2025 has kicked off with businesses and their supply chains facing a seismic shift – with several political and regulatory changes on the horizon, the impact of artificial intelligence (AI) and emerging risks in key sourcing and production markets.
But while these changes impact policy and legislation, consumers continue to demand that brands support positive working conditions and environmental practices.
All of these changes are being driven by 8 key trends:
Ambitious targets set by businesses and governments in recent years have led to an increased focus on supply chains that has driven scrutiny, regulatory enforcement, and evolving expectations from stakeholders. But media investigations highlighting ongoing malpractice have exposed a growing gap between ambition and performance.
Many businesses face challenges aligning their ESG goals with actionable strategies due to supplier visibility. Compounding this issue is the complexity of varying international ESG regulations, which is causing confusion and delays in compliance efforts.
Uncertainty, coupled with economic and political pressures, has led some companies to scale back on sustainability targets, reflecting the tension between profitability and long-term resilience. The Harvard Business Review aptly notes, “Execution—not intention—is the core issue,” as businesses struggle to embed sustainability into core operations amidst market incentives for short-term gains.
Added to this, supply chain data has become a double-edged sword. While companies now gather more data than ever, many lack the tools or skills to translate insights into impactful action which often leads to decision paralysis.
Closing the gap will require robust strategies to support proactive risk management, stronger supplier relationships, and improved data analysis.
#2: Labour risks in unassuming markets
2024 clearly demonstrated that supply chain labour risks can be found anywhere, even in markets considered low risk. Issues like forced labour, child labour, and inadequate wages persist in all territories. “Safe” regions no longer exist.
LRQA’s 2024 Supply Chain Risk Outlook report, based on data from over 25,000 audits worldwide, revealed that over 50% of assessed regions face high or extreme risk of ESG violations. Countries like Australia, South Africa, and the United States moved to higher-risk categories.
These changing risk profiles teach us that traditional, annual audits are lacking in today’s ever-evolving environment. They only offer a snapshot in time of compliance and miss complex issues like unfair wages or inadequate grievance mechanisms.
Effective data collection and analysis tools, combined with grievance mechanisms and worker hotlines, can help to achieve a state of continuous assurance and uncover hidden supply chain risks in real time, allowing brands time to address them before they escalate.
With global scrutiny intensifying, acknowledging and tackling these risks head-on is crucial to businesses that are building more resilient and ethical supply chains.
#3: US policy shifts create new supply chain challenges
Shifting political landscapes and policies are rapidly reshaping the risk landscape for supply chains. In the US, the second Trump administration has already begun bringing in tighter immigration policies, anti-ESG rhetoric, and proposed tariffs on China, Canada and Mexico introducing new complexities for businesses.
Manufacturers are already looking for new suppliers in response to these challenges. While some may reshore, others will need to shift sourcing to emerging markets, heightening risks such as labour violations and supply chain transparency challenges.
Changing labour policies also present domestic risks, particularly for foreign migrant workers. As the US looks to enforce strict immigration policies, the knock-on impact could be increased informal employment and exploitation. To mitigate this, businesses must prioritise fair recruitment, grievance mechanisms and supplier collaboration.
Despite the change of political mood, supply chain sustainability remains a priority for many companies and governments globally. In the EU, the Corporate Sustainability Reporting Directive (CSRD) is driving investor demand for ethical sourcing and global regulations. In the US, State level laws like California’s Climate Corporate Data Accountability Act mandates emission disclosures even while federal policies shift.
#4: The trickle-down effect of regulation for suppliers
We saw, towards the end of 2024, that supply chain due diligence regulations have begun expanding beyond traditional issues, like forced labour and emissions, to include biodiversity and deforestation.
Regulations like the European Union Deforestation Regulation (EUDR) require businesses to assess their supply chains’ impact on ecosystems, local wildlife, and forest preservation. This shift is pushing sustainability professionals to consider topics such as biodiversity and deforestation for a more integrated approach to sustainability.
However, limited data on biodiversity and deforestation makes comprehensive risk analysis challenging. The 2023 Nature Benchmark report revealed that many companies still fail to grasp how business operations intertwine with environmental and human rights concerns, putting them at risk of causing or contributing to adverse impacts.
These new regulations are not only impacting large global businesses – they’re trickling down to SMEs as larger brands embed due diligence requirements in their supply chains. This means that while not directly required to comply with regulations such as the Corporate Sustainability Due Diligence Directive (CSDDD), SMEs are increasingly needing to adapt to meet higher standards of transparency and risk management.
By improving their ESG practices, SMEs can gain a competitive edge and attract larger companies looking to mitigate supply chain risk.
#5: A plethora of data, but quality is king
Data quality has become a critical focus in responsible sourcing and supply chain due diligence. Supply chains are complex and global, which makes accurate, high-quality data essential for transparency and accountability.
Without reliable data, companies face challenges in monitoring risks, addressing human rights violations, and ensuring ethical practices. Only by using high-quality data can businesses make informed decisions to drive operational efficiency and sustainable business practices.
Robust risk indicators are key. These are vital for tracking performance, identifying areas for improvement, and benchmarking against industry standards.
#6: Supplier relations must evolve from leverage to collaboration
Many relationships between brands, retailers, and suppliers have become transactional, driven by the need for cost efficiency, speed, and flexibility in competitive markets. Brands now often prioritise price and delivery speed over long-term partnerships.
This shift has significant implications for supply chain dynamics. Suppliers face reduced bargaining power and constant pressure to cut costs and meet tight deadlines, which can strain operations and potentially compromise quality and sustainability. For brands, this could mean increased risks around reliability, ethical sourcing, and compliance with environmental and social standards.
While transactional approaches may deliver short-term benefits, they undermine the stability, trust, and resilience essential for long-term success.
On the other hand, strong partnerships enable better communication, risk management, and alignment across the supply chain. Supplier collaboration is key: collaborative efforts lead to shared goals and processes, which result in optimised transportation, inventory management, and faster response to market changes.
#7: Food safety and product integrity emphasises sustainability
Companies face growing pressure to ensure their food products are safe, ethically produced, and environmentally responsible. Consumers are increasingly aware of food origins, while laws like the EUDR demand transparency and ethical practices.
Adopting sustainable sourcing practices is essential for addressing these challenges.
By prioritising food safety, fair labour conditions, and environmental stewardship, businesses can maintain product integrity, foster consumer trust, and promote long-term supply chain sustainability. This holistic approach helps mitigate risks and builds trust and loyalty among consumers while fostering long-term sustainability in the supply chain.
Climate change is further complicating food supply chains, forcing companies to adapt sourcing strategies and explore alternative materials and locations as conditions shift.
Technology and innovation will play a transformative role in overcoming these challenges. Though traditionally slow to adopt digital solutions, the sector is increasingly recognising its necessity.
With a focus on water management, packaging innovation and regenerative farming, alongside meeting evolving legislative requirements, 2025 will be a pivotal year for embedding sustainability into the core of the food sector’s operations.
#8: Investor demand for transparent reporting
Data shows businesses prioritising sustainability targets are more attractive to investors.
According to a Deloitte study, 83% of surveyed investors incorporate sustainability information into their fundamental analyses, indicating a strong preference for companies that prioritise sustainability, while KPMG reports 77% of financial investors report that ESG considerations influence their deal strategy, with many willing to pay a premium for assets with high maturity. This trend is driving companies to enhance supply chain sustainability due diligence, identifying risks and opportunities to meet regulatory requirements and increase value.
Legislative changes, such as the CSDDD and the EUDR, are moving faster the adoption of moe strict practices. Investors are increasingly demanding transparency and accountability from companies, pushing them to provide regular updates on how they address risks across their supply chains. This heightened scrutiny ensures that businesses not only comply with regulatory standards but also meet the evolving expectations of socially conscious investors.
In 2025, increasing investor interest in sustainability strategies in 2025 will drive businesses to prioritise their supply chain due diligence more than ever before but it will still require alignment and knowledge on requirements, standardisation, data quality and what sustainability best practice truly looks like.
A year for action
2025 may bring with it significant change that could fragment global supply chains and prompt companies to navigate new regulatory environments and logistical hurdles. But companies can prepare to effectively overcome these challenges – we have more knowledge, more data, more access to solutions than ever before.
Responsible businesses must shift towards enhancing data quality, fostering deeper supplier collaboration, and prioritising human rights protection and environmental issues. This will enable supply chain leaders to reimagine their roles as more senior and strategic, and at the centre of ethics, integrity and sustainability efforts.