When Others Retreat, Innovate: Climate Action in Times of Uncertainty

Corporate sustainability is in a recession.

CEOs are avoiding terms like “ESG” or actively speaking out against it, while some companies are scaling back sustainability pledges or exiting voluntary net zero alliances. Concerns are also growing over the stagnation of federal climate policy in the U.S., weakening international climate agreements, and a slowdown in climate tech investment and financing. But if they are not talking about it, is corporate sustainability no longer important to business?

While corporate sustainability might be publicly facing a downturn, the reality of climate change is only intensifying. And in turn, the impact on business will only intensify. How companies choose to respond in this moment of quiet will be critical for business resilience and competitiveness.

Innovation in Times of Uncertainty

During periods of economic uncertainty or market volatility, companies often default to caution: layoffs, hiring freezes, and shelving new initiatives as capital liquidity becomes scarce or the coffers need to be shored up.

But history shows that those who are strategic in their investments in innovation during challenging times often emerge as leaders. Investing in forward-thinking ideas, experimenting with business models built for the future, and adapting offerings can drive long-term success. When the economy rebounds, these investments often translate into significant competitive advantages.

Consider the Great Financial Recession of 2008: Netflix doubled down on its streaming service, Mailchimp introduced a freemium business model, and Domino’s revamped its pizza recipe. In hindsight, these moves seem like obvious successes. Yet at the time, they were bold, risky investments in innovation when many peers were scaling back.

While streaming, freemium and pizza may not sound much like climate action, they have one key element in common: strategic foresight. They saw how conditions were changing and adapted to those changes and ultimately, added business value. In other words, they innovated.

There are few forces that will drive more change and risk to business than climate change. Making climate innovation inseparable from corporate innovation.

While some companies choose to retreat, it’s the companies that integrate climate innovation into their core business strategies that will adapt quickly and remain competitive. The question is what strategic investments – adaptations and innovations – can companies leverage through climate action to gain value?

Climate Innovation is Corporate Innovation

A common misconception is that climate innovation equates to climate tech. Many believe the only way to innovate is by developing or investing in breakthrough technologies.

However, as with corporate innovation during past economic downturns, successful climate innovation often comes from sustained, incremental changes aligned with a company’s core business context—not just disruptive, short-term solutions.

Innovation, at its core, is about creative problem-solving. For corporate climate innovation, this means leveraging existing resources and practices to uncover business value through climate action. These opportunities can arise in areas like operations, offerings, investments, advocacy, and employee engagement.

The companies that will thrive during this “corporate sustainability recession” will double down on responsible business fundamentals. This includes:

• Investing in new solutions that enhance efficiency, reduce costs, and create growth opportunities.
• Collaborating with partners and industries to de-risk emerging climate solutions and signal strong demand.
• Exploring cost-saving measures that improve offerings and minimize operational impacts.
• Adapting to shifting customer preferences and evolving climate challenges.
• Diversifying products and services to build resilience against market and climate volatility.
• Fostering a culture of innovation by engaging employees and encouraging bold, sustainability-driven ideas.

Making Corporate Climate Innovation Actionable

Drawing insights from dozens of corporate innovation experts, Environmental Defense Fund (EDF) recently published Unlocking Corporate Climate Innovation, a framework highlighting actionable strategies for driving climate innovation and value creation.

The framework examines both in-house and external leverage points available to companies. Internally, this includes integrating sustainability-related, context-based metrics into business structures and incentives, such as Mastercard incorporating sustainability progress into bonus calculations. Or creating spaces for staff to channel their sustainability-related ideas and interest into action, like Microsoft’s employee sustainability community of 10,000 staff.

Externally, this includes companies collaborating with industries to send collective demand signals to create market readiness for emerging solutions, such as the First Movers Coalition’s advance market commitments to hard-to-abate sectors like aluminum, concrete, and steel. Or the opportunity to catalyze startups through industry incubators and accelerators targeting value chain challenges, as seen with ABInBev’s 100+ Accelerator.

Conclusion

Corporate sustainability may publicly face a downturn, terms may change, voluntary targets might get modified. None of that will affect the impacts that climate change will have on business.

Companies that retreat from climate action now will find themselves scrambling to catch up when they fall behind and those impacts intensify. Conversely, those that recognize the value of climate action and pursue strategic investments during this period of uncertainty will position themselves as industry leaders, ready to navigate a world increasingly shaped by climate impacts.