In 2024, the pursuit of sustainability has become a central driver of business strategy as organizations navigate an increasingly complex landscape of environmental, social, and governance (ESG) expectations. This year, significant regulatory advancements, including the Corporate Sustainability Reporting Directive (CSRD), have reshaped how businesses approach sustainability reporting and governance. However, the role of leadership in integrating sustainability into business models has never been more crucial. As companies move beyond mere compliance and toward embedding sustainability into their long-term strategic goals, the focus has shifted from meeting regulatory requirements to fostering a culture of transparency, accountability, and innovation. This article explores the key strategic transformations of 2024, highlighting the evolving responsibilities of leaders, the integration of sustainability across industries, and the broader political and regulatory developments shaping the future of sustainability.

The Role of Leadership in Sustainability: Reflecting on the Developments of 2024

The year 2024 has seen substantial progress, especially with the Corporate Sustainability Reporting Directive (CSRD), which has provided clearer business guidelines but also brought challenges that require strong leadership. The CSRD has been a driving force in pushing businesses to enhance their sustainability reporting, with clear requirements for transparency and accountability. As organizations strive to comply with these regulations, leadership has had to step up in new ways. Executives and boards increasingly recognize that ESG performance directly impacts financial outcomes, reputational risk, and the ability to attract investment. In 2024, sustainability has moved from being a compliance matter to a key strategic consideration that informs decision-making across all levels of the business.

Moreover, the role of leadership in fostering a sustainability-focused culture has become more pronounced. While dedicated teams or departments often lead sustainability, it is the responsibility of the entire leadership to ensure that sustainability is integrated into every part of the business. This requires setting a clear vision and aligning internal processes with sustainability objectives. Leaders must ensure all employees understand, adopt, and act upon sustainability goals, empowering teams to contribute to broader organizational targets.

Equally important is leadership’s engagement with external stakeholders. With increasing scrutiny from investors, regulators, and consumers on sustainability performance, leaders must build trust and credibility through transparency and open dialogue. The CSRD and other regulations have set a higher bar for accountability. Still, leaders must also go beyond compliance, proactively addressing stakeholder concerns and positioning the organization as a responsible corporate actor. Communicating a compelling sustainability narrative is essential, as is ensuring that the company remains accountable to its environmental and social commitments.

Beyond Compliance: Building a Strategic ESG Framework for Long-Term Success

Many companies still view the CSRD as a standalone compliance requirement, assuming their sustainability obligations are fulfilled once the reporting is completed. However, this perspective misses the broader implications of sustainability strategy. The CSRD is part of an interconnected legal framework that includes regulations such as the EU Taxonomy, the Corporate Sustainability Due Diligence Directive (CSDDD), and other ESG-related requirements. These regulations signal the beginning of a more extensive process beyond transparency, focusing on the actions companies must take to effectively align their business and ESG strategies. As organizations face increasing regulatory demands, the value chain is one of the most significant focus areas. Mapping the entire supply chain is becoming essential, with regulations like the CBAM, CSRD, and EUDR requiring companies to gain visibility into their supply chain activities. Once this insight is gained, businesses must strategize and implement actionable ESG plans throughout their supply chains to ensure full compliance and sustainability. A useful tool for companies to navigate these complex requirements and assess their progress is the ESG maturity model, which can help organizations understand where they stand regarding compliance, maturity, and strategy. This model provides a framework for companies to measure their readiness and manage different perspectives on ESG, ensuring they take concrete steps to build a long-term sustainability strategy integrated into operations and business objectives.

Political shifts and their impact on sustainability

European elections and strategic priorities: Sustainability repositioned

The European Parliament elections in June 2024 delivered mixed results. While populist and far-right parties gained seats, they failed to dominate. Pro-EU groups, including the EPP, S&D, Renew Europe, and Greens, lost ground, particularly the Greens, but retained a majority. Internal divisions within these groups have complicated efforts to advance unified policies on climate and migration.

The election outcomes, coupled with the overall geopolitical situation, have shaped the EU’s 2024-2029 cycle strategic agenda, which was released in July this year, which introduces three priorities: a free and democratic Europe, a strong and secure Europe, and a prosperous, competitive Europe. Shaped by geopolitical tensions, economic challenges, and the ongoing war in Europe, sustainability is no longer a standalone focus as it was in the previous cycle in the form of the European Green Deal. Instead, it is woven into these broader priorities, signaling a reduced emphasis on sustainability in the coming regulatory cycle.

However, the Nature Restoration Law passage in August highlights that sustainability has not been entirely deprioritized. This landmark regulation sets binding targets to restore degraded ecosystems, emphasizing those most capable of capturing carbon and mitigating natural disasters. Member States must implement restoration measures in at least 20% of the EU’s land and sea areas by 2030, with full ecosystem restoration targeted by 2050. These measures will contribute to achieving climate neutrality, enhancing biodiversity, and supporting sustainable development.

Dutch climate strategy: pragmatism over ambition

The newly formed coalition in the Netherlands released its plans in September, marking a shift toward a more pragmatic climate agenda that balances economic growth with environmental objectives. The Ministry of Climate and Green Growth emphasized innovation and investment as essential drivers of green development. While the country remains committed to EU climate regulations, the focus has shifted to compliance rather than exceeding targets. Addressing energy grid congestion and accelerating the energy transition are critical priorities.

The Draghi Report and Regulatory Streamlining 

At the EU level, concerns about regulatory complexity and competitiveness have spurred significant action. The Draghi Report, published in September 2024, underscored the urgency of coordinated industrial policies and substantial investment to secure Europe's global standing. It warned that failing to compete with the United States and China could lead to economic stagnation.  

Building on these concerns about 'overregulation', the European Commission announced an omnibus regulation in November to consolidate overlapping sustainability frameworks, including the CSRD, EU Taxonomy, and CSDDD. This move aims to simplify compliance, foster business innovation, and reinforce Europe’s sustainability goals within the context of global competitiveness.

United States of America

The 2024 US elections marked a significant political shift with Donald Trump's return to the presidency, indicating potential challenges for ESG initiatives. The new administration's focus on economic growth and national interests could introduce legislative and policy changes that prioritize business-friendly approaches over progressive sustainability strategies.

Key policy developments include the "Prioritizing Economic Growth over Woke Policies" Act, which aims to reduce ESG-related regulations, and new restrictions on ESG investing. These measures prioritize economic expansion and financial returns, potentially undermining corporate responsibility efforts. Simultaneously, the administration has reinforced its "America First" policy by imposing tariffs on clean energy imports to stimulate domestic manufacturing.

The global implications of these policy shifts extend to international climate commitments, with the US adopting a more cautious approach to the Paris Agreement. By emphasizing national interests over global cooperation, the new administration may weaken collective efforts to address climate change and potentially reshape the country's role in environmental policy. These developments suggest a significant recalibration of the United States' sustainability and corporate governance approach.

Navigating Industry Shifts: ESG Integration Across Key Sectors in 2024

Industries across the globe continued to experience significant shifts driven by the growing importance of sustainability and the integration of ESG factors. From private equity and logistics to energy, businesses increasingly recognize that strong ESG practices are not just a regulatory requirement but a critical element for long-term success.  

Private Equity

The relationship between ESG performance and financial outcomes continued to evolve in 2024. Research indicates a meaningful connection between strong ESG practices and corporate resilience. Particularly during challenging periods like the COVID-19 pandemic, companies with robust ESG frameworks demonstrated enhanced ability to manage complex market conditions.

Private equity firms are increasingly integrating sustainability factors as a risk management strategy. These firms aim to improve portfolio performance and organizational adaptability by systematically addressing potential vulnerabilities. The approach focuses on reducing systematic and company-specific risks, with particular effectiveness observed in medium-sized enterprises. Challenges remain in ESG implementation. Information gathering and developing comprehensive measurement tools continue to be challenging for investors. Successful ESG integration requires careful analysis, nuanced understanding, and a commitment to ongoing improvement.

The most effective investors are those who can transform ESG from a theoretical concept into a practical approach to portfolio management. Understanding and implementing sophisticated ESG strategies will become increasingly crucial for long-term success as the investment landscape evolves.

** if you want to read more about ESG in Private Equity, see our report:  

Logistics

The logistics industry faced continued pressure to reduce its environmental footprint while maintaining efficiency and profitability in 2024. As global supply chains grow more complex, the emphasis on sustainability has become a key differentiator for companies striving to meet regulatory standards and customer demands. The sector has begun embracing alternative fuel technologies, electric vehicles, and more efficient route planning to reduce emissions, all while managing the complexities of global logistics. Companies increasingly adopt ESG standards to mitigate climate change, fuel volatility, and resource scarcity risks. As with other industries, integrating data-driven technologies is helping logistics companies improve operational efficiencies and enhance transparency in their environmental impact. Despite these advancements, the industry faces challenges in implementing sustainability initiatives across diverse geographies, especially in emerging markets where regulations may need to be more defined. Logistics companies that embrace sustainability will benefit from improved operational resilience and customer trust, positioning them for success in a rapidly changing market.

Energy

In 2024, the energy sector has been at the forefront of sustainability transformation, driven by the dual pressures of regulatory requirements and the urgent need to address climate change. Companies in the sector increasingly invest in renewable energy sources, energy efficiency initiatives, and carbon capture technologies to meet national and international decarbonization goals. The European Union's commitment to achieving net-zero emissions by 2050 has spurred significant investments in wind, solar, and hydrogen technologies, focusing on building a more sustainable energy infrastructure. Companies are also improving transparency in their environmental impact, using advanced reporting frameworks like the CSRD to demonstrate their commitment to sustainability. Despite these advancements, the energy sector must overcome substantial challenges, including the high capital costs of renewable energy infrastructure, regulatory uncertainty, and public resistance to new technologies. However, companies that successfully navigate these challenges are expected to lead the transition to a low-carbon economy, positioning themselves as pioneers in sustainable energy production. This transition is not only crucial for meeting global climate targets but is also seen as a significant opportunity for innovation and long-term profitability in the energy sector.

** If you want to read more about the energy transition, see our report:  

Forward Thinking  

As sustainability continues to shape the global business landscape, leadership is increasingly at the forefront of driving change within organizations. In 2024, executives and boards must comply with growing regulatory frameworks like the CSRD and develop and implement strategic sustainability practices that align with business goals and societal expectations. The evolving political landscape in the EU and US further complicates the task, requiring leaders to adapt to shifting policies while maintaining a clear vision for sustainability. The integration of ESG factors across various industries—from private equity to energy—demonstrates the critical importance of leadership in fostering long-term, resilient business models. Looking ahead, it will be essential for leaders to prioritize innovation, transparency, and proactive engagement to ensure their organizations remain at the forefront of sustainability transformation and contribute meaningfully to the global sustainability agenda.

RSM is a thought leader in the field of Sustainability consulting. We offer frequent insights through training and sharing of thought leadership based on a detailed knowledge of industry developments and practical applications in working with our customers. If you want to know more, please contact one of our consultants.