The Sustainability Paradox: Why Companies Are Retreating and Why This is the Moment to Push Forward

At a time when the urgency of sustainable business practices has never been greater, a disturbing trend is emerging. More and more companies seem to be retreating from their previously stated sustainability ambitions. This development, which at first glance appears paradoxical, has various causes and consequences that deserve closer analysis.

The CSRD Reality

A significant factor in this retreating movement is the introduction of the Corporate Sustainability Reporting Directive (CSRD) in the European Union. This directive requires companies to report in detail on their sustainability performance. For the first time, many organizations are getting a crystal clear picture of their actual ecological footprint. The results are confronting and sobering for many.

The hard figures show that the path to true sustainability is more complex and challenging than often assumed. Companies are realizing that their previous ambitions may have been too high, or that the costs of becoming sustainable are higher than expected. In some cases, this leads to a reconsideration of sustainability strategies and even to scaling back targets.

The CEO Dependency

Another factor contributing to the vulnerability of sustainability initiatives is the strong dependence on individual leaders. Many progressive sustainability strategies are the result of visionary CEOs who see the necessity for change. However, when leadership changes, these initiatives can easily be reversed or watered down.

This personalization trend in sustainability makes progress vulnerable and underscores the need for a more systemic, institutionalized approach to sustainability within organizations.

The Inadequacy of the Current Approach

A recent report from the Cambridge Institute for Sustainability Leadership casts a critical light on the current state of affairs. The conclusion is sobering: the dominant approaches to sustainability and ESG (Environmental, Social, and Governance) in business are fundamentally falling short.

The report states that voluntary commitments, standalone sustainability strategies, and the focus on individual company performance are insufficient to bring about the necessary changes. The core of the problem lies in the fact that in most cases, it is still more profitable for companies to operate unsustainably in the short term.

The Inevitability of Change

Despite these discouraging observations, there is an inescapable reality: economic change is inevitable. The ecological boundaries of our planet dictate this. It is no longer a question of whether we will change, but how quickly and in what way this change will take place.

Companies that do not recognize this risk not only their reputation but also their future right to exist. The transition to a sustainable economy will happen, with or without them. The choice companies now have is whether they want to be proactive and reap the benefits of early adoption, or be reactive and risk falling behind.

The Need for Systemic Change

The Cambridge Institute report emphasizes that individual efforts by companies, however laudable, are insufficient to bring about the scale of change needed. What we need is a transformation of entire markets and sectors.

This requires a fundamentally different approach. Instead of seeing sustainability as an add-on or a separate strategy, it must be integrated into the heart of business operations. It must become a central element in how companies create value, compete, and grow.

A New Role for Business

To realize this systemic change, a new role for business is necessary. Companies must:

1. Advocate for policy: Governments need to implement policies that reward sustainable practices and penalize unsustainable ones. Business must actively lobby for this, rather than resisting regulation.
2. See sustainability as a competitive advantage: Companies should compete to offer the most innovative, sustainable solutions. This stimulates innovation and accelerates the transition.
3. Create social support: Companies must play a leading role in creating social support for the transition to sustainability. They must tell the story of the economic and social benefits of this transition.
4. Apply business thinking to sustainability: Instead of treating sustainability as a separate component, companies must apply business principles to sustainability issues.

The Role of Policy and Market Reform

A crucial observation from the Cambridge report is that the market alone is not sufficient to bring about the necessary changes. There is a strong role for government in creating the right incentives.

This can be done, for example, by:

• Pricing externalities, such as CO2 emissions
• Providing subsidies for sustainable innovations
• Setting strict standards for products and services
• Creating markets for climate-neutral and nature-positive products

Companies must actively advocate for these types of policy measures, rather than resisting them. Only in this way can a level playing field be created in which sustainable practices are also the most financially attractive option.

The Opportunity in the Crisis

Although the current situation is worrying, it also offers opportunities. The increased transparency through regulations such as the CSRD gives companies the opportunity to gain real insight into their impact and take targeted action from there.

Moreover, the urgency of the climate and biodiversity crisis creates momentum for change. Companies that are now at the forefront of the transition are positioning themselves as leaders in the economy of the future.

Conclusion and Outlook

The retreating movement we now see in some companies is understandable, but not justified. The challenges we face require more commitment, not less.

What we need is a fundamental reconsideration of how we approach sustainability in business. Not as a standalone strategy or a PR exercise, but as the core of how we create value in a rapidly changing world.

The companies that will flourish in the coming decades are those that now have the courage to look beyond the next quarterly figures. Those willing to invest in innovation, to advocate for ambitious policies, and to reinvent their entire business model with an eye to a sustainable future.

The path to true sustainability is challenging and will require sacrifices. But the alternatives - a world burdened by extreme weather conditions, biodiversity loss, and social unrest - are much more costly.

We are at a crossroads. The choices that companies, governments, and societies make now will be decisive for the world we live in in 2050 and beyond. It's time to persevere, to show ambition, and to see the transition to a sustainable economy not as a burden, but as the greatest economic and innovative opportunity of our time.