Insights

Weak outcomes from international environmental summits in 2024 and a shifting political reality will put greater pressure on individual corporate responsibility

It’s not our fault, it’s the system that is broken. As an excuse for poor environmental practices, it is both an entirely fair position for corporate leaders to take, yet broadly unacceptable to a wide range of stakeholders. Companies should get ready for a new wave of scrutiny from their own employees, customers, NGOs, activist citizens and the media.

Both the recently concluded COP 29 climate talks, and COP 16 nature talks in October, resulted in weak outcomes. Few are holding out more hope of meaningful progress on an international treaty on plastics, with ongoing talks on this taking place in South Korea this week with little fanfare. Election results around the world seem to be taking us away from an era of greater cooperation and bold policymaking on urgent sustainability issues.

Ten years have passed since the landmark Paris Agreement in 2015 inspired optimism in the possibilities of collective action. Since then, a decade of delay and disappointments has shaken faith in the potential for multilateral solutions. Recent research from UNDP and the University of Oxford of 73,000 people across 77 countries, found that four in five globally want governments to take stronger action to tackle the climate crisis. And more than half are now thinking about climate issues regularly.

Those seeking to make a difference may increasingly start targeting individual companies, targeting their role in contributing to the environmental breakdown that is becoming increasing apparent. If a top-down approach isn’t working, you may well try bottom-up instead. Alongside pressure from informed stakeholders such as investors and regulators, it will be necessary to have a narrative suited to a broader audience.

Businesses typically have little choice but to operate within the boundaries of the economic reality in which they find themselves. In a system which fails to price in the true costs of pollution, and where destructive behaviours can result in financial rewards, it is hard to succeed by doing no harm.

Many companies have set ambitious targets and put significant resources into enhancing sustainability over recent years, recognising the reality of global challenges and making genuine progress. But they are now finding that while scientific predictions of climate change and biodiversity loss were broadly accurate, the political and economic system has been far less sensitive in responding to these impacts than they expected.

As a result, there has been a wave of companies quietly rolling back or readjusting the timeframes for their previous commitments. And as much as they might like to keep this out of the spotlight, it is not going entirely unnoticed. Individual businesses could become the focal point for feelings of frustration, upset and anger at environmental degradation, which could impact corporate reputation and brand value, or even affect a company’s license to operate.

In response to this, companies can adopt three complementary strategies that will help them to become more resilient to increasing reputational risks in these areas.

Embrace transparency to better own your narrative: there is a rising tide of information available on corporate sustainability, thanks to voluntary and mandatory reporting, sectoral analysis and ranking reports, along with commentary across media and social media. When you combine this with increasingly sophisticated AI and large language models, it will be far harder to hide your impacts and relative performance. What was once buried on page 176 of a PDF report can now easily be surfaced in response to a simple search query, and readily compared to competitors. If you aren’t disclosing your own activity and explaining the context, then your detractors could become primary sources for what stakeholders will find in their due diligence.

Early advocacy ahead of difficult decisions: where stretching targets and sustainable transformation is not possible without specific policy interventions, be honest about what is required and help provide governments with the mandate to make tough choices. Having a public track record of calling for accelerated change will ease criticism when you have been unable to deliver on long-term goals.

Don’t be afraid to pull away from the pack: a shift to a more sustainable economy will create winners and losers, and within every industry there are leaders and laggards. If you stand together as a sector on particular positions, which are favourable to the slowest movers, then you will share in collective responsibility for negative impacts. Businesses that see long-term value in being leaders (or fast followers) should position themselves clearly ahead of poorer performers, so they can make the most of the opportunities in competitive sustainability.

These strategies will not completely insulate businesses from reputational risks related to their sustainability performance, nor will they necessarily make a big difference to the economic barriers that are holding back progress. But they will help to keep important stakeholders on side and provide a stronger platform for future success, at the same time as potentially mitigating the high long-term costs of inaction on key sustainability issues.