Sustainability will be a differentiator in 2025—but businesses must choose

Every business leader, from the CEO and board down, must decide whether they want to be clear, unashamed sustainability champions in 2025—or whether to make silent progress. The long-term direction on sustainability hasn’t changed. Businesses can’t stop that change. But they can be a part of how that change happens. And individual leaders still have time to both lead and futureproof themselves.

Sustainable finance, regulation, and executive priority all flow in one direction. But the next few years will be bumpy. It’s impossible to think that Trump’s reelection will not significantly affect an increasingly uphill battle facing the climate and broader sustainability emergency. But as businesses or a planet, we weren’t doing enough anyway. Most data points toward sustainability still being a differentiator. It’s time for business leaders to be brave.

No matter your industry or geography, deprioritizing sustainability in 2025 would be a massive risk

Of the 25 sustainability services firms we analyzed in our 2024 market analysis, North America and Europe continue to dominate revenue generation across the spectrum of sustainability consulting, technology, IT, engineering, and broad business services they provide to their average 2,000 clients each (see Exhibit 1). Will this geographical pattern change in 2025 and beyond?

The gut reaction might be that sustainability spending in North America will shrink due to limiting regulation, regulator power, and rhetorical backlash in the US (and through its external influence). However, the positive outcomes of sustainability are becoming so clear that many sectors will see continued increases in investment (see our 2024 recap below). Inflation Reduction Act (IRA) funding also flows largely to Republican states. Time will tell how the vast infrastructure and climate package will be renamed and/or reformed.

Politics aside, Morgan Stanley recently put a loud stake in the ground by finding that 80% of asset managers are upping their sustainable investment, 75% of institutional investors incorporate sustainability into decision-making, and 90% have a client mandate.

Many US businesses must also comply with EU regulations hitting home in 2025. European spending on sustainability will almost certainly grow as CSRD (the Corporate Sustainability Reporting Directive) and cross-border emissions regulations activate and deepen.

Globally, green energy infrastructure spending will increase based on almost any source you could cite. European standards, regional regulations, and the objective business benefits of various sustainability elements will continue to proliferate rather than backtrack.

Exhibit 1: North America and Europe dominate—and will continue to dominate—the revenues of the 25 leading sustainability services providers

Source: 25 leading sustainability services firms in the HFS 2024 market analysis

Sustainability is a differentiator and growth driver, but its enterprise future still hangs in the balance for many

The 605 executives from Global 2000 companies we recently asked view sustainability as the most growth-promoting of all their investment efforts (see Exhibit 2). However, their levels of adoption remain in the balance. Whether it’s new efficiency, innovation, finance, compliance, or employee sentiment, growth and sustainability can present in many wildly different ways. What matters is your business’s sphere of influence.

Exhibit 2: No one told these 605 executives that there was a backlash against sustainability

Source: HFS Research Pulse study of 605 Global 2000 enterprise executives, 2024

Looking back at 2024—despite new and continuing turbulence—the platform for sustainability to be a differentiator is powerful

Throughout 2024 at HFS Research, we’ve built a collective call to action for businesses and their political and civil society stakeholders. We’ve outlined a template for building transition plans toward the clearly defined outcomes of the 17 UN Sustainable Development Goals (SDGs). We’ve laid the groundwork for targeting a diverging sustainability spectrum (see Exhibit 3) between a critical mass for systems change—that shows sustainability works across environmental, social, and economic metrics to pull policymaking, consumer behavior, and business into alignment with the trajectories of the SDGs—and the need to embed sustainability, focusing again on outcomes, throughout organizations especially when the outward ambition may be lacking.

We explored how much of the perceived “greenlash” is a mist driven by rhetoric—as global sustainability investment, strategy, and action ramp up. In launching our latest Horizons study of the energy and utilities industry, we’re aligning our research to the outcomes needed for a just energy transition and advocating that business decision-makers still have a chance to lead. That chance won’t be there forever.

After attending COP29, the annual UN climate summit, we highlighted the need for businesses to positively feed into policymaking—after a dismal showing at the summit—while fossil fuel lobbyists increased their presence. Facing an escalating Russian invasion, Ukrainian businesses at COP continued to show the positive immediate and future outcomes of addressing the SDGs.

Finally, HFS also refreshed our sustainability services market analysis of the leading consulting, technology, and business services providers. Despite a dominant AI narrative in most 2024 business conversations, collaboration based on shared outcomes always stands out in the stories of positive outcomes for sustainability and innovation.

Exhibit 3: We know how to solve sustainability: Transition plan and find your critical mass

Source: HFS Research, 2024

The Bottom Line: Boards, CEOs, and all their leaders must individually and collectively decide whether they want to be loud sustainability champions in 2025 or make more silent progress. The long-term direction hasn’t changed, but the next few years will be turbulent.

The climate and sustainability emergency is about to become an even greater battle. The 2024 COP29 UN summit showed in no uncertain terms that international agreements are, at best, guidelines—and aren’t even ambitious guidelines. The fossil fuel and defense industries are looking at green lights over the next four years, at least. However, the vast majority of businesses across sectors, including finance, continue to move in a positive—albeit too-slow—direction.

Find as many partners as possible and act on your spheres of influence. Align around shared outcomes. Bring banking, insurance, and the whole financial services industry into your ecosystem where possible. Find your way into policymaking, especially if you’re a senior leader. Create and lobby for aligned transition plans. Whatever your company or industry, break down the global context and figure out your part in the systems-changing success story and where the work is needed to embed sustainability more methodically in your strategies and day-to-day business.

At HFS Research, we’ll work with you to build that critical mass and embed sustainability in 2025 and beyond.