The pro-sustainability era in the US underneath the Biden Administration has come to an abrupt end. However, while the government has chosen to lean into carbonization, sustainability will persist, albeit in a potentially different manner. There is a clear link between geopolitics and sustainability efforts, through regulations, supply chain disruptions, and more, but irrespective of political volatility, the business case for sustainability remains.
Why It Matters
Political Influence: Politics have a key role in sustainability efforts, defining baselines, creating enforcement mechanisms, and controlling energy accessibility.
Economics of Sustainability: Sustainability simply makes sense on an economic level, reducing costs long-term and enhances the resiliency of supply chains and standard operations.
Geopolitical Variance: The impacts of concerning deregulation in concentrated regions is limited; multinational corporations are often constrained by the most stringent regulations within their area of operations.
Details
In just a few weeks of the new administration, sustainability has become a taboo notion in the United States. Government regulations have been repealed en masse, and a wave of oil-and-gas executives have been nominated to key roles within the government, stoke fears of climate impact regression
This marks a significant regression in climate policy in the home of the globe’s largest economy, but all is not lost. Businesses remain largely on track to increase sustainability commitments, even as government regulations and mandates ease the constraints.
These investments are unlikely to exist in the same manner though as Forbes contributor, David Carlin, identifies that “sustainability is not retreating – it is evolving.” This is expected to push sustainability commitments away from the public eye, trading grand press conferences for back door meetings to avoid federal scrutiny. Carlin also highlights that sustainability is on pace to become further integrated into the regular operations of companies, becoming the new norm of business.
Geopolitical circumstances have largely controlled businesses. McKinsey’s latest Global Survey on economic conditions indicates that modern business leaders view geopolitical tensions as the biggest risk to economic growth. However, this may not be the case for the growth of sustainability investments.
The actions of US government are unlikely to dissuade financial investment on the global stage as the Capgemini Research Institute identifies that 62.5% of businesses are expected to increase sustainability spending by an average of 10.5%, from a recent survey of 2,500 global business leaders. US policy is isolated, and multinational corporations are still subject to regulations in more stringent regions such as the Eurozone.
This insulatory effect is further compounded by the economic benefits of investing in sustainability. PwC’s 28th Annual Global CEO Survey finds that two-thirds of the CEOs surveyed reported that climate investments reduced costs or had no meaningful impact on costs, meaning that sustainability initiatives have on net, been positive for business operations. PwC identifies that “a clear global trend is emerging: aligning climate-friendly investments with long-term business strategies drives stronger financial performance.”
The US is poised to regress in climate policy, and it’s a certainty that this will hinder global efforts, but concerns may be overblown. Companies ought to shift their calculus for sustainability investments away from what is required and consider the financial gains that may be achieved.
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