This has become a recurring question asked to climate consultants in recent weeks. The answer, however, is complex and needs to be further developed.
Sustainability offers companies opportunities to improve their operational efficiency, reduce costs, and their resilience as well as market potential. For nations as well, a bold long-term sustainability vision fosters energy independence, innovation and competition. Neither the political instability nor the fractured global, US and EU contexts will change this proven evidence: the cost of inaction is way larger than the cost of action. Private companies here have a key leadership role to play.
Political Instability: A Challenge and Opportunity for Corporate Sustainability
In a world marked by complex political dynamics and climate challenges, the corporate sector faces mounting pressure to prioritize sustainability. Yet, political instability often disrupts global and national efforts to transition toward a more sustainable future. Despite these hurdles, businesses need to secure long-term resilience and competitiveness. They are also uniquely positioned to lead by example, champion ambitious climate policies, grasp resulting business opportunities. This also requires a level playing field for companies worldwide on social and environmental standards.
EU Context: Seizing Opportunities in Green Regulation
In Europe, the push for sustainability is supported by robust regulations such as the Green Industry Act, CSRD, CSDDD, Green Claims Directive, Taxonomy and CBAM, which are all maintained by the EU Commission for now and the difficultly abatable industry should advocate to maintain it. These policies underscore the EU’s strategic focus on decarbonization, through amongst others energy and materials efficiency, to enhance energy security, competitiveness and independence.
However, the associated administrative burden poses challenges for companies, especially those who are starting their sustainability challenge. To address this, the EU plans to release an “Omnibus Simplification Package” in February 2025, aimed at reducing bureaucracy while preserving the laws’ core objectives. Yet, uncertainty about the package’s content has created concern, particularly for businesses that have already heavily invested in compliance. Its practical implications remain unclear; however simplification does not equate to deregulation.
The EU’s evolving protectionist stance offers opportunities for companies: it shields European industries from unfair competition while encouraging innovation to meet sustainability targets. Companies must advocate for consistent enforcement of these regulations to foster a level playing field while driving decarbonization.
U.S. Context: Paris Agreement Withdrawal
In the United States, President Trump initiated the withdrawal of the US from the Paris Climate Agreement for the second time. This increases regulatory uncertainty for the energy transition even for corporate organizations. Emissions in the US have decreased since 2007 regardless of the administration, consequently to the shift from coal to gas for their electricity production. This underscores that tangible differences in climate actions between administrations remain limited.
On the other hand, significant investments in clean energy continue, even in traditionally Republican states. These investments have increased by 40% between 2020 and 2023, thanks to the IRA, amongst others. This trend reflects a growing recognition of the economic potential of the green transition, providing a stable foundation for corporate sustainability investments regardless of political leadership.
Businesses operating in the U.S. can capitalize on this momentum by advocating for consistent regulatory support and driving investments in renewable energy and innovation. This not only safeguards economic gains but may also lead to increased operational efficiency, more resilient supply chains and attracting talents.
The Cost of Inaction: Physical Risks and Economic Impacts
The physical risks of climate change – rising sea levels, extreme weather events, and resource scarcity – are translating into increasing and tangible costs for businesses. Companies leading sustainability efforts gain a competitive edge through enhanced reputations and reduced regulatory risks. Those lagging face pressures as expectations shift.
Corporate leadership is essential in shaping regulations that balance innovation and fairness. By supporting strong climate policies, businesses mitigate risks associated with early investments in decarbonization while creating predictability – an essential ingredient for maintaining momentum in the transition. Regulation predictability is particularly crucial for heavy industries with long investment cycles, where regulatory uncertainty undermines progress.
A Call to Action
Political instability may challenge global climate efforts, but it underscores the critical role of the private sector in driving sustainability. Companies can act decisively by:
- Advocating for Ambitious yet pragmatic Regulations: Collaborate with policymakers to establish robust frameworks that respect planetary boundaries, ensure accountability, foster innovation and level the playing field, encouraging other regions to increase their environmental and social standards.
- Embrace Decarbonization: Transitioning away from fossil fuels is no longer optional to avoid short-term to long-term costs. Aligning operations with sustainability goals is essential for long-term competitiveness.
- Push for Global Equity: Support international efforts to bridge climate finance gaps for developing countries, recognizing the mutual benefits of global stability.
In a volatile political landscape, corporate commitment to sustainability is not just a moral imperative—it is a strategic business necessity. By leading climate action and lobbying for ambitious policies, businesses can secure a prosperous and resilient future for themselves and the planet. The course toward a fossil-free future is set, let us stay on track.
Sources :
https://www.reuters.com/world/us/trumps-climate-withdrawal-creates-rare-discord-with-big-oil-2025-01-22/
https://www.iea.org/reports/world-energy-investment-2024/united-states
https://www.euractiv.com/