By Ethan I. Thorpe, Vanderbilt University; Michael Vandenbergh, Vanderbilt University; Zdravka Tzankova, Vanderbilt University; The Conversation
As the federal government moves to eliminate U.S. climate rules, companies still face pressure to be better stewards of the planet from various stakeholders. Each of those groups knows it will face increasing costs from rising temperatures and extreme weather if corporations don’t rein in their greenhouse gas emissions.
Many companies will find that returning to past polluting ways isn’t in their best interest. Over 60% 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 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.
Sustainability matters to companies’ bottom lines. Businesses have used climate and sustainability initiatives for years to make their operations and supply chains more efficient and to reduce their long-term costs.
Early risk-taking by companies like McDonald’s and Maersk has helped pave the way for environmental progress
When McDonald’s faced public pressure to reduce waste in the late 1980s, the company teamed up with the Environmental Defense Fund 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.
Companies are also driving the expansion of renewable energy
Maersk, the logistics giant responsible for nearly a quarter of global shipping, has responded to pressure from its corporate customers with a plan to reduce carbon emissions by one-third from 2022 to 2030 and reach net-zero emissions by 2045. It expects the combination of low-emissions vessels and a more efficient delivery network 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 and business opportunities. Facebook’s parent company Meta and Google invested nearly $2 billion in projects to provide renewable energy in the Tennessee Valley Authority service area, even though no government required them to do so.
Measuring and reporting emissions is becoming more common
Nearly 25,000 companies representing two-thirds of total global market capitalization and 85% of the S&P 500 report their emissions to the nonprofit CDP. Disclosing emissions 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.
State and federal governments are also setting up climate disclosure rules
California has its own formal reporting requirements designed to encourage companies to reduce their greenhouse gas emissions. And other states are considering setting climate disclosure rules. The European Union also has reporting requirements, although they were delayed in April 2025.
Supply chain management is becoming 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 of the average company’s emissions
The supply chain is the largest source 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 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.
Keeping employees and customers happy
Companies also face pressure from average people − both employees and customers.
Pro-climate actions have been found to improve employee and customer loyalty
More than two-thirds of Americans support action to address climate change. Even companies that are not consumer-facing need retail customer and employee support. Pro-climate actions have been found to improve employee and customer loyalty.
Many companies are also facing pressure from lenders and insurers
Many companies also face pressure from lenders and insurers who want to reduce climate risks to their own bottom lines.
Dozens of insurers have committed to ending or restricting underwriting for new fossil fuel projects
Others use incentives, 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 in insured losses
That has led some insurance leaders to recommend insurance companies take bigger steps 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.
Ethan I.
