Taking geopolitics in stride
Maintain momentum; move forward
Our research shows that sustainability is geopolitically and politically sensitive. Sixty-four percent of executives agree that geopolitics is an increasing consideration sustainability investments. Similarly, 65% say that current geopolitics is driving a slowdown in sustainability investments and projects.
We found that most companies are concerned with the US’s geopolitical uncertainty. Executives might be concerned about the availability of federal climate and green tech funding.
Even amid geopolitical shifts, we found that smaller organizations continue to invest more heavily in sustainability. Though total spending increases with company size, big groups tend to spend a lesser proportion of their revenue on environmental initiatives.
In 2024, average annual investment in sustainability declined by around $570,000 per company, year on year. Only small organizations, i.e., those with $1-$5 billion of revenue, bucked the trend. They increased environmental investments from 2.9% of total revenue in 2023 to 3.02% in 2024.
More than half (55%) of executives understand the business case for sustainability. And only 23% of executives agree that the cost of environmental initiatives outweighs the benefits, a figure which has barely changed from 22% in 2023.
Sustainability investment increased among organizations with $1– $5 billion in revenue
Source: Capgemini Research Institute, Sustainability transformation trends survey, August–September 2022, N 668 organizations; August–September 2023, N = 668 organizations; June–July 2024, N = 628 organizations.
Executives can anticipate and prepare for geopolitical changes to maintain the sustainability momentum of their organizations. They can monitor developments like stricter climate reporting regulations and geopolitical crises. This information can inform decision-making so companies can better prepare for the future, today. While regulations accelerate sustainability initiatives (as 98% of frontrunners agree), we also know that geopolitical conflict often slows down their progress.
With the first CSRD reports due next year, companies are feeling the pressure. We have compiled some strategies to help executives anticipate and clear upcoming legal and political hurdles:11
Before beginning a project, conduct a thorough geopolitical assessment of the country in which it will take place.
Shorten supply chains and strengthen critical sectors by increasing the emphasis on domestic manufacturing, especially for products like electric vehicle batteries, semiconductors, and medicine.
Diversify value chains by working with suppliers in different regions, reducing the risk of overreliance on a single country.
Engage with regulatory bodies and government organizations to stay abreast of all developments in your industry.
11 Capgemini Research Institute, The resurgence of manufacturing: Reindustrialization strategies in Europe and the US, April 2024.
