Introduction
Sustainability professionals are perhaps used to working in challenging circumstances, but currently, we seem to be working within a growing paradox. We are seeing accelerations in external global challenges such as climate change, ecological breakdown and growing social inequality, while simultaneously corporate commitment and actions on sustainability might seem to be softening as a result of economic and political shifts.
This article considers some of the main challenges to business sustainability/ESG and examines their implications.
The main challenges threatening sustainability/ESG
While pursuing business sustainability/ESG has perhaps never been straightforward, some of the obstacles are changing. Old challenges are reappearing and new ones are gaining prominence. What are we seeing?
- Intentional pushback – where a focus on and investment in more sustainable business practices are being seen as a political hot potato, evidence of ‘dangerous’ progressive values or just simply a distraction from ‘the business of business is business’.
- Economic challenges – when economies are struggling and there’s greater uncertainty, businesses naturally seek to retrench, cut costs, or postpone investments. In such circumstances, organisations without a clear understanding of the centrality of sustainability for their future success can see sustainability and ESG as unnecessary costs or dispensable activities.
- Regulatory scale-back and reversals– as seen currently with the EU’s Omnibus proposals, delays to deforestation regulations and the reorientation of the SEC’s approach to climate change (which might be categorised as shifting from grudging acceptance to active rejection).
For sustainability professionals, this move from an agenda that previously moved forward to apparent backward steps can be crushingly disappointing. If you entered the profession during a growth period for sustainability, where the agenda was widely accepted and the investments and engagement were more readily available, retrenchment can easily feel like failure.
But, since its inception, corporate sustainability has often felt precarious, vulnerable and uncertain. At every economic downturn over the past (at least 30 years), sustainability has been seen as dispensable at best, or disposable at worst.
The challenges for the meaningful acceptance of the sustainability agenda have never really changed. Many organisations still don’t understand, or haven’t recognised, that, just like any other set of strategic issues capable of affecting their business’s performance and future success, sustainability is not about nice-to-have fripperies, but need-to-have fundamentals.
Within the social networks of sustainability professionals, it’s not hard to find people who are disheartened by recent challenges to the agenda, by a lack of priority from senior management, buy-in from leadership or concern about policy pushback and outright dismantling of the agenda.
However, it is worth recognising that such pushbacks are not new, not unique and may not persist. Change, is after all, unchanging.
What isn’t changing, however, is the urgency that requires companies to respond to fundamental sustainability trends, which are not subject to political whim, ideological sophistry or shifting sentiments. The climate doesn’t care about politics, planetary resources don’t suddenly become more plentiful just because we might wish they were, and foundational ecological functions won’t cease to break down if we ignore that they underpin all economic activity.
Remembering and reinforcing the strategic imperative for sustainability, that no organisation can hope to survive over the long term by ignoring strategic factors that will shape that survival, is perhaps more important for sustainability professionals than ever.
Sustainability is still a priority for business
In our client conversations, we continue to see rising pressure from stakeholders. Investors, customers, staff, and NGOs are demanding clear policies and strong performance. They expect action on climate and carbon, sustainable supply chains, and the identification and management of material issues. These expectations are growing and show no signs of slowing down.
They are consistently asked what sustainability means for their business, what they focus on, what their ambition and objectives are and how they are performing in managing and delivering impact reductions.
Some of the biggest pressures that they are experiencing are from customers, especially for those companies in B2B supply chains selling to big brands with their own sustainability programmes and high ambitions. This pressure is especially mounting for sales and marketing teams, where the consistency and scale of the questions they are asked about sustainability is growing.
This personal experience is backed up by wider research showing that sustainability remains a significant priority and challenge for businesses that are aware of and seeking to manage their environmental and social risks and opportunities.
One recent example is the Bain & Company report ‘The Visionary CEO’s Guide to Sustainability 2025’. Bain’s research found that there are shifts in how leading companies talk about sustainability, moving from linking it to purpose and the moral imperative for their organisations, to a clearer and more consistent focus on the role that sustainability has for their resilience and financial performance.
“Today’s CEOs have moved from moral value to business value, aligning sustainability with core business risks and operational realities such as costs, customers, commercial motions, and capital investments…. The ‘quiet CEO’ speaks less about sustainability, but when they do, they frame it as a concrete lever of business value.” (p 5. The Visionary CEO’s Guide to Sustainability 2025).
Returning to and reinforcing strategy
To make sustainability a core priority amid growing challenges, practitioners must clearly understand, and communicate, why it matters. That clarity starts with returning to and reinforcing strategy.
The need for effective strategic analysis
All organisations, to varying degrees, undertake and execute strategic analysis regularly. They use analysis and tools to assess the factors, drivers and trends that present sources of strategic risk and opportunity, ensuring that they understand how their markets will change, how their access to the resources they depend upon may be affected by global trends and what factors and innovations may shape the future of their sectors.
However, what they don’t all do, or do effectively, is adequately integrate and assess the potential implications of sustainability issues into such analyses.
There are several reasons why sustainability is poorly addressed in traditional strategic planning. First, it’s hard to link complex global trends to specific business impacts. Second, many companies lack the knowledge and skills needed to understand sustainability deeply. Third, most environmental and social issues are not properly priced, even though they pose real risks and opportunities. These issues often exist as externalities, outside standard financial analysis.
Environmental and social externalities are costs or benefits which are not reflected in market prices. Historically, economic systems have assumed natural resources to be abundant and free, leading to the exclusion of critical environmental and social impacts from financial metrics. These unpriced externalities – such as pollution, resource depletion, and labour conditions – are real and material, yet they are rarely adequately accounted for in corporate risk assessments, operating costs, or valuations.
Effective strategic analysis can go a long way to overcome these challenges, as it allows an organisation to identify, assess and understand not only what issues will affect long-term success, but also how they may do so.
Three steps for undertaking effective strategic analysis
While the long-term need for sustainable business practices is widely recognised, many organisations still struggle to build a compelling short- to medium-term business case. To overcome this challenge, companies should adopt a structured, forward-looking approach that embeds sustainability into core strategic planning.
Step 1 – Relating big picture trends to your operating and competitive context
The first step is to assess relevant trends. Businesses should evaluate how macro-level sustainability drivers such as climate change, resource scarcity, demographic shifts, technological disruption, regulatory changes, and evolving ethical standards might influence customer expectations, societal norms, and industry dynamics over the next 5, 10 and even 20 years.
Step 2 – Assessing the implications for your organisation
Organisations should analyse the strategic implications of these trends. This involves assessing their potential impact on operational costs, risk exposure, brand reputation and corporate values, alignment with customer demand, and regulatory compliance. Understanding these dimensions helps identify both vulnerabilities and opportunities.
Step 3 – Sustainability stress testing
Finally, companies must evaluate the long-term resilience of their current business models. This means considering whether ‘business as usual’ is likely to remain viable into the future, or whether strategic transformation is necessary to ensure resilience, relevance, and competitive advantage in a rapidly changing world.
Where is your business case? Sustainability and value
Practitioners and the organisations that they work with need a clear view of the strategic issues and challenges that they face, and their potential implications for current and future resilience.
But it is just as important, perhaps now more than ever, to have a clear business case for sustainability.
This is because sustainability is increasingly under scrutiny, with professionals increasingly asked to justify themselves. When economic, financial and political pressure may be driving companies to think twice about what they prioritise and what they spend, sustainability can sometimes be seen as a cost, or a nice to have that may or may not be part of core business.
Sustainability experts must show how improved performance boosts profit, market access, and revenue. Yet they can often struggle to link their work to financial metrics, strategy, or value creation.
We have written extensively on seeing sustainability through a value creation rather than cost management lens, and also on sustainability and financial outperformance, but in simple terms sustainability relates to business value across four key dimensions:
1. Revenue
Sustainability is increasingly a condition of sale, with customers demanding detailed strategies, targets, and evidence of performance – especially on issues like carbon reduction, deforestation-related resources and circular economy innovation. It also drives growth by enhancing product innovation, sales, and margins, with leading customers and investors seeking granular insights into sustainability-linked financial performance.
2. Costs
Efficiency in resource use directly improves profitability. Optimising input costs strengthens the relationship between expenditure and revenue generation.
3. Intangibles
Sustainability contributes to intangible value such as brand equity, leadership credibility, and stakeholder trust. Sustainability and ESG performance can influence access to capital, investor confidence, and customer loyalty, with governance seen as a key indicator of strategic maturity.
4. Risk
Sustainability can give rise to or be subject to critical risks such as supply chain disruption, regulatory shifts, climate impacts, and reputational threats.
Effective risk functions must integrate these factors to ensure resilience and informed decision-making. We are increasingly working with clients to integrate the results of their double materiality assessments into their Enterprise Risk Management (ERM) processes, so that sustainability risks are not seen or managed separately, but are considered as core to risk management and mitigation.
Sustainability will affect each organisation differently across the four dimensions of value. For some, the greatest impact may be on intangible value, for others on revenue, market position, or costs. However, in all cases, sustainability has the power to shape both risks and opportunities.
For a fuller overview of sustainability and business value, see our article on Sustainable value creation.
Conclusion
If your sustainability efforts are driven only by regulations and external policies, your strategy and business case will likely be weak or need serious improvement.
None of the threats or trends demanding meaningful responses and significant change in business practices have gone away. Corporate sustainability is still an existential requirement for most businesses, and developing effective strategic analysis, assessment and options is the essential foundation of corporate sustainability.
The long-term business case for sustainability is clear. There is no profit on a dying planet or in collapsing societies and markets. Sustainability professionals must help their organisations understand this. Companies cannot afford to ignore, sideline, or underinvest in sustainability. It directly affects performance, market access, and profitability, now and in the future.
