Sustainable Business in Context: US Politics and Global Impacts

What Business Leaders Need to Know

Last month, BSR published a report charting a path for more ambition in sustainability leadership. The report, one of the most successful pieces published in BSR’s history, was shared widely and met with enthusiasm and eagerness to reassert the strategic, transformative role of sustainability, and of the Chief Sustainability Officer.

Just a few weeks later, the US elections dramatically changed the landscape, with profound implications for the global economy and business.  

While the new US administration will not take office until January, it is clear from the Trump campaign, and from the prior Trump administration, that US federal policy will abandon the policy agenda advanced during the Biden years that was generally supportive of efforts to create a more just and sustainable economy.

Business leaders face a crucial question: how can they continue making essential progress in this new environment?

As we consider the changes to come, and the need to adapt, it is also the case that fundamental business imperatives and opportunities, heightened global/sub-national regulatory demands, and social expectations will continue to drive business action.

After all, if at any point in the past 25 years you asked business leaders to list the top reasons to act on sustainability, at no point would “US Federal Regulation” have cracked the top five, or likely even the top 10. Sustainability efforts have largely been shaped by recognition of underlying business risks, strategic opportunities, and changing global expectations from customers, employees, and investors.

In addition, while the US is the world’s largest economy, it is hardly the only market, or government, that matters. Around the world, we see considerable momentum. A significant set of regulations from Europe and other jurisdictions apply to many companies regardless of headquarters location. Investments in clean energy and electrification are coming from many locations, not least China. We saw businesses, along with many states, cities, academic institutions, and individual innovators, hold the line during the first Trump term. We expect a similar situation to unfold now, with a significant constituency of the American economy maintaining their commitments and efforts on climate change, human rights, and other parts of the sustainability agenda.

The incoming administration has made clear that core elements of the responsible  business agenda—climate and nature, human rights, diversity and inclusion, and various governance requirements—will be challenged or rejected. The administration may also challenge companies’ ability to exercise business judgment in managing related risks and opportunities—including fiduciary responsibility, a fundamental obligation that is essential to protecting the interests of shareholders. In addition, general economic volatility may also create macro pressures interfering with progress on sustainability.

Even without being able to predict the full suite of policy changes to come, business leaders should expect the following to shape the context under the Trump administration:

• Regulatory fragmentation: Businesses value clarity and consistency. As federal regulatory agencies withdraw or sharply limit actions ranging from the SEC’s climate disclosure rule to efforts to promote business attention to human capital, the US will move away from the slow and steady harmonization of frameworks. Washington will find itself out of sync with regulators, from Europe to California and to Singapore. Given the US Supreme Court’s reversal of the “Chevron Doctrine,” there is also the risk that courts will invalidate regulatory actions in an inconsistent way in the US. A fragmented and uncertain regulatory environment will raise compliance costs and legal risks and stymie the competitiveness of American companies.
• Investment whiplash: Investors and businesses have deployed enormous amounts of capital behind strategies linked to the energy transition, private sector sustainability solutions, and innovative investment strategies. Limitations on the Inflation Reduction Act (IRA), mixed signals on private sector investments, and threats of tendentious action against innovative investment strategies threaten--all threaten to undermine investment in American jobs, market competitiveness, and global investor demand.
• Damaged global cooperation: The US will likely withdraw again from the Paris Agreement, and potentially also the United Nations Framework Convention on Climate Change (UNFCCC) altogether. There will be little or no US support for global efforts to address climate finance, nature, and other matters, and possibly interference. While other nations and non-state actors will likely step into the breach again, as happened between 2017-21, a global consensus on crucial shared challenges will be far more difficult to achieve. Damaged global cooperation threatens to increase further global market fragmentation and cede America’s position as shaping a shared global economic agenda.
• Heightened risk of social conflict and division: The new administration is suggesting policy actions that could spark substantial protest. While predictions are hard to make with certainty, there is a heightened risk of social divisions and conflict that spill into companies’ workforces and customer bases, which are already highly divided. These divisions are actively stoked by activists using social media, often focusing on individual companies. These increase workforce,  reputational, and legal risks for companies, and push business leaders to take positions on controversial social questions.
• Increased impacts of climate change: A pullback on climate mitigation and resilience will create economic risk, raise the ultimate costs of the energy transition, hinder investments in innovation to achieve an inclusive energy transition, and expose infrastructure, people, and communities to unnecessary vulnerability. While federal policymakers may choose to ignore or reject the impacts of climate change, climate change won’t ignore policymakers. The bill—in costs and harms to people—will come due for companies and communities.
• Heightened litigation risk: In the US, legal challenges to company actions related to diversity, climate, and human rights are already a risk and a cost for business. Companies are likely to face more pugnacious legal challenges from various states and other actors on all sides of the political spectrum, including shareholders, and in the form of class actions. Associated preventative and litigation-related costs could soar; at the same time, withdrawal from prior commitments may raise the specter of increased discrimination or aggravated climate risks with even greater business costs.
• Diminished trust in American institutions and global “brand”: For US-based companies in particular, the decline of positive views of the US, as well as loss of confidence in American leadership and trust in the US government similar to that experienced during the first Trump term, could also damage the brands and credibility of companies strongly associated with the US.
• Rule of law under pressure: Some observers suggest that respect for rule of law and legal norms could be undermined in pursuit of various administrations’ goals. Should this come to pass, there is a risk that companies will face an increasingly arbitrary and capricious legal environment, not only in the US, but also in other nations where governments may be emboldened by the example set in the US.

The period of the first Trump presidency saw several policy developments that hindered progress on sustainability. Yet despite these headwinds—and in some ways as a reaction to them—company action to address sustainability-related business risks and opportunities accelerated. We anticipate similar dynamics this time, though we believe that 2025 is likely to be different than 2017, in ways that are both better and worse for progress on just and sustainable business.

Several positive developments arose between 2017-21 that enabled ongoing progress, including:

• Renewed commitments: Business leaders and investors stepped up with voluntary commitments in the absence of government leadership. For example, the “We Are Still In” coalition of companies, investors, states, and cities demonstrated broad support for the Paris Agreement and the UNFCCC process. Dozens of CEOs advocated for the US to remain in the Paris Agreement before the decision was taken to withdraw.
• Policy action by states and cities: Numerous states and cities established their own requirements and incentives on climate, corporate governance, and diversity, with coalitions of states and cities banding together to aggregate their influence.
• Global policy action: In other jurisdictions, not least the European Union, the global drive for sustainability accelerated, backed by policy and incentives and contributing to the web of regulations now in place.
• Civil society advocacy: Public mobilization to protect and advance climate action, LGBTIQ+ rights, gun safety, women’s rights, immigrants’ rights, and racial equity all flowered during the first Trump term. This also fueled employee activism and division.  

The environment as we go into 2025 may mirror some of these developments, but we see more differences than similarities between 2017 and 2025. To start, here are factors that suggest a more challenging road for sustainability leaders:

• Backdrop of backlash: The backlash against ESG had already begun to impact companies’ decisions, commitments, and public statements well before the election on November 5. Business leaders may therefore be more reluctant to raise their voices or their ambition, especially those with or seeking government contracts, facing regulatory scrutiny, or seeking government approval of M&A activity.
• Economic and global disruption: The first Trump term was marked by continued low cost of capital and low levels of geopolitical conflict. The period since has brought upheavals, including COVID-19, inflation, energy market gyrations, and significant global conflicts, among other preexisting headwinds likely to affect sustainable business.
• Media fragmentation and misinformation: The information ecosystem is even more fragmented than before, with significant mis/disinformation reaching people and reinforcing conflict and falsehoods.

All these factors suggest direct and indirect reasons that sustaining progress may be additionally challenging and complex this time around. That is not the whole story, however. There are many factors that lay the foundation for meaningful forward progress.

• Global, state, and city regulations: Whether or not Washington steps back from policies supporting sustainable business, most large US companies remain subject to regulatory and compliance requirements from other countries and US states (notably California). It is simply not an option for most companies to opt out of these mandates, and it is in their interest to leverage them for the greatest strategic value and to call for harmonization to reduce conflicts and costs. Where “compliance” on sustainability was once seen as a pro forma exercise, a global company’s compliance efforts might entail double materiality, climate risk modeling and governance, respect for human rights, and other activities that represent meaningful progress.
• Governance and accountability: Increased attention—from civil society, investors, and regulators—has created new levels of governance rigor and accountability for corporate commitments, disclosure, action, and impacts on sustainability. This includes new greenwashing rules (e.g., in the EU), and board responsibilities for sustainability disclosures and performance. The sustainable business agenda is in the boardroom in ways it wasn’t in 2017.
• Objective realities: Real-world business risks and opportunities linked to environmental and social factors reinforce the need and value of sustainable business. The reality is that American society is growing ever more diverse, meaning that every company’s workforce and customer base expects—and deserves—that business will continue to value diversity. Similarly, the science underpinning action on nature and climate is undeniable—and the effects of climate change more apparent and destructive. Real-world impacts on business and society are growing every year and reinforce the need for business to take steps to address and prepare for a changing world.
• Energy transition underway: Progress is underway in many aspects of the clean energy economy, with the economics of wind, solar, and other forms of renewable energy getting better every year. The business case for the energy transition is stronger and more achievable than ever. Technological innovation will only accelerate these developments, and the companies best placed to create and leverage them will have an advantage.
• Jobs and innovation: Forward progress is also demonstrated by public and private capital supporting sustainability-related jobs, innovation, and competitiveness. Much of the IRA’s funds have been dispersed, and there is a widespread view that while some might be curtailed, the IRA will not be overturned. This is partly due to the recognition that investments have bolstered jobs, manufacturing, and innovation, much of it redounding to the benefits of GOP-leaning states.
• The limits of backlash: The anti-ESG “backlash” has had more of an impact on communication than action. State anti-ESG bills have mostly foundered or been so broad as to have limited effect; in some cases, enacted policies have even raised costs for taxpayers. Companies have had two years of practice adapting their approaches, focusing less on communications and more on policies, action, and delivering benefits and compliance. On the other hand, the risk that companies will face very intense scrutiny, as well as legal and shareholder action, for withdrawing their commitments is very real.

Finally, if the 2020s have taught us anything, it is that we should expect the unexpected. It is highly likely that there will be developments that will be a reminder to all but the most ideological actors that just and sustainable business is the pathway to resilient, innovative, and equitable economies, businesses, and livelihoods.

Many of these changes have been underway, and companies have been adjusting.  Sustainable business has always proceeded in the face of opposition and economic crosscurrents. Here are a few elements of a playbook that will serve companies well in the face of a shift of the policy winds in the US.

Focus on the Fundamentals

• Deliver value: There are core business reasons why sustainability is valuable. Innovation, resilience and business continuity, workforce development, and community support are all good reasons why various aspects of the agenda deliver business value.
• Continue the integration and professionalization of sustainability: As we found in our recent report The CSO at a Crossroads, sustainability has become integrated as a mature, credible corporate function with governance and accountability. This is in part a response to increased rigor in external expectations and regulatory requirements, as well as business alignment. Such integration and professionalization serve as bulwarks for continued sustainability efforts in support of commitments and disclosures.
• Communicate the benefits of consistency: Businesses can communicate to the new administration that uncertainties, fragmentation, and U-turns are damaging to business, and that companies wish to maintain core activities in support of existing commitments and global regulations. Discreet and high-impact communications may be preferable to a focus on public declarations.

Maintain the Vision

• Look to the long term; avoid overreaction to short-term change: Governments come and go; businesses are here to stay. As we say above, it is clear that the future will be significantly more impacted by the climate and nature crises, and that societies will only grow more diverse.  These factors will last more than four years, and it would be a form of malpractice for businesses to stop planning for the future. While there is an intense focus right now on what is directly in front of us, companies should make good use of scenario planning and other tools to stay focused on the underlying forces reshaping our world.
• Don’t give up on values: Yes, compliance matters, and practicality matters. But we cannot lose sight of the values reflected in this work. Enabling future generations to live better lives. Treating all people with the respect they deserve. Enabling access to healthcare, decent wages, and a strong public education system. And protecting rule of law, democracy and human rights, without which we cannot achieve any of our substantive goals. Businesses that allow themselves to be too transactional will lose support from essential constituencies, hollow out their core purpose, and fail to prepare for the future.

Refine the Strategy

• Ditch counterproductive language: Too many battles have been waged in recent years over terms and acronyms. It is time to focus on the substance of the work and find ways to build greater support from people inside and outside business for core sustainability objectives. Indeed, a new narrative that reflects progress for people and communities is badly needed and could help to mitigate some of the opposing views now rising in influence.
• Reinvest in benefits to people: There are substantive reasons why sustainability does not resonate with large segments of the public. This has enabled political figures to caricature and reject sustainability. Too many people believe that they have no place or security in the vision of a sustainable economy. It is time to reconsider how sustainability can deliver in tangible ways for the average person, and be seen as a solution to—not the cause of—the many changes creating so much public distrust and pessimism.

The US elections changed the landscape, with the potential for profound implications for the global economy and sustainable business.  

BSR is working with its member companies to help them address sustainability-related business risks and opportunities and make essential progress in this new environment. Related services include:

• Board and Executive Engagement: Provide briefings, trainings, and workshops to update corporate leaders on new developments and emerging issues—and to engage them in solutions.
• Strategy Review: Review and update strategic sustainability priorities, risks, and opportunities, potentially including through scenarios testing, persona-based reviews, and identifying more focused priorities
• Futures and Foresight: Partner with BSR’s Sustainable Futures Lab to identify emerging issues, conduct contingency planning, and reframe the time horizon to consider long-term impacts, risks, and opportunities
• Stakeholder Engagement and Advisory Councils: Ensure representation of a range of voices, expectations, and expertise through strategic engagement with stakeholders, including extending beyond voices currently engaged.  External advisory councils may be newly valuable.

Convenings with BSR Member Companies: Upcoming sessions include BSR’s Decoding Regulations series, revisions to net-zero standards, and implications of COP29 and COP16.

BSR’s Member Portal: Access a full library of sustainable business resources, including implementation toolkits, topic briefs, and reports, exclusive to BSR members.