In this article, ESG expert Adam Freedgood and the Third Partners sustainability consulting team discuss the impact of the U.S. presidential election on corporate sustainability outcomes & how companies can prepare for potential regulatory changes.

Corporate sustainability has become a focal point for companies worldwide. With increasing awareness of environmental and social issues, growing stakeholder expectations, and a means to create real financial and brand value, the value of sustainability has become clear to most businesses. However, the shifting political landscape, particularly during an election year, can introduce uncertainties and challenges for corporate sustainability initiatives.

With each new administration comes changes to environmental policy and regulatory requirements. In this article, we discuss how the outcome of the presidential election could reshape the regulatory environment and affect corporate sustainability agendas.

Sustainability after the Election: What Could Change with a New Administration?

1. Less focus on protecting the environment

Rollbacks on environmental protections are a certainty under a new administration. A New York Times analysis, based on research from Harvard Law School, Columbia Law School and other sources, counted nearly 100 environmental rules officially reversed or revoked under the previous administration.

This helps big industries save money by cutting compliance costs, but it makes it harder for companies that want to use clean technology, not to mention damaging public health.

2. Immigration policy shifts

A new administration could also reduce the number of skilled workers. Significant cleantech investments are needed to solve the climate crisis, encompassing infrastructure for electrical distribution, semiconductors for renewable energy, and batteries/EVs for clean transportation. Fewer skilled workers coming to the U.S. slows down the progress of decarbonization and high-tech manufacturing growth, particularly in grid modernization.

Skilled immigrant labor has historically played an important, if sometimes tragic and controversial role in U.S. and global industrial growth, from the bridges that connect urban centers to the rail systems and canals that transported goods ahead of the interstate highway system. Blocking the immigration of skilled workers, or even the threat of changes to immigration policy, will have an impact on the speed at which we can deploy clean tech in America and everywhere that we export our world-leading technology.

3. Reduced access to important government incentives and subsidies

The Inflation Reduction Act (IRA) went into effect in August of 2022. Though its titular objective is to “reduce inflation,” its overall goals are ambitious and meant to have long-lasting impacts on the environment and sustainability. Some of the act’s goals include:

    • Helping to reduce GHG emissions by 50% from 2005 levels by 2030.
    • Accelerating clean electricity and U.S. manufacturing of solar panels, wind turbines, and batteries
    • Advancing breakthrough energy research
    • Supporting critical minerals processing
    • Promoting clean fuels and commercial vehicles
    • Reducing methane leaks

However, a new administration could impact how the resources behind the IRA are distributed.

“While the IRA itself may not be at risk, the federal government plays a key role in helping companies access various grants and incentives and we would certainly see a pullback in the number of firms successfully achieving a positive return on investment by accessing energy efficiency and renewable energy investments,” says Fran Levy, a senior analyst at Third Partners who works with companies on energy reduction and decarbonization strategy. “Federal agencies including EPA, DOE, and USDA play a key role when it comes to helping companies access grants, incentives, and reduced cost technical assistance,” says Levy.

Sustainability after the Election: What Won’t Change with a New Administration?

1. Large companies and their business networks will still need to measure and report impact on a broad range of issues.

Multinational companies, and those who do business with them (suppliers, contractors, buyers, retailers) are now following Europe’s Corporate Sustainability Reporting Directive (CSRD), which aims to enhance transparency and accountability by expanding the scope of reporting requirements for EU companies on environmental, social, and governance (ESG)

2. There are still strong incentives to reduce carbon emissions from investors, buyers, and internal finance teams.

A mix of built-in decarbonization business mandates will continue to push influential industries, especially heavy industry, aviation, agriculture, and transportation, to measure, price and reduce carbon emissions.

3. Consumers will continue to make purchasing decisions based on the environmental and social impacts of products.

Studies show consumers are increasingly sensitive to sustainability and ESG aligned issues. Products marketed as sustainable grew about two times faster than products not marketed as sustainable and achieved a 5-YR CAGR of 9.43% vs. 4.98% for their conventional counterparts. Companies that sell greener products will outsell those that don’t.

Sustainability after the Election: What Should Companies Do?

As the election unfolds, companies need to:

  • Keep up with what the candidates are saying about environmental policy
  • Talk with policymakers about what’s important to them on sustainability
  • Continue working on their sustainability practices
  • Have an action plan prepared for both scenarios – a second term of the current administration, or a second term of the old administration.

Scenario planning and flexibility in strategies are essential to adapt to changing regulations and stakeholder expectations. As a sustainability consulting firm, Third Partners helps companies bring more sustainable products to market and helps innovators grow market share in any political environment. Third Partners incorporates a variety of scenario analysis functions into their sustainability consulting, which range from materiality assessments and action plans to GHG emissions reduction plans and technical assistance with sustainable product development.

While sustainability consulting has seen continued growth through several changes in political administrations, a global pandemic, and multiple recessions, Third Partners principal John Haugen has a cautionary message about 2024:

“Given what’s at stake in this election, we should not understate the risks to the core values of the Constitution itself and what that means not only for business continuity but for democracy,” said Haugen.