By: Simon Weaver, Global Head of ESG Advisory at KPMG International
The global push for sustainability is facing a critical moment in history. Shifting political landscapes and pervasive uncertainty is significantly escalating the risk of a disorderly transition towards a sustainable future.
In recent months we’ve witnessed a flurry of regulatory activity, from the EU omnibus announcement to new ISSB-aligned standards in Asia. Yet, this progress is juxtaposed with the profound shift in the US towards potential deregulation. This diverging regulatory environment creates a complex and unpredictable backdrop for businesses. While many CEOs initially embraced the climate crisis as a challenge to lean into, the stark commercial realities of achieving ambitious net-zero targets have led to a noticeable corporate retreat. Fear of negative consequences for being perceived as a leader in a non-commercial position is causing businesses to “lean out” from their commitments.
This hesitation is compounded by a disconnect in current approaches. Measures like the focus on Scopes 1, 2, and 3 emissions, and even the term “net zero” itself, may inadvertently be slowing genuine decarbonization. Companies often spend more time debating emissions they cannot control rather than investing in actions with tangible impact. Real progress demands that executives collaborate with political leaders and governments to resolve the macro policy gaps that span multiple industries, rather than leaving businesses to navigate a fragmented landscape alone.
In my daily interactions with corporate leaders and regulators, I’ve witnessed two distinct scenarios starting to play out and increasingly becoming embedded in strategy. Firstly, companies often pursue “low-hanging fruit” for quick wins, which fails to move the dial meaningfully. Secondly, many are leaving crucial action to the public sector and regulators, neglecting the collaborative dialogue needed for achievable and beneficial targets.
These scenarios reflect a diverging mix of regulations. While frameworks like TCFD have successfully engaged boardrooms with achievable goals, others, such as CSRD, face criticism for being overly prescriptive and a “tick-box exercise” rather than driving meaningful change. This regulatory fragmentation is exacerbated by political backsliding across many regions, shifting the burden onto boardrooms and CEOs. This erosion of public trust in sustainability risks further fragmenting efforts to tackle urgent social and environmental crises.
To navigate this complex landscape and avert a disorderly transition, a new direction is needed. We need to embrace a “third era of sustainability” characterised by honesty, collaboration, and a strategic focus on what can genuinely be controlled and influenced. Frameworks like the Transition Plan Taskforce (TPT) offer a roadmap, guiding businesses to focus on value creation and risk mitigation. The challenge remains to translate longer-term sustainability risks and opportunities into actionable financial forecasts and strategic decisions.
The balance between realism and ambition is now critical. Many companies are in danger of effectively “giving up” on their climate and broader ESG targets, failing to set new ones as existing commitments slip. Business leaders must balance short-term pressures with long-term scenarios, goals, and realities. The modern world, with its inherent uncertainty and rapid change, demands more agile thinking and responses. This raises a fundamental question: are companies prepared to be honest with themselves and their stakeholders, acknowledging that many underlying assumptions are now unlikely to materialise?
The coming months are likely to be dominated by an increasingly uncertain geopolitical environment. By fostering partnerships, maintaining a resolute commitment to progress, and adopting an honest, collaborative approach, focussed on value creation and value preservation we can steer away from a disorderly transition and collectively build a more sustainable future.
