in an evolving landscape
By Henrique Martins de Araujo and Nikko Karlo Robles
This article sets the groundwork for future articles to help SMEs navigate the complexity of the evolving sustainability landscape, delving deeper into the topics broadly covered here. Following topics will include how multilateral negotiations trickle to voluntary and mandatory frameworks and regulations around reporting, the implications of a simplified EU ESG Omnibus, best practices on embedding sustainability metrics into financial metrics, and how developments in AI can help different ways to measure and manage sustainability performance.
In 2025, geopolitical and economic shifts will create both opportunities and challenges for small and medium-sized enterprises (SMEs) navigating their paths towards sustainability. Sustainability is no longer a mere compliance exercise but a strategic framework to unlock revenue opportunities, mitigate risks, and generate long-term value to shareholders, people and planet. This paradigm shift will be accelerated by advancements in artificial intelligence (AI) and automation, which simplify data management and predictive analytics, enabling businesses to focus more on strategy and innovation.
SMEs are uniquely positioned to capitalize on this evolution. Increased access to automation technologies, deeper integration with larger customers’ sustainability programs, and emerging best practices present opportunities to embed more effective sustainability strategies. However, to seize these opportunities, SMEs must stay informed, agile, and proactive.
Five Key Trends Shaping Sustainability for SMEs in 2025
1. Refinements in Reporting Processes for Large Companies
The first wave of compliance with the Corporate Sustainability Reporting Directive (CSRD) in 2025 will serve as a testing ground for large companies, refining their data collection and reporting processes. This will have downstream implications for SMEs supplying these companies:
- Domain Specialization : Large companies will prioritize areas deemed material, addressing data and performance gaps more strategically.
- Broadening Beyond Climate : While the climate agenda remains at the center stage, biodiversity 1 , circular economic practices (spurred by initiatives like the Plastics Treaty) 2 , and other environmental domains will gain importance.
- Supplier Engagement : Clearer supply chain data and improved supplier engagement processes will minimize supplier fatigue.
- Enhanced Financing Opportunities : New financing mechanisms for climate, nature and circularity will emerge as global multilateral negotiations advance.
Implications for SMEs : SMEs supplying larger companies will face increased demands for accurate, timely sustainability data. By adopting voluntary frameworks such as the VSME (Voluntary Reporting Standard for SMEs) or Global Reporting Initiative (GRI) SMEs can enhance transparency, align with materiality-focused reporting, and unlock opportunities for financing and growth. Observing larger companies’ practices will offer valuable lessons and efficiency improvements.
2. Evolving Regulations will Balance Simplification and Granularity
The incoming EU’s Omnibus ESG regulation aims to streamline sustainability requirements by reducing redundancies across directives like the CSRD, the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy. Meanwhile, in the US, the new administration has reported plans to scale back federal sustainability initiatives. These differences in approach across the Atlantic will set the tone around the balancing.
- Streamlined EU Regulations : Simplification will focus on phased and pragmatic implementation and oversight rather than substantive requirements. The EU is expected to provide more guidance on this early this year.
- Expanded EU Domains : Emerging regulations like the EU Deforestation Regulation (EUDR) and the Ecodesign for Sustainable Products Regulation (ESPR) will gain traction.
- State-led Progress in the US : States like California, New York, and Illinois will continue to advance sustainability regulations, while anti-ESG sentiment may provoke legal challenges.
- Framework Alignment : Increased interoperability of reporting standards especially across mandatory and voluntary frameworks. Voluntary frameworks may simplify their guidelines to accommodate smaller companies and non-EU jurisdictions.
Implications for SMEs : Most SMEs will not be directly covered by these regulations but will feel the ripple effects through supply chain requirements and customer expectations. Staying informed and collaborating with customers and stakeholders will be crucial. Understanding regulatory trends will help SMEs with evolving requirements, engage with customers and investors, and capitalize on new opportunities.
3. Governance and Social Implications of AI will Attract Mindshare
AI and automation are transforming sustainability practices, but their rise brings governance and social considerations to the forefront. Labor displacement, retraining, and data privacy will become critical concerns.
- Human Capital Management : SMEs must ensure AI adoption aligns with inclusive growth ethical practices. Modern slavery and DEI initiatives will receive increased scrutiny, especially in the context of data privacy to train AI models
- Upskilling : Governments and companies will need to collaborate to equip workers with the skills required for an AI-driven economy.
Implications for SMEs : SMEs should revisit materiality assessments to reflect AI’s rapid pace of development. Investments in workforce upskilling and ethical governance practices will not only future-proof operations but also enhance stakeholder trust.
4. Accelerated Paradigm shift from Compliance to Business Value Creation
Sustainability is transforming from a compliance requirement to a driver of long-term value creation. A pragmatic approach with concrete intersections with business operations will be critical in progressing it, especially in SMEs. Companies are embedding sustainability into strategic goals to enhance performance and sixteen new opportunities.
- Sustainability Professionals as Strategic Advisors : Sustainability roles are shifting from compliance–focused to innovation and strategic-focused, integrating sustainability with business and financial goals.
- Revenue and Cost Linkages : Sustainability metrics increasingly tie to tangible business outcomes like sales growth, talent retention, supply chain resiliency, and product innovation. For example, a heavy water consuming manufacturing company could co-mingle data across water management and how it impacts efficient production and lower costs.
- Collaborative Communities : SMEs can benefit from professional networks and knowledge-sharing platforms to refine data governance processes and stakeholder engagement.
Implications for SMEs : By embedding sustainability into their strategic goals, SMEs can unlock partnerships, improve operational efficiencies, innovate in product development, and access (cheaper) capital with purpose. Proactively leading discussions around materiality can also enhance competitiveness in supply chains.
5. Technology Enables a Holistic Approach to Sustainability
Technological advancements are making sustainability more accessible for SMEs. AI-powered tools simplify data collection, enable predictive analytics, and support strategic decision-making.
- Value-focused Tools : Predictive analytics, benchmarking, and scenario planning tools will be more commonly used as data management workflows and capabilities mature. As a shift towards the business value of sustainability emerges, areas of improvement and next-best actions will be critical for users and decision makers of software solutions.
- Data Management Advancements: Automated data collection will increasingly focus on data cleaning, reconciliation and integration. While some technology providers already do this, the use case will trickle further down as more companies start to report. Agentic AI developments will aim to solve for last-mile data challenges in complex data domains such as Scope 3 carbon emission calculations or n-tier supplier visibility.
- Market Dynamics: Expect increased consolidation of technology solutions service providers and the emergence of new entrants with tailored solutions filling market gaps. This will improve accessibility and scalability for SMEs, especially those still starting on their sustainability journey.
Implications for SMEs : SMEs should select sustainability tools aligned with their goals and maturity stage. The right solutions can streamline compliance, enhance efficiency, and drive business value.
Key action points for SMEs
1. Leverage Lessons Learned from Larger Companies
- Monitor peers and customers reporting under CSRD to adopt best practices for materiality-focused data collection and reporting.
- Use voluntary frameworks (eg, TCFD, TNFD, GRI) 3 to build reporting capacity. In the EU, EFRAG’s Voluntary Reporting Standards for SMEs (VSME) offers basic and comprehensive modules giving SMEs optionality to get started.
2. Stay Ahead of Evolving Regulations
- Engage with customers, banks, trade associations, and stakeholders to anticipate regulatory impacts.
3. Leverage AI and Automation Strategically
- Choose sustainability software providers offering integrated data management and analytics capabilities.
- Ensure AI solutions align with business goals and provide actionable insights.
4. Shift Focus from Compliance to Value Creation
- Identify areas where sustainability intersects with business and financial performance.
- Build tangible business cases and track KPIs for sustainability initiatives.
5. Invest in Human Capital
- Conduct workforce assessment to identify upskilling opportunities.
- Collaborate with industry partners and governments to invest in training programs.
Conclusion
As 2025 unfolds, sustainability will remain a complex yet rewarding landscape for SMEs, presenting both challenges and opportunities. By aligning with evolving regulations and voluntary frameworks, leveraging technology, and adopting a strategic mindset, SMEs can transform sustainability from a challenge into a competitive advantage. Those SMEs that act decisively and proactively will ensure resilience, growth, and long-term success in an increasingly dynamic market.
About the authors
Henrique Martins de Araujo
Henrique is a seasoned expert in development finance and venture capital, with a 20-year track record of structuring over $3 billion in investments across diverse sectors and more than 70 markets in Latin America, Africa, Asia, and Europe. Over the past decade, his work has centered on supporting startups and businesses in advancing scalable, market-driven innovations that address the interconnected challenges of climate change, biodiversity loss, and pollution. He specializes in identifying opportunities within the evolving landscape of sustainability regulations and reporting, helping businesses navigate complexity and drive impactful solutions.
Nikko Karlo Robles
Nikko is CEO at Ascentys, ensuring that the vision and strategy is aligned across sales, product, delivery, and marketing activities. Previously, Nikko worked at Thomson Reuters, the global technology and media company, where he most recently led strategy and M&A in the ESG and sustainability solutions business.
References:
- Convention on Biological Diversity. Countries to resume crucial Biodiversity Discussions in Rome, 25-27 February 2025. November 2024.
- Intergovernmental Negotiating Committee on Plastic Pollution
- TCFD (Task Force on Climate-Related Financial Disclosures) , TNFD (Task Force on Nature-related Financial Disclosures) , GRI (Global Reporting Initiative)
- EFRAG VSME (Voluntary reporting standard for SMEs)
Sources:
- NYU Stern Center for Sustainable Business. Sustainability strategies generate financial benefits in nearly all surveyed food and agricultural companies. March 2024.
- Thomson Reuters Institute. Natalie Runyon. ESG in 2025: Significant adaptation in sustainability emerges as business-as-usual. January 2025.
- MSCI. Sustainability and Climate Trends to Watch for 2025.
- Barnes & Thornburg. ESG in 2024 and Outlook for 2025 in the US and EU: A Tale of Two Regions. January 2025.
- IMD. Natalia Olynec. Sustainability trends businesses must watch in 2025. December 2024.
- Reuters. Simon Jessop. Politics, not climate, to drive sustainable finance trends in 2025. January 2025.
- The Consumer Goods Forum. Supplier Sustainability Targets.
- Reuters. Richa Naidu and Chandini Monnappa. REUTERS IMPACT Unilever strikes climate deals with Walmart and others to meet sustainability goals. September 2024.
- Verdantix. Lily Turnbull. 10 Predictions for ESG and Sustainability In 2025 . January 2025.