EU is downscaling green transition: Corporate leadership has never been more important

The global fight against climate change is facing new obstacles, not from scientific limitations or technological shortcomings, but from shifting geopolitical landscapes. 

With Donald Trump’s re-election and his swift withdrawal of the United States from the Paris Climate Accord, alongside economic pressures within the European Union, the momentum behind sustainability efforts is at risk of slowing down.

According to Andreas Rasche, Professor at CBS and expert in corporate sustainability and governance, these political shifts pose both symbolic and substantial threats to global climate action. 

When Trump pulls out of international agreements like the Paris Accord, it sends the wrong signals

Andreas Rasche

“We shouldn’t underestimate the symbolic power of these decisions because they shape how other countries perceive their own obligations. Just recently, Argentina’s President Milei questioned whether his country should remain bound to the Paris Agreement, using the U.S. withdrawal as justification.”

But the dangers extend beyond symbolism. The United States' withdrawal also means reduced financial contributions to global climate initiatives and a lack of transparency in emissions reporting. 

“The U.S. is no longer obliged to report its efforts to reduce national emissions under the Paris Agreement, which reduces global oversight of where we stand in the fight against climate change. On top of that, Trump has already cut significant subsidies tied to the Inflation Reduction Act, hitting key industries like wind energy,” Andreas Rasche says.

Europe’s green agenda under pressure

The European Union, traditionally a stronghold for sustainability policies, is also showing signs of retreat. As economic competitiveness takes center stage in political discussions, policymakers are reconsidering key green regulations.

“Yes, they will scale back,” Andreas Rasche says bluntly. 

“Europe is under enormous pressure because it sits between China and the U.S. The old strategy – relying on cheap labor from China and cheap energy from Russia – is no longer viable. In response, some believe that reducing sustainability commitments will make Europe more competitive.”

But Andreas Rasche warns that this is a flawed assumption. 

“Nobody really knows whether scaling back sustainability regulations actually increases competitiveness. Just because you cut legal reporting obligations on sustainability doesn’t mean your economy suddenly thrives.”

The most immediate change, according to Andreas Rasche, will be in sustainability reporting requirements. 

“The EU is looking to simplify regulations under the so-called ‘Omnibus Simplification Package’, which likely means fewer companies will be required to report on fewer sustainability data points,” he explains. 

“We’ll likely see the first draft of this omnibus proposal by the end of February or in early March. Everything Ursula von der Leyen has said so far suggests that the EU Commission will push for significant and far-reaching changes.”

Risks of weaker environmental regulations

A rollback in sustainability commitments, whether in the US or Europe, poses different types of risks. In Europe, Andreas Rasche says the primary danger is reduced transparency and data availability for investors. 

“The EU isn’t abandoning its climate goals, but the Commission believes it can reach them with less granular sustainability data,” he says. 

“The problem is that investors and policymakers need high-quality data to make informed decisions. Scaling back reporting could make sustainability progress much harder to track.”

In the U.S., the risk is more direct: losing momentum on the clean energy transition. 

“I don’t think Trump will be able to completely dismantle the renewable energy sector – it’s too deeply embedded into the US economy by now,” Andreas Rasche acknowledges. 

“But he can slow it down significantly, and at a time when we need to accelerate action, that’s a major setback.”

The responsibility of business leaders

With governments wavering, the role of corporate leadership in sustainability has never been more critical. “It really is up to companies now,” Andreas Rasche says. 

“Leadership means standing up for sustainability, not just because it’s the right thing to do, but because it’s good for business. It creates new markets, drives innovation and improves risk management.”

However, some companies hesitate to take a stand, fearing that sustainability initiatives without a clear short-term profit might harm their bottom line. Andreas Rasche dismisses this concern as shortsighted. 

“Not every sustainability initiative has an immediate business case,” he admits. 

“But leadership is about thinking ahead. Managing a company is about preparing for the future, and this requires that you consider the strategic risks and opportunities that are tied to environmental and social problems.”

He also stresses that companies should be vocal in the political debate. 

“Silence is also political. If companies don’t speak out against regulatory rollbacks, they’re effectively endorsing them. Now is the time for businesses to make themselves heard.”

Geopolitical crises and the energy transition

Beyond political shifts, ongoing geopolitical crises – such as the war in Ukraine – are also reshaping the sustainability landscape. “The war has put fossil fuels back on the agenda,” Andreas Rasche says. 

“Before Russia’s invasion of Ukraine, the global energy transition was starting to gain serious traction. But when Europe had to cut off Russian gas, it scrambled to secure alternative energy sources, and unfortunately, that meant falling back on fossil fuels.”

In the short term, this has benefited the fossil fuel industry, which has seen very high profits in 2022 and 2023. But in the long term, Andreas Rasche believes the crisis could accelerate the shift to renewable energy. 

“We’ve learned a painful lesson: a high dependency on fossil fuels is dangerous. In the long run, that realisation should push us more toward renewables,” he explains.

However, he also points out that the transition is not straightforward.

“Higher energy prices due to geopolitical instability have driven inflation, which in turn led to higher interest rates,” he says. 

“That makes financing for renewable energy projects more expensive, which has slowed down investment. So, while the long-term direction is clear, the short-term disruptions are real.”

Can we still meet our sustainability goals?

Given the growing challenges, Andreas Rasche is not optimistic about achieving current global sustainability targets. 

“If we’re talking about the Sustainable Development Goals (SDGs) with their 2030 deadline, I don’t think we’ll make much progress. Actually, the SDG mid-term review shows that the world is badly off track in terms of reaching these goals,” he admits.  

“And as for the Paris Agreement’s 1.5-degree goal? That’s now mostly a theoretical goal. Climate scientists will tell you that while it may still be technically possible to reach, it is very unlikely at this stage.”

Andreas Rasche believes that the only way forward is bold action. 

“We need more than incremental policy changes. But looking at the US rolling back policies and Europe shifting focus to competitiveness, I don’t see the political leadership required to drive that kind of transformation.”

A call for leadership

For Andreas Rasche, everything boils down to leadership.

“At this point in time, we need true sustainability leadership,” he says. 

“Companies need to stand up and do the right thing. Geopolitics and regulations are constantly shifting, but strong leadership can steer us in the right direction.”

He emphasises three key traits that leaders must embrace: courage, long-term thinking, and a willingness to go beyond compliance. 

“Too many leaders focus on short-term profits and three-year strategy cycles. Real leadership means thinking further ahead and recognising that sustainability is not just a regulatory burden – it can be a competitive advantage if leaders in the organisation reach beyond just pure compliance considerations.”

Despite his concerns, Andreas Rasche remains hopeful that business leaders will rise to the challenge. 

“We have the knowledge, the technology, and the platforms for collaboration,” he says. “What we need now is for leaders – both in business and government – to step up and take responsibility.”

As political uncertainty continues to shape the future of global sustainability, one thing is clear to Andreas Rasche: 

“The role of corporate leadership has never been more important.”