[Welcome to 2025. A couple of weeks ago HBR published my annual look back at sustainability. It wasn’t an easy year. But one very positive story cropped up in the last week…Costco bucked the pressure of pulling back on diversity and inclusion (Theme #2 below). They issued a nicely worded ‘buzz off’ message to anti-DEI activists. Costco has a long history of doing right by employees. Bravo.]
This was a rough year for corporate sustainability, especially in the U.S. While there are positive stories and reasons for hope, the path to a just world and healthy planet undeniably got more difficult. In fact, in my more than two decades working in sustainability, this is the first time I’ve seen companies publicly declare a retreat from social goals or climate action.
Three existential challenges — climate change, biodiversity loss, and inequality — continue to get worse.* In 2024, we saw the hottest day in recorded history, a UN estimate that we’ve lost an unprecedented 73% of wildlife over the past 50 years, a rising gap between the uber-wealthy and the rest in most of the world, and a backlash against diversity, which isn’t helping to improve racial and gender equity (in a context where a majority of Americans support DEI).
With the so-called anti-ESG movement gaining steam and claiming some high-profile victims, businesses now face a volatile mix of pressure to both “stay out of politics” and help solve our shared societal challenges.
So as the year comes to a close, let’s look at some top themes in sustainability, starting with three big challenges that dwarfed the others.
1. Elections and political turmoil threaten progress.
More than half the world voted in national elections in 2024, with seismic results. Incumbents generally lost, and far-right populist parties held or gained power in many countries, including the U.S.
This the number-one sustainability story, because far-right populist parties are typically hostile to action on climate change or, at best, want to do nothing. (In the realm of autocratic leadership, however, China stands as a notable exception.) And on the social sustainability agenda, the economic policies of this group are likely to make inequality worse (e.g., President-elect Donald Trump’s proposed tariffs will, economists conclude, raise prices, which hits the poorest the hardest).
Early signals from the incoming Trump administration are not promising for climate action or diversity and inclusion. He has nominated an oil executive for energy secretary, vowed to pull the U.S. out of the Paris Climate Accord again (despite a plea to stay in from the CEO of Exxon Mobil), plans to hinder the transition to electric vehicles, and threatened to gut President Biden’s Inflation Reduction Act, one of the largest investments in climate action ever. There’s additional concern about what Trump-appointed judges might do to undermine environmental and social progress. This year, for example, an important ruling from the U.S. Supreme Court made it harder to regulate the environment and public health by throwing out the 40-year-old Chevron decision.
What this all means for business is murky, but there will be headwinds for most aspects of the sustainability agenda, putting more burden on business to drive change themselves.
2. Some companies retreat.
This year we witnessed something new — the anti-sustainability statement. Fearing boycotts and pressure on social media, some companies rescinded or scaled back on their previous commitments to diversity, LGBTQ+ rights, climate goals, and even just “cultural awareness.” Notable examples include retailers Tractor Supply Company, John Deere, Jack Daniels, Black & Decker, and the world’s largest company by revenue, Walmart.
There’s significant evidence that diversity of thought and backgrounds creates value for companies. So, these pullbacks don’t seem strategic in that sense. They seem to be mainly about avoiding threats to brand and sales from potential boycotts, and even to prevent employee harassment. While there’s some risk-reduction logic here, these companies perhaps underestimate the potential increased risks. What does it do to a brand to, say, demonstrate to gay employees and customers that you no longer support their rights?
Far more common than these outright retreats was “greenhushing” — going quiet about sustainability efforts. As one CEO I spoke with said, “We’re still committed to our sustainability goals, but we’re not going to stick our chin out.” In the end, most corporate environmental work, such as reducing carbon emissions, will likely continue — they’re doing it because it’s profitable, after all. But the social side seems less sure. From my conversations with dozens of companies, it seems like there are real changes going on, as diversity work is downplayed (or renamed) and sustainability gets put on the back burner.
Despite the pressure on investors about their sustainability efforts and ESG products — which include accusations of “wokeness” from the anti-ESG world and “greenwashing” from sustainability advocates — green investing hasn’t been killed. BlackRock still raked in money for its ESG and clean economy funds, and even state-level anti-ESG legal action slowed somewhat.
Still, all of this turmoil is having a chilling effect on open dialogue and collaboration between companies — it’s hard to create and mobilize partnerships if you’re literally not talking, which could slow action for years. Fear of controversy and bad publicity can drive non-strategic, short-term, reactive choices. Going quiet doesn’t help solve the biggest issues society is facing. With people around the world wanting to know a company’s position on big issues, and consumers buying from brands that match their values, you can’t sit it out — there are no sidelines.
3. Sustainability reporting requirements overwhelm companies.
Any company listed in or with a subsidiary in the EU — some 50,000 organizations — will need to comply with the EU’s Corporate Sustainability Reporting Directive (CSRD), which goes into effect in 2025. The requirements are not yet perfectly designed to drive results on sustainability performance, but in the long run, mandatory measurement and reporting is a good thing – it requires at least some attention to sustainability, and as the maxim goes “what gets measured gets managed.”
In the short run, however, sustainability departments are expending tremendous energy and time developing new systems and processes. They have to report on their impacts on society, which for some (especially midsize companies) is something they’ve never done before. Most are also struggling to get good data on their value chain emissions (called Scope 3).
At a tactical level, these reporting needs likely did more to slow real action in 2024 than the previous two big trends. Getting ready for regulations has pulled attention and resources away from the real, hard work of making a company more sustainable. One encouraging trend: I’ve met execs at large companies with newly created ESG reporting roles within finance departments, which should help reduce the load on sustainability people.
Some other notable themes from the past year:
4. Clean economy hits tipping points.
Carbon emissions are still rising, but this year saw some exciting progress. The UK shut down its last coal plant, reducing its reliance on coal for electricity from 80% in 1990 to zero today. This shift contributed to the EU’s 8% reduction in emissions last year. Hawaii also replaced its last coal plant with a giant battery-storage facility.
Global clean tech investments are hitting an estimated $2 trillion in 2024, double the investment in fossil fuels. And despite some efforts to slow clean transportation in the U.S., EV adoption surged elsewhere, with more than 50% of new car sales in China being electrics or hybrids.
5. AI’s exponential growth threatens decarbonization efforts.
The tech giants — Amazon, Apple, Meta, Microsoft, and Google — are some of the largest buyers of renewable energy in the world. But after aggressively reducing emissions for years, the exponential growth of AI is both stressing global electricity supply and blowing a hole through their goals. In the last four years, Google and Microsoft’s emissions were up 50% and 30% respectively.
The long-term potential is high for AI to help solve our biggest problems and cut emissions. It can help make buildings and transportation more efficient, manage clean grids, reduce food waste, and much more. But for now, the energy draw and emissions growth are outpacing the benefits.
6. Heavy industry makes some progress.
Some of the heaviest-emitting industries have been quietly adopting lower-carbon technologies, such as electric arc furnaces. One of my favorite stories of the year comes from a client, Trane Technologies, a leader in climate control systems. As part of its decarbonization efforts, it sourced some low-carbon steel, betting that some big customers, like data centers, would want lower embedded carbon in their equipment. In short, it worked, and both Trane and some tech giants spent more on the greener option.
This was great to see, as the “business case” for sustainability has been burdened with proving it always costs less. Companies offer product attributes, whether for sustainability or other benefits, that cost more all the time, and this was one that some customers really wanted.
7. The beginning of a crackdown on “greenwashing.”
Companies are often accused of greenwashing if they seem to be claiming environmental leadership but don’t back it up with measurable action. But now media stories or social media complaints about greenwashing are evolving into real laws. An EU directive is going after companies for greenwashing in marketing. Food and agriculture giant JBS saw opposition to a planned listing on the U.S. stock market because of allegations of “fake sustainability claims to boost sales.” Interestingly, I heard about these cases from companies who were worrying about being sued over greenwashing claims, despite the relatively small number of current legal actions targeted at specific sectors. So, it’s not a huge theme yet, but its impact on the mood around sustainability is real.
8. Honorable mention: Microsoft and Unilever question their own lobbying.
The role of business in shaping sustainability policy is underappreciated (and will be more needed now given the election results). These two big brands issued reports to, in Microsoft’s words, “evaluate how well [our] trade associations align with our own sustainability goals and values.” Both found misalignment between what some major associations were pushing for (or against) and their own aggressive carbon reduction goals. Opening up these gaps to public scrutiny is unusual and shows leadership.
*Dishonorable mention: Boeing prioritizes profits over safety.
If you were to make a list of product attributes that are critical for planes, you’d start with safety, safety, and safety. An obsession with cost-cutting and short-term profit maximization caught up with Boeing this year. It’s part of social responsibility to keep employees and customers safe. This story is a business and sustainability failure.
. . .
During the early pandemic years and the ensuing economic turmoil, sustainability efforts at companies actually increased. It gave me hope that sustainability was here to stay. It’s still on the agenda in multinationals — with regulations and stakeholder pressure they have to do some things — but otherwise, it seems there are few CEOs wanting to lead on this issue today.
This situation is dangerous and frankly surreal since our environmental and social challenges are only getting more obvious and more expensive.* So, how do we get back on track in 2025, especially with less help from national governments? A few things could help. Many regional, state, and local governments will continue to push for climate action, support the clean economy, and defend human rights. Employees that care about these issues could make their voices heard.
And business could step up to fill the gap. When President Trump pulled the U.S. out of the Paris Climate Accord in 2017, hundreds of companies signed a statement declaring “We Are Still In.” And when the Dobbs Supreme Court decision took away abortion rights, many companies told their employees they would pay for travel to states with better reproductive care.
Things will be different in 2025, and uncertainty about the role of business in society has never been higher. But with courage, companies can get back on the path to creating a thriving world.
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*Climate change has become impossible to deny (though many try). The EU issued a “climate breakdown” warning. In 2024, we saw brutal, record heat waves in southeast Asia, the southwest U.S., and the Middle East, where more than 1,300 people died during the Hajj. Extreme weather is getting bigger — scientists proposed a new Category 6 for monster hurricanes — and more expensive: droughts threatened the flow of the giant shipping conduit, the Panama Canal. Biodiversity loss became more apparent. And on inequality, power has concentrated into fewer, wealthier hands (e.g., President Trump’s proposed cabinet would have the most billionaires and highest wealth, by far, in history).
(Image: iStock, Jan-Otto)
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