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February 20, 2025
The new US administration has been in office for 30 days, and changes have come fast and furious, many of them relating directly and indirectly to sustainable business. The public response from business has been minimal thus far, despite the fact that many of these policy pronouncements and executive orders have created significant barriers to existing company commitments.
Some of the orders take direct aim at action on climate, diversity, international cooperation, and sustainable development. High profile moves including the withdrawal from the Paris Agreement, apparent shuttering of USAID, non-enforcement of the Foreign Corrupt Practices Act, and removal of all activities—and language—related to “DEI” have transformed the landscape.
Some of these measures seek to overturn well-established laws and regulations that have been in place for nearly a half century or more, noting that many have been challenged in the courts. This comes at the same time that the European Union’s “Omnibus” is about to appear, with the likely impact of reducing and/or delaying implementation of the world-leading regulatory architecture on ESG in the name of deregulation and competitiveness.
Put simply, there is now immense pressure on companies to diminish or abandon their commitments, de-emphasize climate, diversity, and human rights, and drop public advocacy on these subjects.
This presents a destabilizing moment for companies that remain convinced that sustainability is a way to deliver long-term value, ensure resilience, and innovate.
Through discussions with leaders at many of our member companies over the past month, we are hearing some common themes:
- Changes in direction from Washington present three interrelated challenges: policies are being reversed; funding and incentives are being withdrawn, and there is intense political pressure on companies to reverse their policies and practices.
- Corporate sustainability leaders are digesting the remarkable depth and breadth of recent executive actions. Many leaders expected a “rollback,” and instead have seen an attack. While withdrawal from the Paris Agreement was expected, the removal of well-established, long-standing laws and regulations such as the Foreign Corrupt Practices Act, and longstanding anti-discrimination requirements, are seen by many as departing from the kind of policy environment that enables a stable, predictable environment for business.
- With the European Union’s Omnibus expected to be produced in March, sustainability leaders are also looking at Europe with unease, with the potential for rollbacks or delays on the CSRD and CSDDD, for which companies have been preparing assiduously.
- Regardless of these abrupt changes to the policy and political context, fundamental drivers and stakeholder expectations for sustainable business remain powerful and relevant.
- Even as many companies have quietly–or quite publicly in some cases–reduced their commitments and sustainability communications, most maintain that they continue the lion’s share of the work. In doing so, they are refocusing on business relevance, overall strategy, and enterprise risk management.
Many sustainability leaders inside business also have expressed the concern that their companies are responding to recent developments with short-term thinking that bring negative long-term consequences. Some fear “anticipatory obedience” is diluting business autonomy and judgment, with lasting damage. They also fear that with the withdrawal of reliable policy and economic incentives, the private sector will be left to carry the burden on key issues on its own, resulting in increased costs and decreased predictability.
How should companies approach this moment? Here are some ways to navigate a period of uncertainty and challenge:
- Stay attentive to the underlying reasons sustainable business is important. Despite short-term political pressures and uncertainties, boards and business leaders can only effectively steward their companies if they stay resolutely focused on the strategic implications of changes that will impact them when the current political cycle passes. The mantra of “focusing on the fundamentals” remains important, and many companies are continuing to embrace this.
- Prioritize a sustainability agenda that addresses the needs of a skeptical public. There is little doubt that many aspects of the sustainability agenda have failed to resonate with much of the public. Sustainability should take greater account of the economic opportunities, livelihoods, and risk management that can deliver better outcomes for the public. The “new narrative” that so many have called for should do a better job of articulating how the average person can benefit from sustainable business.
- Decide what’s non-negotiable. Businesses and business leaders have faced pressure to abandon existing principles and commitments. In our view, this is not, well, sustainable. Every company, and every business leader will need to determine what “red lines” they are not willing to cross. Policy debate is a healthy and necessary part of a well-functioning society, and businesses will undoubtedly face moments when they will be expected to “find their voice” about their values and principles, as I noted in my recent chat with New York Times reporter David Gelles.
The abrupt policy changes coming from Washington in no way negate undeniable realities facing business. Challenging “DEI” (without defining the term in many instances) does not negate the fact that American and European societies are growing more diverse by the day, which means companies should be focused on inclusion. Reversing steps in the US and Europe to advance the energy transition should not mean that companies turn away from the real costs and risks of accelerating climate change, or the massive innovation opportunities for companies that meet this challenge. Withdrawing from international efforts to address shared challenges, as slow and imperfect as they may be, only creates more uncertainty and delay that will cost companies dearly; does nothing to stabilize the global economy, and detracts from important efforts to improve public health, address migration, and stabilize the international system.
Regardless of the currently unfavorable political climate, no business leader can disregard the ongoing reasons why sustainable business delivers value, future-proofed companies, and stability. Turning away from these realities presents risks for business and society. Leadership comes from people who are able to see past daily developments to stay focused on strategic needs. That brand of leadership is needed now, more than ever.
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