Sustainability Is Competitiveness. Boards Should Act Accordingly

With $16.7 trillion now flowing through sustainable investment strategies a 49% surge in just two years, the capital markets have rendered their verdict. Sustainability is no longer a peripheral concern. It is the new “battleground” for competitive advantage.

Not long ago, sustainability was dismissed as a “nice-to-have” add-on, separate from core business strategy. Today, that mindset is obsolete. In the hyper-competitive landscape of 2025, sustainability and competitiveness are inseparable, especially in the boardroom. Companies that embed environmental, social, and governance (ESG) principles into their operations are discovering tangible business benefits: from spurring innovation and efficiency gains to attracting talent and capital. In fact, research shows high-sustainability firms (those embracing ESG early) tend to be more resilient and deliver superior long-term returns.

For boards of directors in the U.S. and Europe alike, the message is clear: championing sustainability isn’t about politics or PR, it’s about prudent business strategy.

I. Sustainability as a Driver of Competitive Advantage 

Multiple studies and market surveys now confirm that sustainability-oriented companies often outperform their peers – debunking the myth of a trade-off between sustainability and profit. A comprehensive review of over 2,000 empirical studies found that 90% showed ESG practices have either a positive or neutral correlation with financial performance. In other words, embracing sustainability does not hurt the bottom line and often bolsters it. Similarly, a meta-analysis by NYU Stern’s Center for Sustainable Business concluded ESG initiatives drive positive financial performance in the majority of cases, with negligible downside in others. These findings reflect a broad consensus: strong ESG performance is typically a marker of good management, risk mitigation, and forward-looking strategy – all key ingredients for competitiveness.

Executives and investors increasingly recognize this reality. According to Thomson Reuters’ 2024 State of Corporate ESG report, 71% of corporate leaders now view ESG investments as a source of competitive advantage, up sharply from 60% a year prior. An even larger share – 82% believes ESG’s role in corporate performance will keep growing, underscoring ESG’s strategic importance. Investors concur: a 2024 Morgan Stanley survey of 2,800 individual investors found nearly 80% believe it’s possible to achieve market-rate financial returns while focusing on sustainability. In fact, more than three-quarters of those surveyed want their investments to advance positive environmental and social outcomes without sacrificing returns. The capital markets are voting with their wallets: as of 2024, funds using sustainable investment strategies managed roughly $16.7 trillion – a 49% increase in two years.

Globally, ESG-focused assets now account for over a quarter of professionally managed money. This surge in “sustainable capital” signals that companies with strong ESG profiles may enjoy easier access to financing and a lower cost of capital, conferring a competitive edge.

Customer and talent preferences amplify this advantage. Consumers, especially younger demographics, reward companies that do good. A recent U.S. consumer survey reported that 58% of shoppers prefer brands with public sustainability commitments, and 39% have switched to a competitor because of better sustainability practices. Moreover, 90% of consumers say they are more likely to buy from a brand with eco-friendly packaging or practices. In the battle for talent, sustainability counts as well: employees increasingly want to work for companies with purpose and ethics. According to Deloitte, about one in five Gen Z and millennial workers have considered switching jobs to work at more sustainable companies. Companies ignoring these trends risk reputational damage and loss of market share to ESG-savvy competitors.

Crucially, sustainability drives innovation and efficiency – core tenets of competitiveness. By rethinking products and processes through an ESG lens, firms uncover new ways to cut waste, save energy, and differentiate offerings. As ISS Governance notes, businesses that embed sustainability into operations tend to unlock process innovations, cost efficiencies, and brand trust that fuel long-term growth. A classic example is the rise of electric vehicles and renewable energy. Renewable power is now often the cheapest energy source; by 2024, an estimated 64% of global energy investment was flowing into clean energy projects. The result is a fast-expanding “green economy” valued around $7.9 trillion globally, making it one of the fastest-growing sectors in the world. Automakers have read the writing on the wall: the world’s top car manufacturers plan to spend nearly $1.2 trillion by 2030 to develop electric vehicles (EVs) and batteries In Europe, EVs already comprise roughly 20% of new car sales, and U.S. EV sales are climbing steadily. This massive pivot illustrates how sustainability trends (like decarbonization) are industry competitiveness trends. Companies investing early in low-carbon technology, circular supply chains, and sustainable products are positioning themselves as the market leaders of tomorrow, while laggards risk obsolescence.

II. The Board’s Role: Integrating Sustainability into Strategy 

Given the clear link between sustainability and long-term competitiveness, boards should treat ESG as a core strategic responsibility. This is not about ideology, but about fiduciary oversight and value creation. Boards in the U.S. and Europe increasingly recognise that sustainability risks and opportunities fall squarely within their duties. In global surveys, directors consistently rank sustainability and climate-related events among the top external factors expected to affect business performance in 2025, mirroring CEOs’ views and confirming that environmental and social issues are now material to enterprise value.

The first step is integrating ESG into corporate strategy and risk management. Climate change, resource efficiency, human capital and supply chain resilience must be discussed as strategic issues, not relegated to annual CSR reporting. Leading boards already embed ESG oversight within audit, risk or governance committees, or create dedicated sustainability committees. While only a small share of U.S. listed companies currently have standalone ESG committees, momentum is building, particularly in Europe, where regulatory pressure is higher.

Second, boards must demand robust metrics and accountability. Sustainability targets should be treated with the same discipline as financial ones, including science-based climate goals and material social indicators. Linking executive remuneration to ESG outcomes has become standard practice: by 2024, nearly three-quarters of S&P 500 companies tied part of executive pay to sustainability metrics. These incentives must reward genuine progress rather than symbolic compliance, reinforcing that sustainability performance sits on the C-suite scorecard, not in marketing materials.

Third, boards need ESG literacy. Directors with sufficient expertise are better placed to challenge assumptions, anticipate regulatory shifts and identify competitive opportunities. Many boards now rely on targeted training and external experts to stay ahead of fast-moving regulatory frameworks in the EU and the U.S., where sustainability increasingly conditions market access, transparency and investor confidence.

Finally, boards must promote long-term thinking and innovation. Competitiveness depends on positioning the company for the next decade, not just the next quarter. Evidence shows that firms with long-term, sustainability-oriented governance are more resilient and better positioned to capture future growth. Boards that consistently ask how climate, resource constraints and social change will reshape their industry force ESG into the company’s strategic core. Ignoring sustainability is no longer neutral—it is a competitive risk.

III. Winning in the Sustainable Economy  

In the U.S., Europe, and across global markets, the sustainable economy is no longer a fringe concept – it is the arena of fierce competition and growth. Despite some political noise over ESG in the past few years, most companies have quietly continued raising their sustainability ambitions. A Harvard Business Review analysis in late 2025 found that while a few firms pulled back on climate pledges, many more are doubling down they’re just doing it quietly to avoid politicisation. This mirrors the finding that even amid political headwinds, more organizations are prioritizing ESG to meet regulatory requirements and to seize competitive advantages. Boards should take confidence from this trend: focusing on sustainability is not a partisan stance, it’s a pragmatic one driven by business fundamentals.

Looking ahead, sustainable and competitive strategies will become indistinguishable. From clean energy to ethical supply chains to inclusive workplaces, the companies leading on these fronts will dominate their industries. As stakeholders (consumers, investors, employees, and communities) continue to raise the bar, laggards will find themselves playing catch-up or losing relevance. The board’s role is to ensure their company leads, not follows. That means setting bold aspirations for carbon neutrality, zero-waste operations, measurable social impact, and aligning resources to achieve them whilst delivering financial results. It means communicating transparently about progress and setbacks, building the trust that sustains long-term value.

By 2030, the sustainable economy will not be a segment of the market—it will be the market.

Boards that integrate sustainability into governance today will future-proof their companies and capture the opportunities a greener, more equitable economy affords. The mandate for directors is not activist or political, but plainly fiduciary: to ensure the long-term prosperity of the business. And long-term prosperity now depends on sustainable practices by design. The businesses that embrace this reality will thrive. Those that do not will be remembered as cautionary tales. The choice belongs to the boardroom.

Written by João Maria Botelho.