Recently, there has been a concerning rise in climate denial and populist politics threatening the progress made by the sustainability community. The last few months have been especially rough for corporate sustainability.
ESG (Environmental, Social, and Governance): The three letters that have sparked a range of emotions, from inspiration to confusion and even anger. Initially, the goal was for ESG standards to demonstrate that profitability can coexist with clean air, maintaining human rights, and practicing responsible management. However, significant changes often provoke strong reactions and the ESG label has quickly become a broad and vague concept, leading to heated debates.
Recently, there has been a concerning rise in climate denial and populist politics threatening the progress made by the sustainability community. The last few months have been especially rough for corporate sustainability.
Greenhushing as a silent approach to sustainability within US companies
With the election of Donald Trump in the US, companies are facing a tough environment when it comes to advancing sustainability initiatives. In fact, this is the first time I’ve seen companies publicly scaling back their commitments to social and environmental goals.
However, these retreats seem to be driven more by a desire to avoid brand damage and short-term sales losses than by strategic considerations. But the fear of controversy and negative press can lead to impulsive, short-sighted decisions. While aiming to reduce certain risks, these companies could be unintentionally creating new ones. Eliminating DEI initiatives will lock out top job candidates and fuel social inequalities while limiting new ideas and perspectives within a company. Neglecting proper climate risk management might lead to the world’s largest companies being uninsurable, and what message does it send to customers who value LGBTQ+ rights and environmental protection when these promises are no longer upheld?
Nevertheless, in response to the complicated political environment, most US companies are now practicing “greenhushing”– quietly continuing their sustainability efforts without publicising them. This strategy of not being transparent about the ESG progress hides best practices, making it difficult for others to be inspired to replicate them. Overall, this silent approach slows down industry-wide progress and misses out opportunities for investments due to the lack of credibility.
The European Unions’ U-turn on corporate sustainability reporting
Europe’s enthusiasm for ESG has waned amid concerns that regulations are hurting competitiveness. Like the situation in the US, the growing influence of far-right movements typically opposed to ESG initiatives is also a factor. However, the resistance to ESG in Europe is primarily driven by regulatory fatigue rather than ideological opposition. Many companies are simply overwhelmed by the extensive data requirements.
On 26 February 2025, companies were essentially encouraged to stop their CSRD Reporting by the release of the proposal of the new Omnibus Directive. The European Commission has proposed scaling back the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy and the Corporate Sustainability Due Diligence Directive (CSDDD) reducing the number of companies required to comply and pushing back the deadlines. On 27 March 2025, the EU member states in the European Council announced their approval of the “stop-the-clock” directive, whilst the European Parliament is scheduled to vote on it on 1 April 2025.
Although mandatory reporting is advantageous in the long run – after all “what gets measured gets managed” – it requires substantial time and resources in the short term. Sustainability departments are struggling with that especially in medium-sized companies that have never issued non-financial reports before. This focus on regulatory compliance has diverted attention from the actual work of becoming more sustainable. The potential delay may give companies time to better prepare and align their practices with sustainability principles.
On 10 March 2025, the Palau Project conducted a sentiment survey, gathering 170 responses from two distinct groups: sustainability managers and consultants. The findings highlight a notable trend: While the majority of companies are continuing their CSRD initiatives, some have decelerated their efforts. Conversely, consultants observe that many of their clients are either pausing or waiting. This likely indicates budgetary decisions, with companies opting to cut consulting expenses while still making progress internally with their sustainability teams. But remember one thing: the proposed changes are just that – proposals. It’s important to stay prepared and continue working towards sustainability goals.
It’s easy to forget about sustainability in tough times
Despite the political movements and polarisation of opinions, the reality of climate impacts and social inequality is undeniable. It’s easy to forget why we got into sustainability when times are tougher so here’s a reminder of the existential challenges we are facing:
By 2050, climate change is projected to cause annual damages costing between $1.7 trillion and $3.1 trillion. This encompasses infrastructure, property, agriculture, and human health. As climate impacts worsen, these costs are expected to rise. The poorest nations will face the greatest economic challenges due to climate change (WEF; 2023). The unequal effects of climate change are widening global inequality. A study from Stanford University found that the economic gap between the world’s richest and poorest countries has widened by 25 percent due to global warming (Diffenbaugh & Burke, 2019).
Economic success can coexist with clean air, human rights & ethical management
These figures are compelling and underscore the imperative for ongoing sustainable transformation. Not only does it help curb the advancements of environmental and social crises that threaten our prosperity on a global level, it also provides an advantage at the corporate level by turning potential threats into strategic opportunities.
The heart of CSRD – the double materiality analysis – helps to seize these opportunities. It is a concept which examines both the impact of sustainability issues on a company and the company’s effect on people and the environment. Applying this approach creates a holistic picture of sustainability in all aspects of a company’s operation. This helps break down silos and understand a company’s performance beyond financial metrics. That way, financial teams can develop a more profound understanding of climate-related financial risks, operational units can identify efficiency improvements, and innovation teams can discover new business opportunities. Therefore, double materiality assessments drive innovation and resilience, transforming it from a simple reporting task into a powerful strategic tool.
The proposal for omnibus regulations not only reallocates resources to strategically address ESG issues in a genuinely sustainable manner but also leverages existing frameworks to help companies anticipate potential risks that might otherwise remain unrecognized until a crisis occurs. Additionally, it enables the transformation of these risks into strategic opportunities. Implementing adaptation and mitigation strategies into a company’s operations can reduce costs in the long term. It also strengthens the company’s credibility. Regardless of the expected easing of restrictions, insurance companies, banks and investors will increasingly continue to collect ESG related data and information from their customers as they have proven to be key KPIs for long-term success.
In summary: despite political and regulatory changes, the integration of sustainability into business practices remains a key driver for resilience and innovation in companies.
Our risk engineering team’s ESG specialists are committed to empowering companies to minimise their ESG risks and secure long-term business stability. We offer a comprehensive suite of services, from climate risk consulting to managing supply chain risks, ensuring your business is resilient and prepared for the future. Find out more here.
Laura Hochegger
Deputy Head of Sustainability & Innovation
GrECo Group
T +43 664 822 18 66
