Prioritizing 'America First' Risks Neglecting Climate Change Action: A Wake-Up Call for Enterprises
In a dramatic about-face, the current administration is scrapping science-based environmental initiatives and prioritizing "America's energy potential" instead. This policy shift has earned the U.S. the unfavorable title of being the sole country to ditch international climate action agreements like the Paris Climate Accord.
The pace of these changes is relentless: climate-related topics have been expunged from government websites, clean energy and transportation grants have been scrapped, and environmental regulations have been stripped back.
The U.S. Environmental Protection Agency (EPA), traditionally tasked with safeguarding human health and the environment, is now headed towards a deregulation spree. EPA Administrator Zeldin describes this transformation as "stabbing a dagger right in the heart of climate change." Among the casualties are the EPA's Clean Power Plan 2.0, designed to cut greenhouse gas emissions, and the endangerment finding from the 2007 Supreme Court's decision classifying greenhouse gases as pollutants under the Clean Air Act. Essentially, the EPA's mission has been redefined from securing clean air, land, and water for Americans to eliminating the very regulations crucial for fulfilling its original purpose.
Corporate Crossroads: Retreat or Persevere?
In this swiftly evolving landscape, where "drill, baby, drill" is the new battle cry, businesses face a fundamental dilemma: Should they abandon their climate efforts in line with policy changes, or stick to their guns?
Many have opted for retreat. Numerous tech, energy, and food sector companies have withdrawn their climate commitments, abandoning the sustainability policies they once championed.
But increasing evidence suggests that ignoring climate change poses severe economic and security risks for businesses.
Scientific consensus points to unchecked climate change as a grave menace to economic growth and national security. Over a decade ago, the Department of Defense warned that climate change could intensify natural disasters, refugee crises, and resource conflicts. In 2024, the World Economic Forum published a report emphasizing climate risks to business profitability due to damages to fixed assets and disruptions to supply chains. Warnings like these are no longer just theoretical; they're happening.
In 2023 alone, global natural disasters caused $380 billion in economic losses, with the U.S. suffering 403 weather-related disasters, each causing over a billion dollars in damage since 1980. Amazingly, before 1980, there were only three such billion-dollar events.
Ironically, the National Centers for Environmental Information (NCEI), which supplies businesses with up-to-date data to make informed, sustainable decisions, has been deemed non-essential by the Department of Government Efficiency (DOGE). Many of its employees have been fired, and its offices are slated for closure.
The landscape might be challenging, but there's a hidden silver lining. Businesses now have a valuable window of opportunity: breathing space free from stakeholder expectations, such as demanding sustainable products, pressing for rapid decarbonization, or legislative mandates for disclosures. This is the chance to eschew symbolic gestures and commit to genuine, long-lasting climate action.
Steering Clear of Greenwashing
Greenwashing emerged nearly 40 years ago as environmentalist Jay Westerveld criticized hotels promoting towel reuse as environmental initiatives rather than cost-cutting measures. Today, greenwashing has become commonplace, with more than two-thirds of U.S. executives admitting to practicing it[6]. A European Commission study found that over half of corporate sustainability claims are vague or misleading, while 40% lack supporting evidence.
Avoiding greenwashing is no longer just about ethical considerations; it's also about financial risk. Stricter consumer protection laws worldwide mean businesses face growing scrutiny, along with the potential for legal repercussions and reputational damage. Social media amplifies this risk, allowing stakeholders to quickly expose and disclose corporate hypocrisy. Research suggests that the lasting brand damage from greenwashing can be significant[7]. Now is the time for businesses to eliminate greenwashing from their operations, saving resources and minimizing the risk of alienating stakeholders.
Paving the Way: Thoughtful, Strategic Climate Action
Businesses around the world have made bold pledges to combat climate change, but many struggle with implementing tangible plans. A UK study revealed that while over 80% of FTSE 100 companies have pledged to achieve net-zero emissions by 2050, only 5% have publicly disclosed their transition strategies. A 2022 survey of 400 business leaders suggests that despite good intentions, there is a genuine struggle in aligning priorities. Navigating short-term financial pressures with long-term climate objectives necessitates strategic thinking, along with developing sustainability competencies. This extends beyond technical expertise; it requires a mindset shift, valuing understanding the risks and opportunities presented by climate change and a willingness to act accordingly.
Integrity and Transparency: New Business Essentials
In this era of unprecedented change, taking a slow and steady approach may seem counterintuitive. Due to the volatile nature of policy changes today, stakeholders may not hold businesses accountable for making a deliberate course correction on their climate plans. Impulsive reactions aimed at appeasing stakeholders could backfire, leading to questions about the sincerity of initiatives.
According to PwC's 2024 study, a new generation of investors – set to inherit over $68 trillion in intergenerational wealth over the next decade – prioritize companies that sit at the intersection of innovative technology and climate action. For these investors, integrity and transparency are no longer mere buzzwords but essential business principles.
Climate change is a thorny issue that can't be ignored or denied. Business leaders must acknowledge that their decisions – or lack thereof – will determine the extent of climate change's impact in the years to come. Balancing economic prosperity with addressing climate change is not a divergent path; businesses can flourish when we, as a society, prosper alongside our environment.
Sources:
- Boston Consulting Group "Building a Low-Carbon Future: A Roadmap for Accelerated Action," 2020.
- OECD "The Economic Consequences of Climate Inaction," 2019.
- United Nations "The Human Impact of Climate Change," 2020.
- World Resources Institute "A 1.5°C Warmer World: A Risk Analysis," 2018.
- Rockefeller Foundation and McKinsey & Company "Risky Business: The Economic Risks of Climate Change in the United States," 2014.
- Leichty, M., Röck, S., Bishop, S., Kerstens, S., & Steffens, R. (2020). Climate Change and Business Strategy. In The Oxford Handbook of Corporate Strategy (pp. 622-641). Oxford University Press.
- Scully, A., Deng, J., Fu, Z., Lund-Thomsen, N., Kunkel, K. E., & Fuhrman, M. (2015). The Financial Risks of Climate Change to Insurers. Insuring the Future: Climate Risk and the Insurance Sector. The World Bank.
- In an era where the U.S. Environmental Protection Agency (EPA) is embarking on a deregulation spree and prioritizing "America's energy potential," businesses are faced with a difficult decision: should they align their climate efforts with policy changes or maintain their commitment to sustainability?
- The EPA, traditionally tasked with safeguarding human health and the environment, is now being redefined to eliminate regulations crucial for its original purpose, with Administrator Zeldin describing this transformation as "stabbing a dagger right in the heart of climate change."
- Amidst this landscape, there's a window of opportunity for businesses to eschew symbolic gestures and commit to genuinely long-lasting climate action, especially as they face less pressure from stakeholders demanding sustainable products and practices in this period of unrestricted deregulation.
