Geopolitics & Uncertainty: BCG on the Risks to Renewables

Corporate sustainability has been on an incredible trajectory, but could it be slowing down?

This is a question posed by Georg Kell, Founder of the UN’s Global Compact, Martin Reeves, Chair of the BCG Henderson Institute, and Helena Fox, Ambassador for the Institute.

In a think-piece, these authors look at changes in political and economic landscapes and their impact on sustainability.

Martin explains that “After leaping forward in the early 2000s the corporate sustainability movement now faces multiple potent obstacles to further progress, including the fracture of global collaboration platforms, domestic political backlash and a resulting dilution of mindshare.”

This backlash has come into sharp focus in 2025.

ESG, DEI and net zero are just some parts of sustainability that have fallen into the firing line.

The concern is that immediate financial priorities are overtaking long-term environmental and social goals.

How politics impacts corporate priorities

The BCG report identifies the rise of ‘power politics’ and increased geopolitical tensions as major contributors to changing business approaches to sustainability.

“Trade and investment policies are no longer designed solely to foster economic growth and well-being,” the authors say.

“Instead, they are used to defend and enhance geopolitical aspirations.”

The report suggests that the trend of economic nationalism is on the rise, with governments increasingly prioritising domestic industries and national security over global cooperation.

It says that this shift significantly undermines international sustainability initiatives and weakens the regulatory frameworks that have been designed to promote corporate responsibility.

Consequently, companies find themselves under pressure to align more closely with national interests rather than global sustainability objectives.

The corporate response to these geopolitical shifts is evident across several industries.

Leading car manufacturers like Ford, GM and Volvo have had to readjust their expansion strategies for electric vehicles, citing inconsistent demand and economic hurdles.

Similarly, energy companies, including bp and Equinor, have either cancelled or postponed green initiatives.

“Politics isn’t just creating headwinds for sustainability; it’s deepening the misalignment between markets and reality,” says Loannis Loannou, Associate Professor of Strategy & Entrepreneurship at the London Business School.

“Geopolitical tensions and economic nationalism are bolstering short-term pressures just when businesses require long-term resilience.”

Regulatory uncertainty

Regulatory unpredictability adds another layer of complexity to corporate sustainability efforts.

“While politics may trump other considerations in the short term, planetary realities ultimately shape politics,” the report warns.

The US, for instance, has wavered multiple times in its stance on environmental agreements, with its withdrawal from the Paris Agreement marking yet another phase of climate policy instability.

In Europe, sustainability regulations are facing potential changes from the European Commission’s omnibus simplification package.

With regulatory frameworks constantly changing, businesses must navigate an increasingly fragmented policy landscape.

Many now place greater emphasis on short-term resilience over long-term sustainability investments, stirring concerns about the potential unravelling of progress made over the last twenty years.

Navigating the transition

Despite the current retrenchment from sustainability commitments, the long-term realities remain unchanged.

Climate change continues to be an inescapable factor that will shape future economic and business decisions.

“The two strategies which are least likely to be viable are, on the one hand, pressing ahead idealistically as if nothing had changed, and on the other, dropping the sustainability agenda entirely,” the authors say.

This ongoing reality is highlighted by the rising frequency of extreme weather events and the escalating costs associated with climate-related damages, which will continue to exert influence on market forces.

Advancements in technology related to renewable energy and sustainable business models present a viable pathway for corporations to integrate sustainability with profitability.

The report says that companies focusing on resource efficiency and green innovations are likely to obtain a competitive edge as both regulatory and consumer expectations inevitably evolve.

“Climate change is where short-term thinking and long-term consequences collide for businesses and governments alike,” says Henry M. Paulson, former Secretary of the Treasury for the US government.

“Meeting the challenge of climate change calls on both to assess the risks and act before the economic and environmental consequences of failure are irreversible.”

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