In this business environment, sustainability has become a strategic function of risk management and cost control. Unsustainable practices expose companies to regulatory penalties, reputational damage, volatile resource access, and brittle supplier relationships.
From sourcing and supplier diversification to scenario planning and due diligence, sustainable practices help identify vulnerabilities early, build flexibility into supply chains, and meet evolving legal and stakeholder expectations. For companies and leaders, this new landscape demands more than reactive responses. It calls for a strategic and pragmatic recalibration to turn volatility into resilience and turbulence into transformation.
The Global Risks Report 2025 from the World Economic Forum highlights a sharp rise in geopolitical threats, from state-based conflict and trade uncertainty to regulatory fragmentation. These risks are already disrupting supply chains, from rerouted shipping lanes to delays and compliance challenges caused by diverging environmental and social standards.
But geopolitics is more than disruption – it shapes where and how companies produce, source, and move goods. Rising trade barriers, resource nationalism, and the weaponisation of supply chains are making traditional, globalised models harder to sustain. This is especially true for firms focused on sustainability, which now must cut emissions and improve labour practices while navigating fragmented rules and growing political volatility.
In this landscape, sustainability is both a challenge and a necessity. Companies face increasing pressure to meet reporting requirements, comply with due diligence laws, and secure access to responsibly sourced materials – all amid shifting geopolitical fault lines. As a result, sustainability and risk management are no longer separate concerns. Building resilient supply chains now requires anticipating regulatory change, managing political risk, and aligning sustainability goals with a more complex global reality.
Limited visibility and transparency
End-to-end visibility remains a challenge, especially across complex global supply chains. Understanding material origins, labour practices, and emissions across multiple tiers requires robust digital infrastructure. Geopolitical sensitivities further complicate transparency, particularly in jurisdictions with weak governance, conflicting data regulations, or potential political hostility to foreign audits.
In such contexts, obtaining reliable sustainability data can become politically sensitive or even legally restricted, limiting companies’ ability to validate claims, conduct due diligence, or respond effectively to stakeholder expectations. As a result, blind spots in the supply chain not only hinder ESG performance but also elevate operational, reputational and compliance risks.
Resilience vs. over-reliance
Geopolitical volatility requires diversified sourcing and resilient supply network design. Yet many companies still depend on single region manufacturing hubs or a handful of suppliers. Sustainability adds another layer of complexity; materials and partners must not only be diverse but also meet environmental and social standards. The paradox is that efforts to de-risk operationally must not introduce ESG risk elsewhere in the value chain.
Shifting sourcing away from a politically unstable region might reduce exposure to conflict or sanctions, but if the alternative supplier operates in areas with poor labour protections or inadequate environmental oversight, the move may simply trade one form of risk for another. In this sense, resilience cannot be built purely on geographic or logistical grounds; it must also support long-term cost control, regulatory compliance, and reputational stability.
Regulatory divergence
Environmental and social regulations vary widely by region. In the EU, mechanisms like the Carbon Border Adjustment Mechanism (CBAM) and the Emissions Trading System (ETS) are reshaping the cost structure of carbon-intensive imports and operations. CBAM imposes tariffs on imported goods from countries with weaker climate policies, while the ETS expands carbon pricing obligations across sectors, including maritime transport as of 2024. These measures aim to level the playing field and accelerate decarbonisation, but to some, they represent a form of green protectionism.
For businesses, growing regulatory divergence complicates compliance and demands agile cross-border ESG frameworks. Companies must redesign their supply chain and pricing models to remain competitive and aligned with climate-related expectations in regulated markets.
Cost and competitive pressures
Sustainability initiatives often require substantial upfront investment. Whether it’s adopting low-emission transport, deploying end-to-end traceability systems, or sourcing certified materials, these actions carry higher short-term costs than conventional alternatives. For many companies, especially those operating on thin margins or in cost-sensitive sectors like textiles, electronics, or consumer goods, this creates a fundamental tension between ESG ambition and commercial viability.
Geopolitical factors intensify this pressure. Tariffs, sanctions, and regulatory barriers can drive up the cost of materials and limit access to low-cost suppliers. For example, restrictions on goods linked to deforestation or forced labour, such as the EU Deforestation Regulation (EUDR), may require businesses to exit lower-cost sourcing regions entirely, incurring new logistics and compliance costs.
Meanwhile, competitors in jurisdictions with less stringent standards may continue to operate with lower overhead, creating an uneven playing field. This raises questions of fairness and enforcement, especially in globalised sectors where sustainability-conscious firms’ risk being undercut by those taking advantage of regulatory gaps.
For sustainability to scale in such an environment, it must be embedded in the financial and operational core of the business. By balancing long-term value creation with short-term competitiveness in an ever-changing business landscape.
The shift to green energy is not just a climate imperative. It’s reshaping geopolitical power. For much of the 20th century, control over fossil fuel reserves shaped global alliances, conflicts, and economic influence. Today, that strategic leverage is increasingly shifting to nations that control the raw materials critical to clean energy technologies. Lithium, cobalt, nickel, and rare earth elements are indispensable for electric vehicles, grid storage, wind turbines, and solar panels.
This transition is creating new geopolitical flashpoints. The Democratic Republic of Congo (DRC), for instance, accounts for over 70% of global cobalt production, much of it mined under conditions that raise serious human rights and environmental concerns. Similarly, China dominates not only rare earths extraction but also the processing and refining of many critical minerals, creating chokepoints in global supply chains. In this new landscape, access, control, and ethical governance of these materials are becoming as strategically significant as oil pipelines once were.
In response, governments are implementing industrial policies to strengthen domestic supply chains and reduce strategic dependencies. The European Union’s Critical Raw Materials Act, the U.S. Inflation Reduction Act, and similar frameworks aim to support domestic mining, processing, and the manufacturing of green technologies. At the same time, countries are increasingly moving production closer to home – either by near-shoring to nearby, politically aligned regions or reshoring to their own territory – to reduce reliance on distant or unstable suppliers and regain control over critical parts of their supply chain infrastructure.
These developments signal a significant shift in global competition. Where geopolitical power once revolved around fossil fuels, it is now increasingly shaped by access to critical minerals and the capacity to produce clean energy technologies. For businesses, this shift brings added complexity to sustainability strategies. Ethical sourcing, enhanced due diligence, and mineral traceability are no longer peripheral ESG considerations; they are becoming integral to managing both geopolitical and commercial risk.
The shift to green energy is reshaping the economic priorities of global trade and industry. For much of the 20th century, control over fossil fuel reserves shaped alliances, conflicts, and economic power. Today, strategic attention is increasingly focused on the raw materials critical to clean energy technologies. Lithium, cobalt, nickel, and rare earth elements are indispensable for electric vehicles, grid storage, wind turbines, and solar panels.
This transition is reprioritising global influence toward nations that control or process these critical inputs. The Democratic Republic of Congo (DRC) accounts for over 70% of global cobalt production, much of it mined under conditions that raise serious human rights and environmental concerns. Similarly, China dominates not only rare earths extraction but also the processing and refining of many critical minerals, creating chokepoints in global supply chains.
In response, governments are implementing industrial policies to strengthen domestic supply chains and reduce strategic dependencies. The European Union’s Critical Raw Materials Act, the U.S. Inflation Reduction Act, and similar frameworks aim to support domestic mining, processing, and the manufacturing of green technologies. At the same time, countries are increasingly moving production closer to home – either by near-shoring to nearby, politically aligned regions or reshoring to their own territory – to reduce reliance on distant or unstable suppliers and regain control over critical parts of their supply chain infrastructure.
These developments reflect a strategic reprioritisation. Where influence once revolved around fossil fuels, it is now increasingly shaped by access to critical minerals and the capacity to produce clean energy technologies. For businesses, this shift adds complexity to sustainability strategies. Ethical sourcing, enhanced due diligence, and mineral traceability are now central to mitigating operational risk and maintaining stable access to essential materials.
In today's business world, sustainability can no longer be treated as a siloed initiative or an afterthought to traditional supply chain priorities. Meeting this challenge requires companies to move beyond reactive compliance or short-term crisis management.
Instead, the focus must shift toward integrated, forward-looking approaches that embed sustainability into business continuity and risk frameworks. This involves:
Investing in traceability technologies for transparent, multi-tier supply chain monitoring. Particularly crucial when operating across jurisdictions with divergent governance and disclosure standards.
Designing resilient, diversified supply networks that can withstand both environmental shocks and geopolitical disruptions. Supply chains must be restructured not only for cost or efficiency, but also to meet evolving ESG expectations and reduce exposure to politically volatile regions or single-source dependencies.
Engaging in scenario planning to map out possible geopolitical, regulatory, and environmental futures. From trade fragmentation to carbon border adjustments and mineral nationalism, scenario planning enables companies to stay ahead of external pressures and regulatory unpredictability.
Rethinking sourcing strategies to factor in climate vulnerability, social risk, and conflict exposure. Decisions about where and how to source materials are now intertwined with reputational risk, stakeholder expectations, and long-term access to critical inputs.
Building cross-sector coalitions to advocate for aligned standards, share risk, and strengthen collective leverage. In a world where national interests can clash and standards can splinter, public–private collaboration is increasingly essential for shaping consistent sustainability benchmarks and ensuring business continuity.
Turning turbulence into transformation
Supply chains are no longer just operational backbones. They are strategic assets and sustainability barometers for a future-proof business. The recent geopolitical upheavals are not temporary disruptions but the foundation of a transformed global landscape – one where trade, risk, and corporate responsibility are intertwined.
In this new era, businesses that move beyond reactive measures and embed sustainability into their core risk management and strategic planning will be better positioned to navigate uncertainty.
More than just weathering the storm, these companies will influence and help define the emerging rules of a more fragmented, yet opportunity-rich, global economy. Turning turbulence into transformation requires deliberate, informed action and a recognition that resilience and sustainability are inseparable imperatives for long-term success.