(Illustration by iStock/SvetaZi)
In President Trump’s second term, a variety of executive actions have reversed social progress. Withdrawing from the Paris Climate Agreement presents a significant challenge to bending the global emissions curve since it is one of the world’s largest greenhouse gas (GHG) emitters, but a variety of other actions will endanger the energy transition. Trump’s newly established National Energy Dominance Council will prioritize domestic oil and gas production, and reversing offshore drilling bans risks ecosystem degradation and increased emissions. Trump revoked Biden’s plan for 50 percent of all new vehicles sold in the United States to be electric by 2030, halting the distribution of funds from a $5 billion program to install vehicle charging stations. The head of the EPA has asked the White House to “repeal the ‘endangerment finding,’ which says that greenhouse gases pose a threat to public health and welfare,” contradicting climate science. Reversing the federal ban on plastic straws may seem minor, but 400 million tons of plastic waste is produced each year, harming marine ecosystems and human health. Meanwhile, Trump’s executive order dismantling diversity, equity, and inclusion (DEI) initiatives within the federal government eliminates DEI considerations in federal hiring, promotions, and performance reviews, aiming to prioritize merit-based decisions.
According to the latest Sustainable Development Report, only 16 percent of the targets are on track to be met by 2030. For poverty and climate action, none of the targets are on track.
How should companies respond this catastrophic backsliding? Management teams have a range of strategic responses available; they can exit or hide, and they can fight or foster. Backsliding is not a new phenomenon that emerged with the second Trump administration. Companies should learn from the past, and think long term: In other periods of backsliding, leaders were separated from greenwashers. The COVID pandemic was also a period of backsliding, during which many SDG indicators were reversed, numerous people were pushed into extreme poverty, and gender inequality was exacerbated. Some CEOs took pay cuts to cover employee salaries while others took hefty bonuses before filing for bankruptcy. Despite the pandemic-driven setbacks, many companies increased their climate ambitions, and the murder of George Floyd raised awareness and commitment to racial injustice.
This period of backsliding will demonstrate which funds are really committed to responsible investing, and investments will shift to those funds that remain responsible. In eras of sustainability backsliding, it is quickly becoming evident who the real leaders are—they uphold or even increase their commitments when the going gets tough.
Exit. Many companies are leaving industry alliances or retiring corporate sustainability goals and programs. Wells Fargo, Bank of America, and Morgan Stanley have already exited the Net Zero Banking Alliance, citing political pressure and legal concerns; BP and HSBC have scaled back their net-zero targets, reflecting a broader trend of corporations diluting their sustainability goals in response to shifting political and economic landscapes. Walmart, John Deere, and Ford have scaled back or censored formal diversity targets, programs, and initiatives in response to conservative activists. Meta is also retiring some DEI practices and CEO Mark Zuckerberg has argued that Meta, and other corporations, need “more masculine energy.” Asset management giants BlackRock and Vanguard have paused their support for environmental, social, and governance (ESG) proposals.
In some cases, this approach may reveal that the earlier strategy of greenwashing no longer needs to be maintained. In other cases, companies are buying time to fully evaluate and assess the changes. But while companies that are abandoning sustainability activities may ward off short-term risks related to the immediate policy sphere, they face reputational and economic risks in the same short term: Consumers and activist groups, for example, held a week-long boycott aimed at Walmart.
Hide. Some companies are strategically changing, hiding, or rebranding prior sustainability commitments to reduce risk. Costco, for example, is standing by its DEI practices but has rebranded them as a “People and Communities” program (even while seeing an increase in customers, presumably in appreciation for upholding its commitments). JP Morgan and Citigroup have left the Net-Zero Banking Alliance, but have stated that they plan to work independently on the path to net-zero. Opting for a lower-profile approach, scaling back public commitments, or, for example, omitting DEI-related reporting indicates a new strategy for communicating about sustainability: While maintaining internal sustainability efforts remains a priority, external positioning becomes more calculated.
Hiding could still put companies at short-term risk. With companies facing lawsuits over DEI practices—as evidenced by Missouri’s case against Starbucks for breaching anti-discrimination laws—businesses that stand by their (hidden) DEI practices increase their vulnerability to changing laws and conservative scrutiny.
Fight. Many companies are standing their ground and publicly reaffirming their existing sustainability commitments. For some, maintaining sustainability is a strategic imperative that cannot be quickly abandoned or hidden. For Ikea, whose CEO reaffirmed the company’s commitment to the Paris Agreement, sustainability is fully integrated into Ikea’s business model and core to its brand proposition. Moody’s rating agency and financial services company continues to leverage diverse teams to enhance the accuracy of its evaluations and decision-making. (Research demonstrates that diverse teams drive innovation, improve prediction accuracy, and enhance overall decision quality).
Some are emphasizing the long-term nature of sustainability issues, since social and environmental challenges will endure much longer than one president. Archer Daniels Midland (AMD), a United States multinational food and commodities trader, for example, declared it would stick with its climate goals and reaffirmed its commitment to taking the climate crisis seriously. Ismeal Roig, a member of ADM’s executive council, said, “Frankly if I look forward to 10 or 20 years and you look at what’s going on with climate change, I don’t think this is a thing that we can just shrug off and forget about.” The company has reduced its GHG emissions by 25 percent since 2019 and is committed to no deforestation and to implementing regenerative agriculture practices. Andrew Forrest, an Australian mining billionaire, also confirmed a long-term commitment to net zero because it is “completely bankable.” He believes that short-term policy changes that scrap tax incentives for renewable energy will not change the long-term drive toward clean energy.
Companies can use arguments about long-term strategic foresight and proactive risk management to ward off the short-term noise created by the changing political situation in the United States. In the short term, sustainability might be more expensive following Trump’s policies, but in the long term, maintaining those commitments makes strategic sense, especially in industries with long-lasting infrastructure lock-ins. Renewables have become increasingly competitive with fossil fuels as the cost of photovoltaic panels has dropped. These figures might change given President Trump’s exhortation to “drill, baby, drill,” but he cannot reverse the technological improvements that have been made in renewable energy or the long-term dynamics toward an increasingly warming planet and the associated consequences.
A few corporate leaders have, therefore, openly stated that now is not the time to be absorbed by backsliding driven by the Trump administration, but to lead the sustainability transition more ambitiously than ever. André Hoffmann, Vice Chair of Roche, in the SDG Tent at the World Economic Forum in Davos reminded leaders not to be distracted by the short-term noise but to stick with their long-term sustainability vision: “I am sure that the economy will become more sustainable going forward because it is absolutely needed.”
Foster. It remains to be seen if and how companies can turn Trump-driven backsliding into an opportunity to redefine and accelerate sustainability. Some corporate leaders are not just holding their ground but actively doubling down, investing more, innovating, and expanding sustainability efforts beyond their existing efforts. Although fossil fuels are becoming cheaper, companies can make even stronger climate commitments to transition to cleaner energy sources. Companies can invest now in infrastructure and other plans to secure a net-zeroU future. In March, Jesper Brodin posted on LinkedIn, “We’re investing €1.5 billion to accelerate the phase-out of fossil fuels through retrofitting our stores with renewable heating and cooling systems.” Ørsted, one of the world’s largest renewable energy firms, is increasing investments in offshore wind even as the United States shifts policy priorities.
Companies are also repositioning their efforts to private-sector agreements. Companies like Verizon are bypassing government policy shifts by securing private-sector power purchase agreements to continue expanding renewable energy adoption. Private-sector coalitions focused on voluntary carbon markets and cross-industry partnerships are gaining traction, proving that sustainability leadership does not require government approval—it requires commitment and strategy. Other companies are focusing their growth on international markets. Tesla, for instance, has signed a lease agreement to open its first showroom in Mumbai, reinforcing its presence in Asia to help sustain the global electric vehicle transition. In the long run, Trump’s policies are unlikely to prevent the electric vehicle transition in the United States (it may just take longer).
Companies can use the moment to rethink DEI approaches beyond policies and quotas to embed it in everyday practices. Managers can conduct a detailed review of hiring, evaluation, and promotion processes for unconscious biases and develop new approaches to foster a fairer and more inclusive workplace. Companies that surpass backsliding to foster sustainability innovation, rather than retreating, will emerge as the new industry leaders, shaping the next era of long-term value creation.
Read more stories by Amanda Williams, Lucrezia Nava & Gail Whiteman.