How should US companies committed to sustainability prepare for a second Trump presidency?

Written By The SSC Team

For U.S. companies committed to sustainability, preparing for a potential second Trump presidency will likely involve a strategy focused on resilience, adaptability, and market-driven ESG efforts, as regulatory support may decrease. Here’s a strategic roadmap to help companies stay committed to sustainability in a shifting regulatory environment:

1. Strengthen Market-Driven Sustainability Efforts

  • Focus on Consumer and Investor Demand: Companies should continue to emphasize sustainability initiatives that align with market demand, as these often have the strongest staying power, independent of political shifts. ESG commitments that resonate with consumers (like reduced carbon footprints, ethical sourcing, and waste reduction) and investors (like risk management and transparency) are likely to be high-impact and have strong internal support.

  • Leverage Brand Value in Sustainability: Companies with established green brands should double down on their ESG communications, emphasizing the business case and brand value in sustainability. This can help sustain internal and external buy-in for sustainability efforts, even if regulatory incentives are reduced.

2. Optimize and Localize Supply Chains

  • Increase Supply Chain Resilience: To manage potential tariffs and supply chain volatility, companies should explore reshoring and diversifying suppliers, especially focusing on suppliers with strong ESG credentials. By localizing and stabilizing supply chains, companies can reduce emissions from transportation and mitigate risks tied to international disruptions.

  • Engage in Circular Economy Practices: Circular economy strategies—such as recycling, refurbishing, and material reuse—can reduce dependence on new materials, especially if tariffs drive up import costs. Companies can also market these circular practices as sustainable, further reinforcing their commitment to ESG goals.

3. Invest in Renewable Energy and Carbon-Reduction Measures

  • Prioritize Onsite Renewable Energy: If incentives for renewable energy imports decrease, companies may benefit from investing in domestic, onsite renewable energy production, such as solar installations on company-owned properties. These assets can help reduce dependency on federal policies and contribute to long-term cost savings.

  • Adopt Internal Carbon Pricing: Setting an internal carbon price can prepare companies for possible future regulatory changes and provide a consistent framework for evaluating projects based on their carbon footprint. This approach can also build resilience against future international carbon tariffs, like those planned by the EU, by encouraging low-carbon innovation.

4. Enhance Sustainability Reporting and Transparency

  • Voluntary Reporting Standards: Companies should consider adopting or enhancing reporting frameworks, like the Global Reporting Initiative (GRI) or Task Force on Climate-related Financial Disclosures (TCFD), even if federal mandates are relaxed. This approach meets growing investor expectations for transparency and positions the company favorably for future regulatory changes.

  • Set Science-Based Targets: Aligning goals with science-based targets ensures that sustainability objectives are credible, robust, and aligned with global best practices, even if U.S. regulations become less stringent. This will also maintain alignment with international frameworks, an asset for companies with a global presence or investor base.

5. Commit to Social and Governance Aspects of ESG

  • Strengthen Labor and Social Standards: Despite possible shifts away from federally mandated DEI and labor standards, companies can continue prioritizing equitable pay, safe working conditions, and diversity. By building a strong social foundation, companies can bolster employee engagement, attract diverse talent, and mitigate reputational risks.

  • Enhance Board-Level ESG Oversight: Creating or strengthening ESG oversight at the board level can embed sustainability deeper into the company’s governance structure, reducing the risk of it being deprioritized in times of regulatory change. This might include creating board committees focused on sustainability or setting executive compensation linked to ESG metrics.

6. Advance Innovation in Sustainability

  • Invest in Sustainable R&D: Companies should focus on innovations in sustainable product design, waste reduction, and efficient manufacturing, as these areas not only help meet ESG goals but also support long-term profitability. Investing in R&D around sustainable materials or energy efficiency can yield competitive advantages.

  • Utilize Digital Tools for Sustainability: Tools like data analytics, IoT, and AI can help companies monitor and improve resource efficiency, reduce waste, and optimize energy use. Such investments in technology can reduce dependence on policy support while directly contributing to sustainability targets.

7. Maintain International Alignment and Compliance

  • Prepare for International Standards: Companies with a global footprint or international clients should continue aligning with EU and other global ESG regulations, as these standards are unlikely to change regardless of U.S. policy shifts. Ensuring compliance with international standards can help avoid issues like carbon border adjustments.

  • Strengthen Global Partnerships: Building partnerships with international ESG organizations and stakeholders can provide insights and support, helping companies stay aligned with global sustainability trends. This could include partnerships for carbon offsetting, sustainable sourcing, and circular economy initiatives.

8. Develop a Strategic Communications Plan

  • Emphasize the Business Case for Sustainability: Articulating the financial and operational benefits of sustainability to both internal stakeholders and the public can help justify ongoing ESG investments. By presenting sustainability as a driver of cost savings, resilience, and long-term value, companies can sustain their ESG momentum even if federal support wanes.

  • Prepare for Reputational Risk Management: If certain industries face scrutiny for loosening their sustainability practices, companies should have a robust communications strategy ready. Staying transparent about challenges, engaging in dialogue with stakeholders, and actively seeking solutions can help maintain public trust.

In summary, U.S. companies should prepare for a potential shift in federal support for ESG by prioritizing market-driven sustainability, enhancing supply chain resilience, reinforcing board-level ESG governance, and aligning with international standards. By embedding sustainability more deeply into business practices and building a strong market and investor-driven case for ESG, companies can maintain momentum in their sustainability efforts despite any regulatory changes.

The SSC Team
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