Many of the world’s largest companies spent 2024 preparing for sustainability to move front and center in their business. One global survey of more than 5,000 companies indicated that 90% planned to increase spending on sustainability in the next three years. Two International Sustainability Standards Board standards, burgeoning European regulation on climate and human rights, and ESG legislation in over 20 U.S. states combined to indicate sustainability would shift from a nice-to-have to a must-have for corporates, from “from voluntary to mandatory.”
Just one month into 2025, executives and board members are asking whether this momentum holds. The is no shortage of headline-grabbing developments: an executive order to withdraw from the Paris Agreement in the United States, loss of high-profile members from a flagship finance industry collaboration on decarbonization, and a range of other events suggest setbacks for what some analysts have called the “ESG agenda.” In some quarters, there is handwringing and in others, victory shouts. Leaders face a barrage of contradictory signals.
Amidst the noise, leaders can stand out by keeping their reasoning consistent and their focus clear. The central question leaders need to ask has not changed: What does sustainability mean for my business, now and in future? Here, language can distract. That ESG had become contentious, ill-defined, and politicized is not a new observation. A key reason for this is ESG, sustainability, and related terms have come to serve as an imprecise proxy for a much bigger question: What is the role of business in society? That this role is far from universally agreed is not surprising. It is this very complexity that offers the opportunity for leadership.
Leaders who engage in systematic, ongoing review of their business impacts and dependencies on social and environmental systems are rewarded with powerful business insights. Done well, this process will not only identify risks and opportunities your competitors may overlook but also flag up ways you can collaborate to overcome those shared across your sector. This strategic approach is far from greenwashing or a compliance exercise. When done with an innovation lens, it is transformational for strategy and your ability to create value.
No matter what 2025 may bring, here are four key questions that will empower you to lead effectively.
- Can my leadership team and board identify our company’s top three sustainability-related risks and opportunities?
- Which sustainability-related risks and opportunities do we track consistently, and where do we need more information or data?
- Do we have a clear process to reflect these risks and opportunities in our strategy and decision-making?
- What mechanisms do we have in place to govern sustainability-related opportunities and risks over time?
The debate about the role of business in society has been ongoing and will continue to evolve. Leaders who stay the course with a robust and strategic approach to understanding the role of sustainability in their business will be well-positioned to create value that outlasts today’s headlines.
Source: Forbes
