Companies will still face pressure to manage for climate change, even as government rolls back US climate policy
- Written by Ethan I. Thorpe, Fellow at Private Climate Governance Lab, Vanderbilt University
As the federal government moves to eliminate U.S. climate rules[1], companies still face pressure to be better stewards of the planet from their customers[2], investors[3], employees[4], local communities[5], lenders[6], insurers[7], global trading partners[8] and many states[9].
Each of those groups knows it will face increasing costs[10] from rising temperatures[11] and extreme weather[12] if corporations don’t rein in their greenhouse gas emissions.
Many companies will find that returning to past polluting ways[13] isn’t in their best interest. Over 60%[14] of chief financial officers surveyed by global management firm Kearney in December 2024 signaled that they intended to invest at least 2% of their revenue in sustainability in 2025.
These companies may maintain a low profile[15] about climate change while the Trump administration is in power, but they have strong financial incentives to continue to reduce their emissions and their own climate risks.
We study private[16] environmental[17] governance[18] – the ways companies and organizations work outside government to improve the nation’s sustainability and reduce environmental damage. Our work finds that, in this polarized era, addressing climate and sustainability challenges is not just a matter of government action. That’s because a lot of climate and sustainability progress is underway[19] in the private sector.
Sustainability matters to companies’ bottom lines
Businesses have used climate and sustainability initiatives for years to make their operations[20] and supply chains[21] more efficient and to reduce their long-term costs[22].
When McDonald’s faced public pressure to reduce waste in the late 1980s, the company teamed up with the Environmental Defense Fund[23] to analyze the problem. It was able to reduce its waste by 30% over the following decade, saving the company US$6 million a year. This early risk-taking by McDonald’s opened the door for other environmental groups to help businesses understand how to reduce their environmental impact, including emissions, while boosting the companies’ profitability.
Maersk, the logistics giant responsible for nearly a quarter[25] of global shipping, has responded to pressure from its corporate customers with a plan to reduce carbon emissions[26] by one-third from 2022 to 2030 and reach net-zero emissions by 2045. It expects the combination of low-emissions vessels[27] and a more efficient delivery network[28] with hubs and shuttles to help meet its climate goals while increasing productivity.
Companies have also helped drive the expansion of renewable energy, motivated by the competitive economics of renewables[29] and business opportunities[30]. Facebook’s parent company Meta[31] and Google[32] invested nearly $2 billion[33] in projects to provide renewable energy in the Tennessee Valley Authority service area, even though no government required them to do so. And major companies continued signing[34] renewable energy[35] power purchase agreements[36] in 2025.
Microsoft[37] and Amazon[38] are responding to massive new power demand by trying to locate data centers near existing nuclear power plants for cleaner energy supplies.
Thousands of companies report emissions via private systems
Another sign of companies’ continuing commitment to sustainability is how many of them measure and report their greenhouse gas emissions even when governments do not require them to do so.
Nearly 25,000 companies[39] representing two-thirds of total global market capitalization and 85% of the S&P 500[40] report their emissions[41] to the nonprofit CDP. Disclosing emissions[42] is like keeping a fitness journal with a personal trainer. It helps a company track its progress and plan for future financial and environmental risks. More than 12,500 small- and medium-size companies[43] also disclosed emissions to CDP in 2024.
Many of these companies were initially motivated by pressure from environmental groups[44] or corporate customers[45]. Today, they have more reason to continue paying attention to emissions.
California[46] has its own formal reporting requirements designed to encourage companies to reduce their greenhouse gas emissions. And other states[47] are considering setting climate disclosure rules. The Trump administration has promised to challenge them, and announced that it also plans to cut[48] federal greenhouse gas reporting standards[49], but companies will likely still face reporting rules in the future. The European Union also has reporting requirements[50]. It delayed their start date in April 2025[51] to give companies more time to comply.
Cleaner supply chains can also be more efficient
Managing supply chains with climate and environmental risks in mind can also help businesses increase their efficiency and reduce the risk that climate change will disrupt their operations.
The supply chain is the largest source[52] of the average company’s emissions and may be particularly vulnerable to climate shocks. A storm can easily disrupt vital production or shipping, and droughts or heat waves can damage crops, stop work and increase costs. Companies estimate[53] climate-related supply chain risks at $162 billion, nearly three times the cost of mitigating those risks. Many companies therefore have incentives to reduce emissions and their exposure to related hazards.
Nearly 80% of the largest companies[54] across seven global economic sectors had set environmental requirements for suppliers within their value chains as of 2023. These requirements include reporting carbon emissions[55], reducing emissions[56] and using sustainable forestry practices[57].
Walmart eliminated 1 billion tons of carbon emissions from its supply chain in less than seven years[58] by sharing its expertise with suppliers and working with them to reduce their emissions[59]. Walmart’s global director of sustainable retail noted in 2024 that[60] the effort made its suppliers more efficient, too.
Keeping employees and customers happy
Companies also face pressure from average people − both employees and customers.
More than two-thirds[61] of Americans support action to address climate change. Even companies that are not consumer-facing[62] need retail customer and employee support. Pro-climate actions have been found to improve employee[63] and customer[64] loyalty.
The outdoor clothing company Patagonia ranked third[65] out of over 300 brands in a 2024 customer experience survey, in part because of its reputation for sustainable practices. Many of the over 10,000 respondents cited the company’s sustainable practices[66] as the leading reason for their support.
Many companies also face pressure from lenders[67] and insurers[68] who want to reduce climate risks[69] to their own bottom lines. Dozens of insurers[70] have committed to ending or restricting underwriting for new fossil fuel projects. Others use incentives[71], such as lower premiums for companies that reduce emissions or invest in climate adaptation.
Climate change may accelerate the current 5% to 7% annual increase[72] in insured losses, according to estimates from insurer Swiss Re. That has led some insurance leaders[73] to recommend insurance companies take bigger steps[74] to reduce emissions through their investments and policy underwriting.
Private climate governance can help buy time
Media attention and interest group advocacy is often focused on government actions, but decisions made in boardrooms and through initiatives with nonprofits have created an important kind of private climate governance.
As companies respond to their own economic risks and incentives, they help buy time to avoid the worst impacts of climate change until the political system recognizes the financial risks posed to the entire country.
References
- ^ eliminate U.S. climate rules (climate.law.columbia.edu)
- ^ customers (nielseniq.com)
- ^ investors (www.blackrock.com)
- ^ employees (www.salesforce.com)
- ^ local communities (education.cfr.org)
- ^ lenders (equator-principles.com)
- ^ insurers (www.iais.org)
- ^ global trading partners (commission.europa.eu)
- ^ many states (www.c2es.org)
- ^ increasing costs (www.nature.com)
- ^ rising temperatures (www.thelancet.com)
- ^ extreme weather (iccwbo.org)
- ^ past polluting ways (19january2021snapshot.epa.gov)
- ^ Over 60% (www.kearney.com)
- ^ may maintain a low profile (yaleclimateconnections.org)
- ^ private (scholar.google.com)
- ^ environmental (news.vanderbilt.edu)
- ^ governance (as.vanderbilt.edu)
- ^ underway (www.westacademic.com)
- ^ operations (www.nature.com)
- ^ supply chains (www.sciencedirect.com)
- ^ reduce their long-term costs (www.nature.com)
- ^ Environmental Defense Fund (www.edf.org)
- ^ Axel Heimken/picture alliance via Getty Images (www.gettyimages.com)
- ^ nearly a quarter (repository.law.umich.edu)
- ^ to reduce carbon emissions (www.hapag-lloyd.com)
- ^ low-emissions vessels (www.maersk.com)
- ^ more efficient delivery network (www.maersk.com)
- ^ motivated by the competitive economics of renewables (www.lazard.com)
- ^ business opportunities (www.nature.com)
- ^ Facebook’s parent company Meta (sustainability.atmeta.com)
- ^ Google (sustainability.google)
- ^ invested nearly $2 billion (papers.ssrn.com)
- ^ signing (www.reuters.com)
- ^ renewable energy (www.rwe.com)
- ^ power purchase agreements (www.edf-re.com)
- ^ Microsoft (www.npr.org)
- ^ Amazon (www.spglobal.com)
- ^ 25,000 companies (www.cdp.net)
- ^ 85% of the S&P 500 (www.cdp.net)
- ^ report their emissions (www.cdp.net)
- ^ Disclosing emissions (www.science.org)
- ^ small- and medium-size companies (www.cdp.net)
- ^ pressure from environmental groups (ghgprotocol.org)
- ^ corporate customers (papers.ssrn.com)
- ^ California (ww2.arb.ca.gov)
- ^ other states (greencentralbanking.com)
- ^ that it also plans to cut (www.propublica.org)
- ^ greenhouse gas reporting standards (www.epa.gov)
- ^ European Union also has reporting requirements (greencentralbanking.com)
- ^ delayed their start date in April 2025 (www.europarl.europa.eu)
- ^ largest source (www.hinrichfoundation.com)
- ^ Companies estimate (cdn.cdp.net)
- ^ 80% of the largest companies (repository.law.umich.edu)
- ^ reporting carbon emissions (www.cvshealth.com)
- ^ reducing emissions (sustainabilityconsortium.org)
- ^ using sustainable forestry practices (mobilecontent.costco.com)
- ^ in less than seven years (corporate.walmart.com)
- ^ reduce their emissions (www.walmartsustainabilityhub.com)
- ^ noted in 2024 that (www.supplychaindive.com)
- ^ More than two-thirds (doi.org)
- ^ companies that are not consumer-facing (papers.ssrn.com)
- ^ employee (www.yumpu.com)
- ^ customer (doi.org)
- ^ ranked third (kpmg.com)
- ^ sustainable practices (www.patagonia.com)
- ^ lenders (www.sciencedirect.com)
- ^ insurers (www2.deloitte.com)
- ^ reduce climate risks (www.iais.org)
- ^ Dozens of insurers (global.insure-our-future.com)
- ^ Others use incentives (blogs.edf.org)
- ^ 5% to 7% annual increase (www.swissre.com)
- ^ insurance leaders (www.linkedin.com)
- ^ insurance companies take bigger steps (esg.wharton.upenn.edu)
Authors: Ethan I. Thorpe, Fellow at Private Climate Governance Lab, Vanderbilt University
