Climate Week NYC arrives at a telling moment. The world has just lived through the hottest August in recorded history, with heatwaves, floods, and wildfires affecting communities across the globe. Yet many business and government leaders have become a lot less vocal on urgent environmental and social challenges. With climate effects multiplying, many lofty net zero commitments have recently come back down to Earth with a bump.
We have seen missed deadlines for setting meaningful science-based targets, high-value opportunities such as AI have led to increased absolute emissions, and some companies are moving away from goals entirely by declaring they would be unrealistic without wider systemic transformation.
Humanity has no choice but to confront the climate crisis. The need for action is obvious, as are the consequences of delay, which will be measured in people’s livelihoods as well as corporate balance sheets. Yet there remains a very important business strategy question: whether much-needed political, technological, and economic change will happen sooner or later? And how should companies respond to this commercially, while driving forward genuine transformation on corporate sustainability?
Risks become reality
This year’s heatwave laden summer in the Northern Hemisphere served as a reminder that we are edging ever closer towards the sharper end of the climate crisis, where predicted threats are now experienced events. People are losing homes and harvests, and the burden often falls hardest on those least able to bear it. There have also been notable knock-on effects on energy security and affordability, directly affecting the transition to more sustainable systems. And the pressure is sure to grow.
In the energy industry – where I have spent most of my career – while companies are getting to grips with managing variable output from the record-breaking growth in renewable power, climate impacts are now disrupting the baseload capacity on which our electricity systems rely.
Lower water levels in lakes and rivers are significantly curbing essential hydroelectric generation at sites such as the Hoover Dam in the western United States. In southern France, a lack of cooling water has affected gas and nuclear plants, while low water levels in the Danube have contributed to a full-blown energy crisis in Eastern Europe. These and other factors make energy less secure and more expensive.
During an unfolding El Niño year, we are already witnessing unprecedented climate pressures, which are pushing prices up and constraining company growth. Science tells us this will become a new normal. While the human toll is evident, the economic impacts are also becoming ever clearer, pushing energy prices higher and contributing to their volatility.
Wildfires have been damaging infrastructure and assets from Indonesia to Canada, raising premiums and making some areas entirely uninsurable. Drought is shrinking agricultural productivity, threatening price spikes for food and soft commodities, and cutting production at industrial facilities.
These disruptions are all exacerbated by – and likely contributing to – increasingly volatile geopolitics and social fragmentation. Climate is a threat multiplier, driving displacement and straining the social contract on which stable markets depend. Current dynamics suggest that we will continue to see new trade barriers, more frequent disruption to operations, and challenges to companies’ license to operate. Under this kind of pressure, efforts to steer a large business towards a more sustainable trajectory become significantly more complex.
Integration is the solution
Standalone sustainability functions have often looked to the long term without sufficient recognition of the day-to-day demands faced by their own organizations’ commercial teams. On occasion, overly exuberant executives have set up their successors for failure, by publicly pursuing audacious, sometimes inspiring, but ultimately unachievable goals as a part of their legacy.
Companies with admirable ambitions can still fail to build resilience, uphold cost control, and preserve business continuity while improving sustainability performance. Those that find a way to genuinely integrate sustainability into decision-making across core functions – particularly finance, operations, logistics, and procurement – while seizing the commercial opportunities presented by the net-zero transition will be best placed to succeed.
In many organizations, this process is underway but still in its early stages. Too many executives have been able to disregard the recommendations of their sustainability colleagues, finding ways of delaying difficult but inevitable decisions and avoiding short-term pain at the cost of longer-term gain. But this leaves them exposed to serious and escalating impacts.
Accelerating the transition can help transform sustainability from a compliance cost into a genuine performance catalyst: managing risk, improving efficiency, and capturing new sources of value.
Embracing pragmatism
Alongside other members of the Council on Sustainability Transformation, convened by ERM, we have identified five key recommendations in a new white paper that leaders should adopt to improve sustainability integration.
The first is to reposition sustainability within the business, treating it as a cross-functional capability embedded in strategy, planning and operations rather than a separate workstream. The second is to reframe it in financial terms, translating sustainability risks and opportunities into quantified financial impacts on cost, productivity, resilience, and competitive advantage. The third is to prioritize resilience-critical investments, focusing on the initiatives that most clearly strengthen performance and enable efficiency gains, revenue opportunities or differentiation.
Alongside these, accountability needs to be reassigned across the business, with responsibility embedded in core functions such as finance, operations, procurement, and technology so that sustainability is tied to execution. Capability must be built to realize impact, equipping teams with the data, tools, and shared language they need to apply sustainability insights in their day-to-day decisions.
This is not about adding another layer of process into decision-making, but making sustainability an integral part of learning, deciding, and executing. Companies that keep environmental and social factors separate from core decision-making will be more exposed to shocks and miss out on value. Those that get it right can improve performance and turn sustainability into a lasting source of competitive advantage.
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