The world seems to be in turmoil. We are witnessing ongoing wars, economic troubles characterized by inflation, debt, and GDP stagnation, rising populism, migration issues, increasing plastic waste, extreme weather events, and other challenges that contribute to a sense of unrest. In this landscape, businesses need to find a place for sustainability, adapt to this new reality, and preserve the progress made in recent years. However, we are observing a trend among companies to deprioritize environmental, social, and governance (ESG) commitments, primarily influenced by recent political developments in the U.S. and the prevailing perception that economic growth is incompatible with sustainability strategies. This blog explores the contradictions between some controversial company actions regarding ESG since December 2024 and the global risks expected for this year and the long term.
Sustainability Contradictions: How Corporations Navigate Risk and Political Pressure
According to the Global Risks Report 2025, an annual publication from the World Economic Forum (WEF), armed conflicts, extreme weather events, geoeconomic confrontation, misinformation and disinformation, and societal polarization are the top five risks for this year. The WEF report is based on the Global Risks Perception Survey, which includes over 900 experts from academia, business, government, international organizations, and civil society. Therefore, we should understand that it captures a very broad scope of opinions and real-world issues. Nevertheless, there is a contrast between these results and what we see today: a noticeable trend among companies from different sectors in either abandoning ESG goals or, in other cases, softening them.
One of the latest cases involves a well-known UK bank moving its Head of Sustainability to another position within the same bank and appointing another person as Group Head of Sustainable & Transition Finance. The press source said the decision was made “following growing threats from anti-ESG policymakers”. It seems that adding the word Finance to the role, or not having one person exclusively in charge of sustainability, adds more credibility or lowers risk in the eyes of investors and politicians. In any case, this highlights the contradiction between the top five risks identified in the WEF survey and the actions taken by the business world under political pressure.
The influence of politics on the sustainability strategies of countries and companies is neither new nor unexpected. At the beginning of this year, the European Union issued warnings about the potential consequences of the United States’ withdrawal from the Paris Agreement, given its significant role as the world’s largest economy and one of the highest greenhouse gas emitters. This situation arises from President Trump’s second term and mirrors the events of his first term from 2017 to 2021.
At a company level, since December 2024, major U.S. banks and asset and wealth management (AWM) companies, including Goldman Sachs, Citigroup, BlackRock, and Wells Fargo, among others, have decided to quit the Net-Zero Banking Alliance in response to the Trump administration and high pressure from conservative groups and the Republican Party. Although they claim they are still committed to climate targets, it is something that no one can assure.
In the case of DEI commitments, Amazon, Meta, McDonald’s, Walmart, and Ford are putting their goals aside and withdrawing from various human rights initiatives. In January this year, The National Center for Public Policy, a conservative think tank, proposed that Apple “abolish its Inclusion & Diversity program, policies, department, and goals,” stating that DEI poses “litigation, reputational, and financial risks to companies.” This is interesting because the same argument has been used to support DEI goals. So, who is telling the truth? The answer seems to be as ambiguous as “it depends,” varying based on political judgment.
Balancing Financials with Businesses’ Sustainability and Long-Term Stability
Humanity began shaping its environment long ago, and the Industrial Revolution marked a significant inflection point for greenhouse gas (GHG) emission levels. According to Statista data from 2023, China is the country with the highest GHG emissions, representing 30.1% globally, followed by the U.S. with 11.3%, India with 7.8%, and the European Union with 6.1%. This data nearly aligned with the GDP share of these countries in 2024, with the U.S. at the top, followed by China, the European Union, Japan, and India. The correlation is undeniable. One must now consider the so-called “externalities” that these countries have permitted while pursuing economic growth. When analyzing at a company level, several studies have found that higher revenues often correlate with higher GHG emissions. This relationship can be attributed to the scale of operations; larger companies with higher revenues typically have more extensive production activities, leading to greater emissions.
Years ago, the ESG trend was flourishing, with a widespread consensus that an economy or business that grew at the expense of environmental degradation and human cost was unacceptable, rendering the traditional business model obsolete. However, since the pandemic, many economies have suffered, leading to shifts in governmental political decisions, as well as geopolitical conflicts and other international issues, such as migration. The elections last year, described as the largest election year in history with more than 70 countries holding national elections and approximately two billion eligible voters, changed the political landscape and, consequently, the way governments view the inclusion of ESG principles in businesses and the economy.
The results of the Global Risks Report 2025 state that the top four long-term risks (over the next 10 years) are related to the environment: extreme weather events, biodiversity loss and ecosystem collapse, critical changes to Earth systems, and natural resource shortages. Despite being aware of, or at least anticipating, these outcomes, some governments and companies have chosen to ignore what is evident, likely influenced by populism, immediate economic results, higher profits, and short-term approval. To illustrate this, in 2022, scientists from the Netherlands discovered plastic particles in human lungs and blood. Additionally, in 2021, they found microplastics in the human placenta. However, at the end of last year, world leaders were unable to reach a consensus on a legally binding international agreement to cap plastic production. It is worth noting that plastics are a derivative of petroleum, and the opposition primarily came from the world’s largest crude oil producers.
Like human nature, which is full of contrasts and grey areas, not everything in this new scenario is negative. There are companies creating new roles and hiring leaders for sustainability; others are adhering to their ESG strategies or are developing innovations that help reduce emissions and assist companies in achieving their ESG goals and disclosures. Additionally, sustainability-aligned international initiatives and regulations have been undertaken. This year, we will see the first reports under the Corporate Sustainability Reporting Directive in the European Union, and there is an increasing trend of countries adopting IFRS sustainability disclosure standards.
According to a Deloitte survey conducted in 2024, among corporations with revenues of at least USD 500 million or private equity funds with at least USD 1 billion in assets under management, 72% of these organizations reported deciding against proceeding with an acquisition due to the target company’s poor ESG performance. This underscores the importance of sustainability in considering the long-term financial results of a company.
A Semantic Problem
In my first blog last year, ESG Regulations in a Climate and Political Change Scenario, I highlighted the impact that a second Trump administration could have on the approval of some of them, as well as the influence that this would have on other relevant global economies adopting anti-ESG postures. The term “ESG” has likely attracted negative attention from various groups who believe that incorporating factors which do not directly affect a company’s financials will eventually reduce profitability and is therefore not worth it.
The way words can acquire positive or negative connotations depending on their context is curious. This may be what happened with “ESG,” a term first introduced in 2004 by the UN Global Compact. It was intended to be a positive concept, aimed at integrating sustainability within organizations. However, as we are currently seeing, ESG has a negative implication, as it is being associated with diminished profits among AWM firms and viewed as an obstacle for economic growth. This is partly attributable to the incorporation of ESG standards and key performance indicators, which are perceived as additional costs for companies, as well as the implementation of disincentives for certain industries or practices that adversely affect people and the planet.
It is an established fact that decoupling economic growth from GHG emissions has been challenging. The higher the GDP, the higher the emissions. Additionally, certain governments have been indulgent with sectors that make significant economic contributions to the country, permitting them to operate with minimal oversight or control. If ESG has been associated with reduced profits, it is because all costs of a specific business are being considered. Therefore, reduced profits occur because the so-called “externalities” are appropriately internalized within the business and considered a relevant aspect of the company’s operations.
In summary, this year presents significant challenges, particularly for those who believe in the potential for improvement. At Evalueserve, we are confident in our ability to help you thrive in this ever-changing environment. Our comprehensive solutions portfolio—Regulatory Radar, Sustainability and Climate Assessment, and Procurement Solutions—empowers you to anticipate and manage emerging risks. By focusing on key pillars such as ESG performance, disclosure, controversies, and geo-industrial exposure, we’ll ensure your business stays ahead of the curve and meets market demands effectively.
Discover here how Evalueserve can add value to your business strategy.
