Sustainability is not under threat but it must evolve in 2025

The incoming Trump administration in the US this month, with its unapologetic anti-woke and ESG-bashing agenda, has sparked a flurry of panicked speculation around the world about whether financial and corporate business leaders will follow suit and pull back their corporate sustainability agendas. The news today that JPMorgan has followed on the heels of Bank of America and Citi in quitting the Climate Finance Group – Wall Street’s largest climate alliance – has thrown kerosene on the fire.

(Breathe).

There are several strong arguments why this won’t happen, not least because it would be more expensive to scrap existing ESG frameworks,  and all the good progress that’s been made in the past decade, than to adapt them to the new and fast-changing environment. 

Argument 1: Climate legislation offers protections. 

Climate reporting requirements and regulation are here to stay: In addition to the International Sustainability Standards Board's (ISSB) S1 and S2 standards that have now been adopted by some 30 jurisdictions representing 57% of global GDP and come into force this year in the UK (incorporating TCFD and TNFD), the European Union’s Corporate Sustainability Reporting Directive (CSRD) is coming.  With a reporting deadline in 2026, it will reinforce the need for multinationals and C-Suite decision-makers to get in line by measuring environmental impact, climate risks and opportunities and disclosing decarbonisation efforts.

Argument 2: Climate risks are increasing. 

The intensifying effects of climate change and biodiversity loss – which will trigger a cascade of environmental knock-on effects that impact our food security, energy security, economies and border stability – are not going away. Markets will be forced respond to the poly-crisis that a study (published in Nature in 2023) estimated that climate change could cost the global economy $38 trillion per year by 2049 - more than double the annual GDP of the European Union.

Argument 3: Sustainability-linked finance remains a growth area – at least outside the US. 

Despite the flight from the US-based Climate Finance Group, the bottom line is the majority of banks and investors in the UK and EU now require sustainability-related financial information to be provided alongside financial statements to justify investments and loans. Outside of the US, green finance and impact investing remains a dynamic growth area.

Argument 4: China will take the lead on sustainability.

Despite still being the world’s largest GHG emitter, China’s clean tech revolution and sustainability innovation continues to lead the world. Almost half of the world’s solar and wind capacity resides in China with some 300+ gigawatts under construction. This expansion will dwarf US renewable efforts by a factor of nine to one.

Argument 5: Stakeholder sustainability power: 

Local authorities and cities with devolved power and control over their energy systems, company stakeholders, communities of people directly affected by climate change and consumers increasingly demand sustainable and responsible policies. A good example of local agency is New York City’s Local Law 97, a landmark climate policy passed during Trump’s first presidency, that places carbon caps on large buildings.

The big shift in 2025 will be that companies stop trying to push the sustainability agenda for its own sake and pull focus on the risks that are material to their business. They will need new strategies to remain sustainable – in the old-world sense of not having their revenue streams collapse and being abandoned by their customers – rather than winning all the green awards. 

The fact is, the present dangers presented by climate change including extreme weather events, flooding, drought, wildfires and a world of shrinking resources and increasing political destabilisation will continue to have significant material impacts on procurement, logistics, operational costs and future market size predictions. At the same time, consumers, employees and wider stakeholder groups now demand greater transparency and evidence of responsible business practice.

As an article in Thomson Reuters this month summarised: “In 2025, businesses are expected to rigorously prioritize their ESG impact toward more material business issues. And an increasing number of companies are likely to adopt ESG as a strategic lens and use it as an opportunity to fundamentally reshape their business models.”

The flip side of any risk is opportunity, of course, as companies are finding out as they navigate their materiality and climate-related financial disclosures. The opportunities  to break the mould are exciting: To reevaluate (and shorten) global supply chains; to collaborate across sectors; to reengage with stakeholders, customers and local communities on a more meaningful level; and, yes, to open up new revenue streams. 

The circular economy, for example, offers up multiple opportunities for businesses to innovate and change for the better: building in real sustainability and resilience, while cutting costs. Regenerative business models – from AI-driven tech recycling technology to soil-conditioning fertiliser alternatives to smart and sustainable plastics alternatives – are revolutionising markets and attracting billions in venture capital.

 The Wellbeing Economy – a global movement spearheaded by six WeGO nations – for example, seeks systems change that puts people, health and planet before profit. It is already growing exponentially at a grassroots level in Wales and Scotland.

Ultimately, all these risks, opportunities and fluctuations boomerang back to good corporate governance and stewardship. Responsible business principles and clear leadership are more critical than ever in an unstable and volatile world. 

Company directors and SLTs may even find themselves feeling grateful this year for the solid groundwork and boundaries laid down by their sustainability roadmaps, climate action plans and EDI processes etcetera, as they help to steer the ship through the choppy and unchartered waters of 2025.