Is Trade War Forcing Firms to Compromise on Sustainability?

Trade tensions and shifting tariff policies are putting pressure on corporate sustainability strategies, with business leaders increasingly forced to weigh economic pressures against environmental and social commitments.

According to EcoVadis, part two of the 2025 US Business Sustainability Outlook reveals that 72% of US executives identify tariffs and trade wars as the leading external supply chain risks.

Yet the sustainability implications of these pressures could prove far more consequential than the immediate financial impacts.

The research indicates that 56% of respondents anticipate these issues will compel compromises on sustainability or ESG priorities, with 22% expecting major impacts.

This trend raises questions about the resilience of corporate climate commitments when faced with economic headwinds.

Only 23% say they will uphold their ESG strategies and commitments regardless of tariff and trade pressures.

"Tariffs and trade wars are intensifying the pressure on supply chains and exposing cracks in sustainability commitments," says Pierre-François Thaler, Co-Founder and Co-CEO of EcoVadis.

"The companies that will come out ahead are those using supplier intelligence to see risks early, diversify their options and avoid letting short-term shocks derail long-term resilience."

The study, based on responses from more than 400 executives at US companies with revenues exceeding US$1bn, reveals how environmental commitments are colliding with multiple risk factors including escalating trade pressures, climate events, labour issues and cyber threats.

C-suite leaders demonstrate a broader sustainability perspective than their operational counterparts, with 41% citing extreme climate events as a top concern and 40% pointing to geopolitical conflict.

These priorities suggest an awareness that environmental risks could have long-term business implications comparable to immediate trade disruptions.

Climate risks compete for attention

Directors and Vice Presidents emphasise cyber threats and labour disruptions, both cited by 36% of respondents, with a third highlighting ESG regulatory compliance across regions as a primary concern.

Risk and compliance leaders show different priorities, with nearly two-thirds (63%) naming cyber threats as their top concern above tariffs and labour disruptions.

Among these executives, 58% identify tariffs as their primary worry and 42% point to labour disruptions.

Just over a third of finance leaders flag cyber threats and just under a third acknowledge climate risks.

Meanwhile, 44% of supply chain leaders point to ESG regulatory compliance across geographies and 39% cite geopolitical conflict.

Sustainability under strain in supply chains

According to EcoVadis, these pressures are compounding broader supply chain disruptions with environmental consequences.

Nearly half (44%) of companies endured between four and 10 disruptions last year stemming from third-party failures, trade disputes, labour issues or environmental events.

Leaders are responding with strategies that could support or undermine sustainability goals.

The research shows 61% are focusing on value chain collaboration and reformulations, whilst 56% are pursuing alternative sourcing for key components.

Additional responses include:

• supplier ESG engagement (52%)
• shifting sources away from risky regions (51%)
• enhanced risk management (36%)
• continuity insurance (20%)

Hidden environmental risks persist

The sustainability challenges prove particularly acute among larger organisations.

Among companies with revenues over US$20bn, 30% admit covering up major sustainability risks in their supply base because the affected suppliers were vital to their business, compared to 16% of all companies surveyed.

Despite repeated climate events including wildfires and hurricanes, 21% of firms report taking no actions on related supply chain risks.

This inaction carries significant environmental and financial consequences.

EcoVadis predicts that the cost of inaction could reach US$500bn annually by 2030, facing companies with potential annual liabilities of this magnitude.

This projection becomes especially significant considering that a company's supply chain accounts for 21 times more emissions on average than its direct operations, according to the study.

The findings suggest that supply chain sustainability could prove more critical to meeting climate targets than operational improvements alone.

However, the first report of the 2025 US Business Sustainability Outlook found that most companies are continuing to invest in sustainability, even amid regulatory rollbacks and greenhushing, indicating that commitment to environmental goals persists despite mounting pressures.