The New Sustainability Playbook: 10 Questions For Business Leaders

Forbes

23-03-2025

Melanie Nakagawa, Chief Sustainability Officer Microsoft, at talking about "Accelerating climate ... More solutions with AI" on November 16, 2023 in Lisbon, Portugal.
The negative impacts of the Trump administration's tariffs are already taking effect and are projected to be even more consequential. Prices are projected to rise. At the same time, output and employment will be reduced, resulting in a net negative impact on the U.S. economy. In this context, every business with a global supply chain is facing an existential crisis: reduce investments in sustainability to save money in the short term, or stay the course and preserve long-term value? As cost rise from higher tariffs, business leaders need to understand the consequences of reducing investments in sustainability.
Cutting costs will jeopardize business relationships with global supply chain partners that require compliance with sustainability standards including GRI, ISSB, and SASB. Downsizing investments in sustainability will also alienate employees, consumers, and communities who reward businesses that reduce environmental impact, enhance social equity, and improve long-term resilience.
Every business leader will need to decide whether to maintain investments in sustainability that come with a cost but also deliver immense value. This new playbook will help leaders make the best choices for their companies.
Short-term cost savings can lead to long-term vulnerability. Cutting back on emissions reductions, renewable energy, or supply chain resilience might lower costs now. But it also raises the risk of climate impacts, harm to reputation, and fines from regulations. PG&E's failure to upgrade grid infrastructure to prevent wildfires resulted in the company facing an estimated $30 billion liability for damages from the two years of wildfires, according to the New York Times.
Many multinational clients and procurement partners now mandate sustainability metrics. Preferred supplier lists may remove companies that fail to align with frameworks like GRI, ISSB, or SASB may be removed from preferred supplier lists. This is especially true in sectors such as apparel, electronics, automotive, and food. If you are part of a global value chain, slashing ESG investments could mean losing business. Walmart requires key suppliers to report emissions and energy use. Suppliers that don't comply may be delisted.
Employees want to work for companies with purpose, consumers reward brands that do good, and communities are more supportive of responsible corporations. Scaling back ESG efforts to offset tariff-related costs could result in lower morale, higher turnover, customer churn, and social license to operate issues—intangibles that can rapidly transform into significant concerns. Patagonia's sustained customer loyalty and employee retention are closely linked to its genuine ESG commitments.
Institutional investors are placing greater emphasis on sustainability as a proxy for governance and future-readiness. While some shareholder segments may support short-term margin improvements, others—like pension funds and ESG-focused funds—may divest from companies seen as backtracking on sustainability. Before you cut ESG budgets, consider how it might change your investor profile. BlackRock has flagged companies with weak ESG disclosures as riskier and redirected capital toward ESG-aligned portfolios, according to ESG Today.
Sustainability efforts can benefit your company in the long run. You will save energy with efficient operations. Proactive compliance will cut regulatory costs. Plus, responsible sourcing will help your brand stand out. These investments may not appear on this quarter's balance sheet, but they build competitive advantage over time. What will you lose if you abandon what you've already built? Unilever's Sustainable Living Brands grew 69% faster than the rest of its portfolio, demonstrating tangible ROI.
The green transition is not a trend—it's an economic transformation. Companies in many fields are investing in sustainable innovation. They focus on electric fleets, biodegradable packaging, zero-waste operations, and inclusive hiring practices. If your rivals are pushing hard while you pull back, your market relevance could drop significantly. Ørsted shifted from relying on fossil fuels to becoming a top player in offshore wind. They moved faster than European energy giants who took longer to adapt.
Before making cuts, get insights from boards, investors, employees, NGOs, and community leaders. They likely have strong views on your sustainability goals. Often, stakeholders will advocate for re-prioritizing—not abandoning—ESG commitments. Transparency can protect your brand and build credibility, even in times of retrenchment. Interface, the carpet maker, teamed up with NGOs, suppliers, and customers for its sustainability plan. This likely helped maintain its brand trust during tough times.
The Inflation Reduction Act (IRA) and state-led green grants offer billions to companies investing in sustainability. Cutting ESG funding now could mean missing out on tax credits, rebates, and partnerships that offset costs and de-risk long-term investments. Have you explored every opportunity to turn sustainability into a net gain? First Solar secured over $700 million in federal tax credits from the Inflation Reduction Act for U.S. manufacturing.
Sustainability and profitability should co-exist. ESG investments boost efficiency, cut waste, and make resource use better. They also reveal new business models. Leaders who see sustainability as central to performance, not just an extra, are most likely to succeed. IKEA's focus on circular practices and renewable energy cuts waste and saves money worldwide.
Will people remember you as the company that pivoted toward the future—or as the one that retreated when pressure mounted? Leadership is not just about getting through this quarter. It's about creating a story that builds confidence, pride, and progress. The choices you make today will shape your company's legacy. This is especially true during times of climate change and economic uncertainty. Microsoft's pledge is to become carbon negative by 2030. This makes it a leader for the future, even in tough economic times.
Tariffs and inflationary pressure are forcing difficult decisions. But cutting sustainability investments will likely be a costly mistake. Business leaders need a new approach. This should balance short-term costs with long-term stakeholder value, regulatory risks, and market expectations.
Sustainability is not a corporate responsibility—it's a strategic advantage. In the current environment, reducing investments in this area may seem like a sensible decision, but it can ultimately lead to weakened supply chain relationships, investor skepticism, employee disengagement, and lost consumer trust.
The strongest and most resilient and respected companies will maintain their investments in sustainability, even when times are tough. The most resilient and respected companies in the coming decade will be those that continue to lead—not retreat—on sustainability. As tariffs increase and economic strain grows, follow this playbook to make smart choices for your company.