Corporate Sustainability at a Crossroads: Navigating Radical Uncertainty

In a new article for Harvard Business Review Georg Kell, Martin Reeves, and Helena Fox notes that corporate sustainability is in a crisis and ask what it should companies do now.

Corporate sustainability is at a critical juncture. Shifting political dynamics, increasing social polarization, and a populist backlash against sustainability initiatives are reshaping the landscape for businesses that have long championed sustainability. Some companies have quietly scaled back their ambitions, while others have retreated altogether. The U.S. government is unwinding sustainability commitments, and in Europe, resistance is growing to new reporting requirements. Against this backdrop, a pressing question emerges: Has corporate sustainability become unsustainable in its current form?

A Future Sustainability Resurgence

Despite these challenges, there are several compelling reasons to believe that sustainability will ultimately rebound. The key factors influencing this potential resurgence include significant progress in renewable energy, the inescapable planetary realities, and the rise of new, profitable business models.

1. Progress in Renewable Energy

One of the most powerful drivers for a sustainable future is the substantial progress made in renewable energy. China’s pivotal role in expanding global renewable energy capacity has been instrumental. Renewable energy has become economically viable, and investments in global power grids have significantly reduced the cost of renewables. In 2023, renewable energy accounted for nearly a quarter of the EU's energy consumption, making further regression in this sector increasingly difficult. As renewable energy is now deeply embedded in geopolitical competition, its momentum will be challenging to reverse.

2. Planetary Realities Will Reshape Politics

While political forces may seem to resist sustainability in the short term, the long-term impact of climate change is undeniable. Climate-related disasters have become more frequent and severe, and many critical Earth systems have already been breached, heightening the risk of irreversible environmental damage. These realities will mobilize public opinion, forcing policymakers to act. The severity of climate events, such as the recent wildfires in Los Angeles, will likely intensify the call for stronger sustainability measures, even if political forces initially resist such actions.

3. New Business Models Are Transforming Sustainability into Profit

Perhaps most importantly, new business models are shifting sustainability from an expensive obligation into a profitable competitive advantage. Companies like Maersk, which has heavily invested in low-carbon fuels and electrified port operations, are demonstrating how sustainability initiatives can differentiate a brand and create attractive business opportunities. Beyond these examples, sectors such as car-sharing, solar energy, and recharging networks are already proving that sustainability can be financially viable. Rising costs associated with climate change—such as higher insurance premiums and price increases in agriculture—are further incentivizing businesses to innovate around sustainable models.

Navigating the In-Between Period

In light of these dynamics, how should companies respond? The article from Harvard Business Review advises a nuanced approach to sustainability, one that avoids both idealistic commitments and total abandonment of the agenda. Companies must be prepared for a turbulent transition period, where unpredictability reigns and political and economic challenges may be formidable.

Here are several strategies recommended for companies navigating this period of radical uncertainty:

Guided by Long-Term Trends

Companies should look beyond short-term political volatility and focus on long-term sustainability trends. By proactively addressing environmental risks and preparing for future regulations, businesses can ensure they are not caught off guard when societal demands for sustainability become more pronounced.

Build Bridges Across Polarized Communities

Shared values—such as environmental stewardship and responsibility to future generations—can help businesses bridge political and cultural divides. By focusing on these values, companies can create strategies that resonate across differing political and cultural contexts, building trust and alignment even in times of tension.

Champion Localisation

The fragmentation of global sustainability frameworks and policies presents a challenge, but also an opportunity. A localized approach, focusing on specific community needs and regional resilience, can offer businesses greater flexibility and build trust from the bottom up. This strategy, championed by economist Elinor Ostrom, emphasizes the importance of local initiatives in creating widespread agreement on norms.

Integrate Sustainability with Innovation

Companies should embed sustainability directly into their innovation and technology strategies. Tangible economic benefits—such as improved energy efficiency, waste reduction, and resource optimization—are often more defensible and less prone to political backlash than idealistic, long-term goals. By making sustainability a core element of innovation, businesses can align environmental objectives with financial success.

Adopt a New Leadership Mindset

In an era of radical uncertainty, leaders must embrace adaptability and resilience. The key to navigating contradictions, political flux, and economic unpredictability is clarity around core sustainability principles. Companies should focus on their most important sustainability objectives and maintain a steady course, even when faced with short-term challenges.

A Temporary Setback, Not the End of Sustainability

While the current retreat from sustainability commitments is undeniable, it is likely to be a temporary phase. The structural drivers of sustainability—ranging from renewable energy investments to market-driven business models—are strong and cannot be easily undone. Companies that seize this moment to fortify their sustainability strategies will be better positioned when the pendulum inevitably swings back toward greater environmental responsibility.

The key, as noted in the Harvard Business Review article and echoed by John Kay in his books Obliquity and Radical Uncertainty, is to strike a balance between short-term pragmatism and long-term sustainability goals. In Obliquity, Kay argues that complex objectives like sustainability are best pursued indirectly, through broader strategic objectives, rather than through rigid, short-term targets. Similarly, in Radical Uncertainty, Kay emphasizes the importance of resilience and adaptability when facing unpredictable outcomes. Companies that take these principles to heart—embedding sustainability into their broader strategy—will be poised for success, both in the long run and in the face of ongoing uncertainty.

Looking Ahead

As companies continue to grapple with radical uncertainty, these strategies will be crucial. The Enlightened Enterprise Academy, in partnership with Aperture Strategy Ltd, will soon explore these themes in a series of retreats and live dialogues. The first retreat, featuring John Kay as a guest speaker, will take place on May 22nd & 23rd.

A subsequent online dialogue, featuring a panel of experts including Kay, Henry Mintzberg, and Mike Jackson, will be held on June 10th 2-4pm BST. These events will dive deeper into the strategic implications of operating in an age of radical uncertainty.

Further details

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