March 31, 2025
Sustainability/ESG and investor relations teams are operating in a period of unprecedented complexity, uncertainty and ambiguity. Most everything appears to be in flux: strategy, shareholder and stakeholder expectations, regulatory impacts, reporting and communications, and so on. For many public companies and their advisers, the current sustainability/ESG reporting season is being defined by soul-searching, wordsmithing, “walking on eggshells,” and a raft of legal and risk management considerations.
For public companies that are reporting their full-year 2024 results in the first several months of 2025, it probably feels a lot “like building the car and trying to drive it at the same time.”
However, there is one group of companies that may be in the best position to navigate this difficult environment. Those are the companies whose fiscal years do not align with the Gregorian calendar; about one-third of public companies fall into that category. Hopefully, by mid-year or even later, these companies will be able to enter their year-end reporting season with at least some of the uncertainty and ambiguity resolved. To follow the metaphor, these companies have time for the car to be built, for the early adopters to buy a new model and learn about the best and worst of the vehicles, and for the manufacturers to tweak the technology and issue recalls if needed.
In other words, time is probably on your side if your reporting cycle is mid-year or later, and here are four good reasons:
Politics
More time to see how the initial changes and proclamations from the Trump Administration translate into official government policy, in the courts and in the realities of day-to-day implementation. What we know so far are that the new Administration has taken multiple anti-DEI and anti-ESG positions, the value of Board diversity is being hotly debated, substantive changes are likely in a few to many environmental and financial regulations, and the SEC’s climate disclosure rule is officially canceled. As of the writing of this article, we are only about 60 days into a four-year presidential term. Inevitably, there will be adjustments, nuances, corrections and probably over-corrections, and off-calendar year reporting companies can hope for some clarity by mid-year.
Regulatory uncertainty (California)
The California Air Resources Board has until July 1, 2025, to implement climate disclosure regulations under the Climate Corporate Data Accountability Act (SB 253) and Climate-Related Financial Risk Act (SB 261). The regulators have given indications of higher thresholds for being covered under the new laws, greater flexibility and lower verification standards, but definitive answers have been slow in coming. For example, CARB is still trying to define what constitutes “doing business in California,” which is a critical trigger for compliance requirements. There is also the question of whether California will accept off-calendar fiscal year data or insist that all companies report calendar year data. We should know a lot more by July – or implementation of the rules will likely be delayed even further.
Regulatory uncertainty (Europe)
For U.S. companies that operate in Europe, it appears that the requirements of the Corporate Sustainability Reporting Directive (CSRD) will be significantly relaxed, but further clarity and full adoption by member states are still several months away. The latest proposed changes include delaying reporting requirements to 2028 (instead of 2026 or 2027) and removing approximately 80% of companies from the scope of CSRD (compared with the number of companies that were originally considered in scope).
Take a step back to see the big picture
Non-calendar year reporting companies have the opportunity now to consider new processes, programs, tools, partners, goals, metrics, etc. This strategic work is better done in the “offseason” before the deadlines and other pressures of year-end reporting dominate so much of the workday. It’s always a best practice to take advantage of the offseason. Add in the complexity of 2025, and this kind of planning and organizing becomes essential.
If you have this time on your side or just need an outside perspective, Dix & Eaton can help you move from complexity to clarity and from ambiguity to agility. To get started, we are offering a free seven-point assessment. We will evaluate your current approach to sustainability and financial reporting, stakeholder engagement and investor relations, balanced against the volatile macro environment. Click here to request a free assessment or consultation, or contact me.
