Corporate Sustainability Is in Crisis. What Should Companies Do Now?

After much progress over the last two decades, corporate sustainability is at a crossroads. A shifting political landscape—intensifying rivalry between nations, increasing social polarization, and a populist backlash against sustainability efforts—is radically redefining the conditions under which corporations must survive and thrive. Some prominent companies have quietly watered down their ambitions while others are already back-pedaling. The U.S. government is swiftly unwinding sustainability commitments and there is pushback against new European reporting requirements. This begs the question: Has the corporate sustainability movement become unsustainable in its current form? As sustainability and business strategy practitioners, we offer our perspective on this existential question for the movement. Why Planet Will Eventually Trump Politics While in the short term, it seems reasonable to expect a further unravelling of the corporate sustainability agenda, all may not be lost. There are reasons to believe that several countervailing forces will eventually overturn this clear regression and lead to a renewed emphasis on sustainability, albeit after a messy interregnum which could last several years. 1. Enormous progress has been made on renewable energy. This was in no small part shaped by China, which was responsible for 40% of the world’s renewable energy capacity expansion between 2019 and 2024. Renewable energy has become not only economically viable, it’s even an object of geopolitical competition. Of course, decades of global investment and capital expenditure ensured such leaps forward were possible. In the last decade alone, $300–400 billion per year has been invested into power grids around the world enabling widespread electrification. These investments secure infrastructure that lowers the marginal cost of renewables and makes rolling back progress harder. In 2023, renewable energy represented nearly a quarter of the EU’s final energy use. 2. Planetary realities will shape politics. While politics may trump other considerations in the short term, in the last 50 years the number of disasters due to climate change and changing weather has already increased by a factor of five. Of the nine dimensions assessed under the planetary boundaries framework, a method for determining the risks of disturbing critical Earth systems, six had already been breached by 2023, increasing the risk of irreversible environmental damage. A failure to contain carbon emissions and a deteriorating climate situation, revealed through increasingly dramatic events like the recent Los Angeles fires, will eventually mobilize popular opinion and reshape politics. Ironically a deterioration of climatic conditions may even enhance the probability and intensity of a bounce back. 3. New business models are transforming sustainability into a source of profit and competitive advantage. The ever-increasing stock of sustainable business model innovations seems set to transform sustainability from an expensive if necessary inconvenience to a self-sustaining source of profit and advantage. For example, Maersk has invested heavily into low-carbon fuels and electrification of port operations. In doing so, the company has differentiated itself as an attractive lower emissions supply-chain partner. Car-sharing platforms, recharging networks, co-working spaces, and home solar systems are just some of the many sustainable business models which are already commercially viable. And markets are already responding to climate impacts, as is evident with rising insurance costs and price increases of agricultural products, creating an incentive for further business model innovation. Navigating the In-Between Period So how should companies react to this complex dynamic whereby pressures to adopt sustainable business models are weakened in the short term but likely strengthened in the long term? What’s least likely to be viable in this complex situation is to either press ahead idealistically as if nothing had changed, or to drop the sustainability agenda entirely. Neither an “all-in idealism” or an “abandon ship” approach are likely to further the long-term fortunes of individual enterprises or the planet as a whole. In transitioning from one sustainability regime to another, leaders should not expect an orderly or predictable trajectory, but rather a complex and confusing liminal period, or what Italian philosopher Antonio Gramsci termed “a time of monsters.” However, in-betweenness does not have to mean aimless, inactive, or erratic. As companies navigate the transition, we advise keeping the following in mind: Be guided by the long-term scenario of a sustainability rebound. Expect that this will increasingly be demanded by citizens around the world. This mindset will not only help your company prepare for the unavoidable situation where society will demand more drastic measures, it will also help build resilience to deal with the physical damage that a warming globe is already extracting. By acting now companies can reduce their exposure to future environmental risks and pre-empt future regulatory changes. Furthermore, this will help companies plot a consistent course and build trust with customers and society. Look to fundamental values to help build bridges between polarized communities. While broadly shared values like stewardship of our shared environment and responsibility to future generations have not entirely avoided the politicization of most aspects of business, they can still help span political and cultural divides and offer firms a stable foundation to build strategies upon. Operating from your own company’s values and principles creates a pragmatic basis to plot a steady course through the inevitable ups and downs of daily political surprises. Champion localization. While fragmenting policy frameworks and platforms are undoubtably undermining international collaboration, there is a hidden upside: A more national and local approach can provide greater resilience and also help build trust bottom up. As Nobel laureate and economist Elinor Ostrom has pointed out, widespread agreement on norms often comes about through multiple independent initiatives rather than the imposition or negotiation of a single global approach. Such a polycentric approach is already a reality for companies like Nike and New Belgium Brewing. Integrate sustainability imperatives with innovation and technology strategy. Near-term, tangible economic benefits, such as energy or materials efficiency, are more defensible than idealistic goals and less easily reversed. Interface, the global flooring company, pioneered a closed loop model by collecting and recycling its modular carpet tiles in the late 1990s, which both reduced its raw material costs while expanding its customer-interaction opportunities. Today, more than half of their materials are from recycled or bio-based sources. For Interface, sustainability is not a distant ideal, it’s already baked into their current viable business model with its stress on modularity and recycling. Leaders Must Embrace a New Mindset Leaders have been steering through the radical uncertainty created by Covid, rapid progress on AI, geopolitical conflict, and domestic political surprises for several years now. But when it comes to sustainability, they need to extend this new mindset to allow them to navigate the contradictions between short-term expediency and long-term goals and values. This means: Expecting reversals and contradictions. The daily clash of ideas and political contingencies could easily discourage persistence with sustainability efforts. Instead, internalize the notion that the external context will evolve, and reversals and contradictions are inevitable. Guide your organization based on your core values. This doesn’t mean being oblivious to the political context but rather having absolute clarity on your most important sustainability objectives. This clarity will enable your teams to navigate uncertain landscapes and avoid the cost of frequently switching strategies. Prize pragmatism over idealism and focus priorities. With the above in mind, do not allow idealism to distract from realism. While sustainability isn’t going away, in the current climate, performative activism can be a political liability. Instead, temper your ambition with a dose of pragmatism. Articulating and focusing on specific priorities and results will help to bridge the gap. Prize self-help over global collaboration. While externalities and regulations have an undeniable impact on the operating context, individual organizations are not without agency. If the fractures in international collaboration remain or worsen, businesses should reinforce ownership of the levers they do have. Companies that wait for a broad global consensus to be reached risk being outpaced by events. Seize the opportunity to make progress while competitors are distracted. Periods of uncertainty offer a window to get ahead while competitors meander. View the present moment as an opportunity to develop competitive advantage and strengthen your position. Long-term sustainability objectives do not have to be in direct tension with short-term wins. Business that can navigate both, stand to gain significantly. For example, companies that act upon the imperatives of materials efficiency, resilience through localization, mitigation of climate risks, or differentiation through business model innovation can create both short-term benefit and long-term sustainability. In short, companies can best ensure their own sustainability by looking past short-term politics and pragmatically navigating towards an inevitable rebound. While the current retreat from sustainability commitments is very real, it is also likely temporary. Those who use this window to fortify their sustainability engines will be better positioned when the pendulum inevitably swings back. The question is not whether sustainability will matter again—but whether your organization is ready when it does.

Corporate Sustainability Is in Crisis. What Should Companies Do Now?

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