What Does Trump Mean For Corporate Sustainability?

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Isobel Wild [00:00:52]:

I'm Isobel Wild. Welcome to the State of Sustainability Podcast, a show for professionals transforming corporate sustainability strategies. Brought to you by Altruistiq where does the result of the US Election leave corporate sustainability? So Republican Donald Trump claimed victory in the US election and there's been a lot of speculation around the potential impacts of this result on the climate. I think as a lot of headlines showed, Trump during his campaign advocated for things like increased fossil fuel production as well as cut cutting funding for initiatives like Green the Green New Deal. But in today's episode, I want to get under the hood of what this actually means for corporate sustainability and if the impacts are good or if there are some bad impacts. So, Saif, welcome.

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Saif Hameed [00:01:44]:

Hey. Hey, Izzy. How are you doing?

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Isobel Wild [00:01:46]:

I'm well, thank you. I might actually just jump straight in it and just get asked for your overview of what how do you foresee sustainability being impacted under Trump administration?

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Saif Hameed [00:01:58]:

Yeah, there's never a dull moment in the sustainability space, Izzy. I think that right now I actually think that the jury is out on a lot of stuff. I don't see anyone expecting moves that are both rapid and high impact in the sustainability space. I think everyone is kind of expecting some level of gradualism. Let's first take a step back and look at the ESG space as a whole and recognize an important bifurcation. This election was a very charged election when it comes to esg. I actually think it was much more charged when it comes to everything on the social side. Like, I think that this election was a backlash against a lot of the DE and I focus that we've had over the last few years.

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Saif Hameed [00:02:47]:

I saw that certainly come out much more strongly in a lot of the campaign kind of slogans, media, et cetera, than I saw on the climate side. I think there was a climate focus as well, but actually I think that social is likely to take more of a backseat than the environmental front. The other thing that I think we need to recognize is that there are a lot of companies that have won from the focus on the environment that the US has had in the last four years. If you look at net beneficiaries of the Inflation Reduction act, for instance, a lot of those beneficiaries are traditional businesses, like a lot of energy players are taking advantage of the subsidy regime. A lot of Republican leaning states are net beneficiaries of funding for clean tech. Texas is a great example. And so I think that there's a growing vested interest for many traditionally Republican leading stakeholders in the US in keeping a lot of the clean tech and green and environmental focus more or less in play. I think that that is much less clear on the social column from where I'm sitting.

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Isobel Wild [00:03:52]:

And in terms of these policy changes that we could anticipate under a Trump administration, are there any kind of significant changes that might shape how corporate sustainability strategies might evolve in the future?

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Saif Hameed [00:04:06]:

It'll happen more for certain industries than for others. Let me give you a couple of examples that we're already seeing. In the fund management space, in the finance space, there has over the last two years, even before this victory, been a growing awareness of a need to sort of step back from the public positioning around ESG or sustainability. And so you look at like Vanguard, for instance, which is one of the largest fund managers in the world. I forget if they are the largest fund manager in the world or not, but they're certainly right up there. And if you look at the move towards allowing investors in the funds to have some say in the vote that Vanguard is able to assert on company boards and in shareholder resolutions, Vanguard is now allowing its investors to basically say we will prioritize profit over purpose. And we would actually prefer to ignore ESG and how Vanguard votes are stake. And that combined with a lot of the sort of, let's say, back walking that you see from some of the major financial institutions suggests that the movement from a lot of Republican leaning states and state backed pension funds and public sector pension funds and the like that we've seen over the last couple of years has been effective, where many of these stakeholders are saying we want ESG nowhere near our money.

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Saif Hameed [00:05:25]:

And I think that is likely to get more. So I think that's likely to be accelerated in the next few years. I think we're likely to see the financial space which is heavily regulated, a big beneficiary of state Money in many ways, I think that's going to be quite responsive to this presidency. I think that on the other hand, let's say companies in the physical goods and services space that do a lot of business with Europe, that do a lot of business in California, that have global distribution, I think those companies might actually continue with a lot of the agenda that they've had. They might shout about it less, they might talk about it less, but I think that a lot of the program or the strategy will probably continue through to implementation.

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Isobel Wild [00:06:05]:

And if there is. So back to what you were saying initially around the perhaps there'll be more of an environmental skew versus a social skew. What does that mean in terms of a corporate sustainability strategy?

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Saif Hameed [00:06:18]:

Yeah, I think different parts of the economy will respond in different ways. Let's be clear, I think that the next four years are probably worse for the sustainability space, including corporate sustainability, than they would have been under a continuation of the current US Government or regime. Like if you had kind of extended the Biden era four years forward. And let's say if you think of Kamala Harris as the extension of that, I think that would probably have been better for the corporate sustainability space, just in terms of policy momentum and so on. I think this will be worse. So I don't think there's a scenario where there is more money to go around. But I think we were already seeing that frankly with just where the economy was just in terms of kind of valuations of businesses, share prices, momentum behind these topics. I think a lot of that was already trending towards a more conservative skew.

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Saif Hameed [00:07:10]:

I think we saw that with some of the big companies that had been most bullish around sustainability, like Unilever, not quite, let's say taking a step back, but maybe taking a step sideways rather than forwards. Where they were saying we are going to be, we are going to be more focused on fewer things and less about saving the world and more about building what we think will be a sustainability sustainable business long term. I think you're likely to see more of those sorts of moves where companies kind of get more focused, they talk a bit less and they do a bit more, but they do stuff in a narrow constraint. And that's on the environmental side, I think on the social side, I do think it is going to be worse. I already see, for example, private equity owned businesses and private equity funds being a little less bullish in what they say, say on the social and de and I front and I see the management teams of these companies which are often mid Sized businesses responding much more negatively to De and I topics versus their response to the environment side.

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Isobel Wild [00:08:13]:

Maybe to reflect on what this change of ambition will mean for corporate sustainability teams. Will this alter the growth strategy of teams or how they're structured and do you see any kind of shifts in priorities? So maybe what we're just talking about, DNI versus environmental topics, will there be a shift?

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Saif Hameed [00:08:32]:

So I think that most corporate sustainability teams are undersized. As a general statement, if I maybe use a comparison point, let's take Europe, let's take mid sized businesses, mid to large. So let's say that we're talking about the roughly 50,000 businesses that are in scope for the CSRD regulation, the Corporate Sustainability Reporting Directive of the eu. If you look at the impact assessment that the European Commission had done before the regulation was passed, the impact assessment had a number of, I think somewhere between one and two and a half million euros. I think where they believed this would be the cost for meeting CSRD requirements just in the kind of reporting admin, analytical admin, data gathering admin, et cetera that these companies would need to do to comply with the regulation, you know, a few million euros or a few million dollars, let's say of spend. I would be very surprised if the average business in that pool of 50,000 companies that they had in mind is spending that amount on regulatory compliance. I think it is much less right now. And I think what that tells us is that corporate sustainability teams, even in Europe are small, are overworked and the expectations on them are far too high.

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Saif Hameed [00:09:50]:

And I think there's a catch up process that most companies need to do to right size their sustainability team. And I think this will be true for American businesses that are doing business in Europe and that are also captured. I think this is generally going to be true that these teams need to get bigger on the whole. Whether they will get as big as they might have done in a continuation of the Biden era, I think that's debatable. I don't think this is, this is a sort of open season for sustainability. I think these teams will grow. I think they will need to grow in a very focused way where they start prioritizing quality of experience, trying to see if individuals can do multiple jobs within the team, focusing on retention because retention is a great way to get more bang for your buck when it comes to talent. So I think we're going to see a lot of focus and kind of shift to quality rather than necessarily just quantity.

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Isobel Wild [00:10:42]:

And we speak a lot on this podcast about Budgets and how to manage budgets, how to maximize budgets, how to secure your budget. If this policy trickle, I mean like government change, policy trickles down, which likely will, how should you go about navigating your next budget renewal?

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Saif Hameed [00:10:58]:

So I think the impact is going to be somewhat indirect. And so if you are, let's say, a listed business in the US and you are largely still exposed to the same regulation, which are for many businesses working on sustainability, the main stimulus or the main reason that they're doing stuff on this topic, there's a side reason which is you're trying to capture hearts and minds of a consumer sentiment, but let's say the major reason is still regulation. I think that you more or less continue doing the same things that you're doing and you're probably going to continue funding the same things that you're funding. I think that you will probably want to talk about it a bit less maybe, because talking about it creates exposure. And I think that if you're listed, you just don't want the heat from this because you're seeing activist investors, frankly on both sides. Like you're seeing activists on the green side and you're seeing activists on the anti woke side. And I just don't think most businesses want to deal with that either way. Like, I think you want to continue what you're doing on the down low, I think you want to shout about it maybe just a little bit less.

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Saif Hameed [00:12:03]:

And I think you want to try and position this as business as usual. So you might see a lot of repackaging of environmental sustainability stuff as just good business practice, like good supply chain risk mitigation, good cost control, good marketing, good branding. And you might want to position it less as a mission orientation of your business. But I think that budgets are frankly not very likely to be impacted at this stage of the cycle. I think there's another factor at play, which is many companies have set 2030 targets when it comes to, let's say, emissions reductions. And I don't think anyone wants to be pulling the cord on that so close to target conclusion, because a lot of the investment that you've already made in the first few years of this decade, frankly, will more or less be wasted.

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Isobel Wild [00:12:54]:

Let's dig into that communication point a bit more. We've spoken on this podcast quite a bit about the challenges around justifying the ROI of a sustainability project on the back of communication or brand narrative benefits. But for companies that have global markets, how do you think their communication strategies might change where they can deploy perhaps regional and more tailored sustainability narratives to fit the appetite of that market.

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Saif Hameed [00:13:24]:

I think that the best approach for most companies to take is some form of micro segmentation. And I think that in a B2C context, let's do that first and then talk B2B. In a B2C context, I think you want to start to go quite narrow in terms of your messaging. Like if you are selling, let's say, to reasonably affluent people in London or New York or Paris, and you're selling a product that is somewhat discretionary, I think that you might go full throttle on the system, sustainability messaging and narrative, because maybe that's the best way to capture that market. I think, by contrast, you probably want to appreciate and recognize that in many other segments or micro segments, it's not just the US Election, but also, frankly, elections in many other parts of the world, including Italy and France and parts of Europe, where we're seeing a rejection of, let's say, future thinking. So sustainability in favor of bread and butter today issues. And I think that you want to recognize that and be appreciative of that. And so there's a flip side to that micro segment of London, New York, discretionary, young urban buyers who are very sustainability oriented.

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Saif Hameed [00:14:40]:

And that flip side is probably people in other locations where they are much more interested in just value for money. Is this product going to do what it says? Is it a good thing for me to be buying for me and my family? Is it going to be easy on the wallet? And I think that you want to focus the messaging on those issues rather than look like you are being political with your mayonnaise or your chocolate bar. I think that's the B2C side. So I would encourage businesses to think in terms of these micro segments divided not just by region or geography, but also by demographic, age, other cuts as well. I think on the B2B side, you see a similar narrative playing out, which is let's say for a B2B business, if you take your 100 top accounts or your 100 top customers, you're going to have some accounts there that are really oriented towards sustainability and some accounts that are actually really not oriented towards sustainability. Let's take the example of let's say you're providing whey protein or pea protein and you're selling into maybe some kind of nutritional supplements and alternatives that are again, maybe big in urban markets, selling to younger audiences or younger consumers. And for those brands, you might want to continue to double down on sustainability because it's a part of their brand narrative. And the segment that they're targeting is a sustainability oriented segment.

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Saif Hameed [00:16:05]:

At the same time, you might have a totally different set of customers or key accounts where actually these accounts are themselves targeting consumers that are in the totally opposite segment of the economy. And so you probably want to avoid leaning on the sustainability narrative and maybe lean on different levers as well. One thing maybe worth saying, Izzy, is that I find that if you look at our products as Altruistiq , we have, as you know, three products, corporate footprinting, product footprinting and supply chain engagement. In terms of our three software products, I think that corporate footprinting traditionally targets regulatory compliance. Product footprinting increasingly is about providing a data pack to go alongside the purchase or the transaction between businesses. That is a form of communication, which is why I mention it here. And I think that is rapidly becoming a sort of secular form of communication in that it is just something that is going to end up being provided along with purchase, along with the transaction. And I think that is probably going to be true whether or not the parties on either side of that are incredibly sustainability leaning.

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Saif Hameed [00:17:16]:

I think that is just going to become table stakes to accompany a transaction, which means that the material for a good communication or narrative is there by default. Whether you use it or lean on it can be a different issue.

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Isobel Wild [00:17:27]:

Do you think as a result of the election there are going to be some other nations which might step up as hubs for sustainable innovation and action? Do you think that's a trend that might emerge?

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Saif Hameed [00:17:40]:

It's really interesting to see some of the news coming out of cop. We decided not to go this year, we'll go to the next one. But some of the news that we're seeing coming out is that in response to the election, where one of the things that Trump has talked about is pulling out of the Paris Agreement and the countries that are soft nudging the US to stay are Saudi Arabia, Russia, China. And so it's actually interesting to see that cast of characters. And I don't think it's an accident. And particularly, let's talk about Saudi Arabia for a bit. The kingdom has had a really interesting and I actually think really clever sustainability strategy that is being deployed across multiple parts of the Middle East. And that is if you look at how they use oil and gas and petroleum products, typically they have subsidized those for sale locally and they also export, but they subsidize them for sale locally, which means that relative to what they could sell the product for externally, they make a loss when they sell it locally because of the subsidy.

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Saif Hameed [00:18:45]:

What they have recognized is that there's going to be an export market for these products for decades to come. Because whatever pace of change you put on the energy transition, there is always going to be for decades to come. There is going to be a market for oil, there's going to be a market for gas. But what they're doing is they're phasing out the local energy system, reliance on oil and gas, and actually phasing in renewable energy in a big way for their local needs. And actually, multiple countries across the Middle east have been looking at this because they're recognizing that they just save money for one thing, because they're not replacing products that they could export much more profitably with cheap renewables. They have plentiful availability of the natural resource for renewable energy, whether it's the sun or wind. And actually they're recognizing that they can export a lot of the surplus, not just in the form of power, but potentially also through additional derivatives like hydrogen, for instance, and other downstream products, through setting up local capacity. So a lot of these countries now have enough invested skin in the game behind the energy transition themselves and behind, let's say, the US Staying in the Paris agreement and momentum continuing that I think they might just manage to keep the US in the agreement.

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Saif Hameed [00:20:01]:

And even if the US Checks out, I think there's a reasonable chance that some of these countries become really interesting hubs for certainly clean tech investment. I think that the UK has an opportunity, but I don't see the UK actually putting as much at play as I do see Saudi Arabia actually getting into this mix right now.

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Isobel Wild [00:20:25]:

And do you see any potential of the opposite happening? Because I know there's a lot of talk around Trump putting tariffs on potential clean energy coming into the US and instead trying to invest in generating power internally within the U.S. so do you see that actually that being a ventrality of hindering global ambition, or do you think it would just.

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Saif Hameed [00:20:49]:

I think that within the Trump administration, you have many different interests at play, and I think we're going to see how all of that interacts with itself. So, for instance, if you look at the tariffs, the scale of the tariffs on Chinese products, which I think is like 60% was the number I saw sort of bandied about, and 20% on products every other country, I think it's going to be very hard to implement that scale of tariff program without hurting a lot of the, not just a lot of the voters who back Trump, but also just a lot of the businesses and the business owners that are very closely integrated into the new government. So I think that there's just going to be this broader question on how the tariffs play out. Let's also not forget that one of the biggest proponents of electrified transport is running the Department of Government Efficiency in Elon Musk and also one of the biggest solar and renewable energy entrepreneurs in the US as well. Maybe that has an impact on the import of clean energy. Let's see. I mean, a lot of the component parts are already being imported from many different countries and there's just a lot of business that depends on that. So to be honest, I would be very surprised if the tariff program was implemented in its entirety as it's been stated.

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Saif Hameed [00:22:09]:

That said, what we hear is that the pick for Treasury Secretary has become quite charged because Trump is looking for a candidate that is really going to sign on to his tariff program. So it's really very early to say and I actually think the market doesn't know how this is going to play out either, because if you look at how the stock market has reacted, there isn't a massive penalty right now on clean tech. Actually you see penalties on some other industries like vaccines, for example, with the appointment of RFK Jr as health secretary, but you don't see that really on cleantech.

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Isobel Wild [00:22:47]:

Yeah, I think another impact that I want to touch on is confidence levels. And I would love to just get your two C's on any advice that you have for sustainability professionals who need to perhaps instill confidence in colleagues and shareholders or executive to maintain the level of ambition and commitment to their sustainability goals despite potential policy setbacks.

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Saif Hameed [00:23:12]:

Yeah, I think that I can really appreciate that this election has impacted a lot of people. And I just know from individuals I've spoken with, customers of ours, people in the sustainability teams of those businesses, that this has been a highly emotionally charged election and a very emotionally charged outcome for many people. The way that I see it is effectively we're talking about climate science here, we're not talking about climate opinion. And the climate science tells us that the world is just going to get a lot worse. And that's going to happen one way or another, which means that the sustainability profession is only going to become more important and more needed. And that is a multi decade journey. It is not a four year journey. And it is by its nature going to pull everyone into the tent at some point.

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Saif Hameed [00:24:07]:

When Covid happened, it pulled pretty much everyone into the tent. I mean, there were obviously some people kind of staying on the fringes, but pretty much everyone around the world appreciated this is a catastrophe. We need to do something about this unambiguously and we need to come together to take some form of action and that's what's going to happen here. The difference is that this is not a one off thing that happens within three months and suddenly affects the whole world. This is incremental. But you're already seeing this. I'm from a country where really no one talked about sustainability or climate change or anything like that. I went to schools where I was taught that fossil fuels are a scarce resource.

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Saif Hameed [00:24:47]:

And so the reason we should be energy efficient is that there might not be enough fossil fuels to go around. So we should just preserve this precious item or precious commodity. And now actually like, you know, you have a ministry of climate change in Pakistan, you have actual movement on not just air quality, but also climate change mitigation, adaptation. You have nature based solutions, you have a market for renewable energy certificates. It has pulled everyone into the tent in Pakistan, which is not by any measure a traditional sustainability leaning ecosystem. That's just because it's affected so many people and I think we're just going to that over time. So for everyone in the sustainability space, I would say hang in there. I know it's a tough message, but you're on the right side of science and your job is only going to get more critical for that reason.

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Saif Hameed [00:25:37]:

And at some point you're going to get a critical mass of people in the tent such that this becomes a secular, non political issue because that's the only way that the science goes.

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Isobel Wild [00:25:49]:

And what tools or tactics do you reckon are at your disposal to help demonstrate that the science is on your side? You know, like we've spoken about carbon pricing previously, but if there's less of a winning the hearts the hearts more of winning the minds, would you suggest any kind of focus on specific tools that could enable this compelling story to have more weight to it?

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Saif Hameed [00:26:14]:

I would say, Izzy, it's more of the same in terms of what we usually talk about here. Let's focus on the dollars, focus on the money, don't focus on the mission. No one in the sustainability space should focus on the mission. They should focus on the business case of what they're doing. Why is this a good thing for our business? Why is this a good thing for shareholder value? Why is this a good thing for revenue, for the bottom line, for cost control? And the extent to which you can make that case is the extent to which your initiative will fly not just in the short term, but also frankly in the medium and long term. I'm always very critical about using the SDGs, the Sustainable Development Goals, as a business framework. And the reason for that is that they just don't map to corporate action. Most businesses cannot justify an agenda of ending world poverty, or of ending hunger, or of creating education for all.

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Saif Hameed [00:27:09]:

I mean, there are some businesses where maybe this is very relevant, but arguably, even in an education business, you're not in it to educate the world. You're actually in it to educate everyone who can pay. Otherwise it wouldn't be a business. And I actually think that the more that sustainability professionals can understand that and build a narrative that reinforces business value, the more they will insulate their programs against the winds of political change.

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Isobel Wild [00:27:35]:

The winds of political change, eh? Saif, to round us off, what are your big bets off the back of the election?

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Saif Hameed [00:27:42]:

My big bets is that I think that tariffs will be understated on the whole, but maybe in certain sectors, in certain areas will be quite focused. I think that the US Is on a trajectory towards clean tech, and I don't actually see that necessarily stepping back. We might see it being more nuanced where oil and gas has a bigger seat at the table than it would have otherwise, but I think the clean tech train has left the station and is only going to get faster as well. I think that a lot of businesses will start decoupling social from environment as they communicate sustainability and will talk in different ways about those different topics. I think that sustainability as a term will gather momentum. I think ESG as a term will have a harder time.

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Isobel Wild [00:28:30]:

Lots of changes to get your head around. Saif, thank you so much. It was great to kind of cut our teeth on the Trump election in this podcast and we'll definitely keep the insights coming.

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Saif Hameed [00:28:41]:

Thanks, Izzy.

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