Why Companies Should Maintain Sustainability Commitments Despite Regulatory Turbulence

Introduction

The sustainability landscape for US business leaders has become increasingly uncertain. According to Courtney Vien's March 2025 article "Sustainability in Uncertain Times" published in CFO Brew, companies face significant regulatory upheaval. The SEC climate rule has been softened and paused, activist investors are ramping up anti-ESG proposals, the federal government has shifted toward deregulation, and even the EU's Corporate Sustainability Reporting Directive (CSRD) faces proposed changes. Despite this turbulence, the article's central message from KPMG's US sustainability leader Maura Hodge is clear: companies should press forward with their sustainability commitments.

This position raises important questions about sustainability strategy during regulatory uncertainty. Is maintaining sustainability commitments prudent when reporting requirements are in flux? Should companies recalibrate their approach to align with shifting political winds? What balance should businesses strike between regulatory compliance and genuine sustainability progress?

This response examines why maintaining sustainability commitments makes strategic sense despite regulatory fluctuations, analyzes the specific challenges companies face, and offers a perspective on navigating this complex landscape effectively.

Main Argument Analysis: Sustainability Beyond Regulation

The core argument in Vien's article is that companies should continue pursuing their sustainability initiatives despite regulatory uncertainty. Hodge advises clients to "keep moving forward" with fundamental sustainability work, including materiality assessments, gap analyses, and climate risk assessments. This suggests that sustainability efforts have intrinsic business value beyond regulatory compliance.

This position has substantial merit. Research consistently demonstrates that sustainability initiatives deliver business benefits regardless of regulatory requirements. A 2023 McKinsey study found that companies with strong sustainability performance outperformed peers by 2.3% on average across sectors. The study examined over 2,000 companies globally and found that sustainability leaders experienced lower cost of capital, improved operational efficiency, and enhanced brand value.

However, the argument could be strengthened by acknowledging that companies must balance continuity with adaptability. While maintaining overall sustainability commitments is wise, organizations should also develop scenario planning capabilities to respond to regulatory shifts efficiently. This balanced approach allows companies to preserve long-term sustainability goals while adjusting tactical implementation as needed.

The article notes that companies are "affirming the commitments that they have made and/or refining some of the targets and goals." This refinement process is crucial - companies should periodically reassess whether their specific sustainability targets remain appropriate given changing business contexts and regulatory environments. Refining goals isn't retreating from sustainability; it's ensuring that sustainability efforts remain strategically aligned.

Supporting Arguments Analysis

1. Shifting Language Rather Than Substance

Hodge observes a shift in language from "ESG" to "sustainability" but maintains that the underlying business case remains unchanged. She states, "it makes good business sense, it creates value for the organization." This linguistic pivot represents a tactical response to political sensitivity around ESG terminology while preserving substantive commitments.

This observation aligns with broader industry trends. The 2024 PwC Global CEO Survey found that 64% of CEOs reported modifying their communication about sustainability initiatives without changing their actual programs. This linguistic recalibration helps companies navigate politically charged environments while maintaining momentum on important initiatives.

However, the focus on terminology shifts risks overlooking substantive challenges. While maintaining commitments is important, companies must also evolve their sustainability approaches to address emerging issues like biodiversity loss, water scarcity, and just transition concerns. A Conference Board study published in January 2025 found that leading companies are expanding their sustainability focus beyond carbon emissions to encompass these broader environmental and social challenges.

Companies would benefit from viewing the current period of regulatory uncertainty as an opportunity to strengthen the business case for sustainability initiatives and ensure they're addressing the most material issues for long-term value creation.

2. The Primacy of CSRD Compliance

The article notes that many companies are prioritizing compliance with the EU's Corporate Sustainability Reporting Directive (CSRD) because it is "the most complex and has the most requirements, and it's the one that's coming the fastest." This pragmatic approach makes sense for companies with significant European operations.

The CSRD's influence extends beyond EU borders. According to analysis by Deloitte, approximately 10,000 non-EU companies will be subject to CSRD reporting requirements through their EU subsidiaries or significant EU operations. For many US companies, CSRD compliance will establish a comprehensive sustainability reporting foundation that can be adapted for other frameworks.

However, focusing exclusively on CSRD compliance carries risks. Companies must still attend to jurisdiction-specific requirements and stakeholder expectations in their home markets. A balanced approach involves using CSRD as a comprehensive baseline while maintaining flexibility to address market-specific nuances. This might include additional emphasis on social equity issues in the US market or water conservation in water-stressed regions.

The article could have explored how companies can leverage CSRD compliance investments to satisfy multiple reporting frameworks efficiently. Research by the Value Reporting Foundation demonstrates that companies with integrated sustainability data systems can reduce reporting costs by up to 30% through streamlined data collection and analysis processes.

3. Ongoing Data and Controls Challenges

Hodge acknowledges that while regulatory uncertainty dominates current concerns, fundamental challenges around "collecting the data and getting the data in the ways that we need it, putting the controls in place" remain significant. These operational challenges often receive less attention than regulatory developments but are critical to effective sustainability management.

Data quality and controls deserve greater emphasis. Research from GreenBiz and Sphera found that 67% of sustainability professionals identified data quality as their primary challenge in sustainability reporting. Without robust data and controls, companies struggle to set appropriate targets, track progress effectively, and provide reliable disclosures.

Rather than viewing current regulatory uncertainty as a reason to delay investments in sustainability data systems, companies should recognize that high-quality sustainability data supports business decision-making regardless of reporting requirements. The 2024 MIT Sloan Management Review Sustainability Index found that companies with mature sustainability data capabilities achieved 15% higher resource efficiency on average compared to peers with less developed capabilities.

Companies should prioritize building robust sustainability data infrastructures with appropriate controls and governance. These investments position organizations to respond flexibly to evolving reporting requirements while supporting internal decision-making on sustainability issues.

4. The 95% Solution Approach

Hodge offers a particularly practical insight when she notes that despite regulatory uncertainty, "Probably 95% of what you're doing is still relevant, but there is a piece that may not be, and you don't know what that is." This observation highlights that regulatory shifts typically affect specific aspects of sustainability reporting rather than fundamentally changing sustainability priorities.

This "95% solution" approach provides a useful framework for companies uncertain about how to proceed. By continuing work on the vast majority of sustainability initiatives while maintaining flexibility around the specific reporting elements subject to regulatory change, companies can make progress while minimizing wasted effort.

A Harvard Business Review analysis published in December 2024 supports this approach, finding that companies that maintained consistent sustainability priorities through regulatory changes outperformed those that frequently pivoted their sustainability strategies. The researchers attributed this performance difference to implementation advantages from sustained focus and stakeholder trust built through consistent commitments.

However, the 95% solution requires careful judgment about which elements constitute the uncertain 5%. Companies should develop clear criteria for identifying which sustainability activities are most vulnerable to regulatory shifts and establish monitoring systems to track relevant regulatory developments. This enables targeted adjustments rather than broad-based uncertainty or paralysis.

Additional Research and Insights

Investor Expectations Remain High Despite Political Headwinds

While the article mentions increased anti-ESG shareholder proposals, it doesn't fully explore the countervailing force of mainstream investor expectations for robust sustainability management. Research from BlackRock's 2025 Stewardship Report indicates that 76% of institutional investors consider sustainability performance in investment decisions, up from 65% in 2022.

Morningstar data shows that assets in sustainable investment funds reached $3.7 trillion globally by the end of 2024, representing a 12% increase from the previous year despite political pushback. This growth demonstrates continued investor interest in sustainability-oriented investments.

Similarly, Bloomberg Intelligence research released in February 2025 found that companies with strong climate transition plans experienced lower stock price volatility during market downturns compared to peers without such plans. This suggests that robust sustainability programs provide a form of risk mitigation that investors value regardless of regulatory requirements.

Given these trends, companies that maintain strong sustainability commitments are better positioned to meet investor expectations and potentially benefit from the growing allocation of capital to sustainability leaders.

Consumer and Employee Expectations Continue to Evolve

The article focuses primarily on regulatory and reporting considerations but doesn't address how consumer and employee expectations influence corporate sustainability commitments. Recent research indicates these stakeholders continue to prioritize sustainability despite political polarization.

According to the 2025 Edelman Trust Barometer, 68% of consumers globally expect brands to address social and environmental challenges, a figure that has remained relatively stable over the past five years despite political fluctuations. In the US specifically, the percentage stands at 59% - lower than the global average but still representing a majority of consumers.

Employee expectations show similar patterns. Research from IBM's Institute for Business Value found that 71% of job seekers consider a company's environmental impact when evaluating potential employers, and 67% are more likely to apply to and accept positions from environmentally