Sustainability Trends: Key Insights for Businesses

Executive Summary

The April 2025 Quarterly Outlook from ERM’s Sustainability Institute highlights four critical trends shaping the corporate sustainability landscape: escalating global trade disputes, evolving sustainable finance approaches, reassessment of climate targets, and a renewed focus on business imperatives in sustainability. This report provides key takeaways and implications for companies navigating these complex dynamics.

Trend 1: Companies Bolster Supply Chains Amidst Global Trade Disputes

Global trade disputes are escalating, with the U.S. imposing new tariffs on imports from China, Canada, and Mexico, including steel and aluminum. This has led to retaliatory measures from other countries, creating a highly volatile and unpredictable global trade environment. Businesses are experiencing increased costs and dented consumer confidence due to these tariffs, with some even considering layoffs to mitigate rising costs. In response, companies are proactively adjusting their supply chains by shifting production to less tariff-exposed countries, such as Apple producing iPhones in India, asking suppliers to reduce prices, as seen with Walmart, and expanding domestic production, exemplified by Novo Nordisk and Apple. The U.S. clean energy sector is particularly vulnerable due to its reliance on imports from China for key components like battery storage; while solar and wind supply chains are more established domestically, high tariffs will likely increase costs. To navigate this, companies must evaluate their supply chains for trade-related exposures and make proactive adjustments to ensure resilience, including identifying and investing in alternative suppliers in less impacted regions. It is also essential to account for the economic effects of trade disputes, such as increased input costs and potentially slower consumer demand, and adapt financial planning accordingly. Furthermore, engaging with policymakers and trade associations can help inform decision-makers about potential business impacts and craft new pathways forward.

Trend 2: Investors Wrestle with Evolving Sustainable Finance Approaches

The landscape of sustainable finance is evolving, marked by influential financial institutions exiting UN-convened net-zero alliances like the NZBA and NZAM, prompting these groups to reconsider their strategies and requirements. This creates a push-and-pull dynamic where stakeholders advocate for continued sustainable action, such as institutional investors calling for climate-aligned investments, while regulatory changes, like SEC rule reversals, make some sustainable finance activities more challenging. Despite these hurdles, financial sector and government actors continue to commit to sustainable finance through new initiatives and increased investment targets, as demonstrated by BBVA, Standard Chartered, BNP Paribas, and Goldman Sachs. For companies, it is crucial to stay informed about these shifts in the sustainable finance landscape, including which investors are altering their sustainability-related investment positions. Understanding the contrasting opinions and expectations of stakeholders on sustainability performance is also vital to avoid being caught in the middle. Lastly, continuously scanning for new opportunities and parties interested in sustainability-related investments that align with the company’s strategies can unlock new avenues for growth.

Trend 3: Climate Targets Reassessed Amidst Shifting Business Landscape

Many companies are reevaluating their climate targets due to political and economic shifts, with some scaling back or delaying commitments, including Wells Fargo, HSBC, IKEA, Equinor, and Shell. Conversely, other companies are reaffirming their climate commitments, emphasizing long-term economic and operational benefits, such as Archer Daniels Midland, Rio Tinto, TotalEnergies, and Lego Group. Companies altering their targets may face both positive outcomes, like reduced political pressure, and negative ones, such as shareholder pushback. Interestingly, missing targets may have limited market consequences. To adapt, companies should integrate business landscape shifts into their climate strategies to better navigate political or economic changes and avoid reputational or operational challenges. It is imperative not to let short-term challenges overshadow the long-term benefits of climate action, which include new market opportunities and enhanced operational efficiency. Maintaining transparency by communicating climate strategies and any adjustments openly is key to preserving trust among stakeholders.

Trend 4: Companies Shift Focus Towards Business Imperatives in Corporate Sustainability

Despite uncertainties, companies continue to recognize the value of sustainability, with many planning to increase or maintain sustainability-related investments. Sustainability efforts are increasingly being adapted to align more closely with core business imperatives, aiming for both environmental and financial benefits. Examples include Walmart’s food waste reduction initiatives and KIND’s water-saving practices. Furthermore, EU policies such as the Omnibus and Clean Industrial Deal are likely to encourage companies to align sustainability initiatives with business imperatives by reducing regulatory burdens and fostering innovation. Therefore, companies must ensure their sustainability strategies are integrated with their overall business strategies to contribute to long-term success. Prioritizing sustainability actions that deliver measurable business value, such as cost savings or resource efficiency, will help them weather political and economic uncertainty. Staying informed about policy developments and leveraging opportunities to gain commercial benefits from evolving regulations is also crucial for competitive advantage.