BCG Asks: Has Sustainability Become Unsustainable in 2025?

After years on an upward trajectory, is it possible that the corporate sustainability movement is beginning to falter?

This is a question posed by Georg Kell, Founder of the UN’s Global Compact, Martin Reeves, Chair of the BCG Henderson Institute, and Helena Fox, Ambassador for the Institute.

In a newly published think-piece the three co-authors posit that, whilst sustainable business practices have surged in recent years, changes in the political and economic landscape are prompting some companies to backpedal on sustainability.

“After leaping forward in the early 2000s the corporate sustainability movement now faces multiple potent obstacles to further progress, including the fracture of global collaboration platforms, domestic political backlash and a resulting dilution of mindshare,” explains Martin.

This backlash has come into sharp focus in 2025. ESG, DEI and net zero are just some of the tranches of sustainability to have found themselves in the firing line in the first few months of the year.

The concern is that immediate financial priorities are overtaking long-term environmental and social goals.

How political headwinds are reshaping corporate priorities

BCG’s think-piece cites the resurgence of ‘power politics’ and geopolitical tensions as one of the main reasons for the change in the way businesses approach sustainability.

"Trade and investment policies are no longer designed solely to foster economic growth and well-being," the authors say.

"Instead, they are used to defend and enhance geopolitical aspirations."

The authors also suggest that economic nationalism is gaining traction, with governments prioritising domestic industries and national security over global cooperation.

This shift has undermined international sustainability initiatives and weakened regulatory frameworks designed to drive corporate responsibility.

As a result, companies are facing pressure to align with national interests rather than long-term global sustainability goals.

The impact of these geopolitical shifts is evident across multiple industries.

Some of the world’s leading car manufacturers, including Ford, GM and Volvo, have scaled back electric vehicle expansion plans, citing fluctuating demand and economic constraints.

Energy companies have cancelled or postponed green projects, while financial institutions, including five of Canada’s largest banks and six major US banks, have exited the Net Zero Banking Alliance.

The retreat of these firms signals a broader recalibration of sustainability commitments in response to volatile economic conditions.

“Politics isn’t just creating headwinds for sustainability; it’s deepening the misalignment between markets and reality,” says Ioannis Ioannou, Associate Professor of Strategy & Entrepreneurship at the London Business School.

“Geopolitical tensions and economic nationalism are reinforcing short-term pressures just when businesses need long-term resilience.”

The uncertainty surrounding sustainability regulations

Regulatory uncertainty further complicates corporate sustainability efforts.

The US has shifted its stance on environmental agreements multiple times and its withdrawal from the Paris Agreement signals another period of climate policy instability.

In Europe, sustainability regulations face growing resistance from businesses concerned about their impact on competitiveness.

According to former President of the European Central Bank, Mario Draghi, the EU faces an “existential crisis” if it doesn’t address its dwindling global competitiveness.

With regulatory frameworks in flux, businesses must navigate an increasingly fragmented policy landscape.

Many firms are now prioritising short-term resilience over long-term sustainability investments, leading to concerns that the progress made over the past two decades could unravel.

Will climate realities ultimately dictate business strategy?

Despite the current retreat from sustainability commitments, the long-term reality remains unchanged.

Climate change is an unavoidable factor shaping economic and business decisions.

"While politics may trump other considerations in the short term, planetary realities ultimately shape politics," the report warns.

The increasing frequency of extreme weather events and escalating costs associated with climate-related damages will continue to influence market forces.

Technological advancements in renewable energy and sustainable business models offer a potential pathway for corporations to integrate sustainability with profitability.

Companies that invest in resource efficiency and green innovation are likely to gain a competitive advantage as regulatory and consumer expectations inevitably shift once more.

Market responses, such as rising insurance premiums and increased agricultural prices due to climate-related disruptions, further reinforce the economic necessity of sustainability.

Navigating the transition

For businesses, the challenge is not choosing between idealism and abandonment but finding a pragmatic balance.

"The two strategies which are least likely to be viable are, on the one hand, pressing ahead idealistically as if nothing had changed, and on the other, dropping the sustainability agenda entirely," the authors of BCG’ think-piece say.

Companies that succeed in this evolving landscape will focus on resilience, strategic adaptation and innovation.

Strengthening local engagement, prioritising sustainability initiatives that align with economic interests and anticipating future regulatory shifts will be key.

BCG’s experts say that businesses that view sustainability as a core component of long-term strategy rather than an expendable cost will be better positioned to navigate the turbulence ahead.

“Climate change is where short-term thinking and long-term consequences collide for businesses and governments alike,” says Henry M. Paulson, former Secretary of the Treasury for the US government.

“Meeting the challenge of climate change calls on both to assess the risks and act before the economic and environmental consequences of failure are irreversible.”

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