KPMG Warns Political Polarisation Raises Risk of Disorderly Sustainability Transition

Political uncertainty and diverging regulatory regimes are significantly increasing the risk of a disorderly transition to a sustainable economy, according to Simon Weaver, Global Head of ESG Advisory at KPMG International. Weaver argues that corporate sustainability ambition is weakening as companies fear backlash for taking public climate positions, and calls for a more honest and collaborative third era of sustainability.

Weaver identifies two problematic corporate responses to the current environment: pursuing low-ambition quick wins that do not move sustainability targets meaningfully, and deferring action to regulators while avoiding the collaborative dialogue needed for achievable goals. This dynamic is playing out against a backdrop of diverging regulation — new ISSB-aligned standards taking effect in Asia at the same moment the U.S. moves towards deregulation, and the EU's Omnibus initiative reducing sustainability reporting scope — creating an unpredictable compliance environment for multinationals.

Weaver is critical of current frameworks, arguing that the focus on Scopes 1, 2, and 3 emissions and the term "net zero" may themselves be slowing genuine decarbonisation by prompting companies to debate emissions they cannot control rather than investing in impactful actions. He notes that while TCFD successfully engaged boardrooms with achievable goals, CSRD faces criticism for being a tick-box exercise. The erosion of public trust in sustainability initiatives risks further fragmenting the collective effort needed to address environmental and social crises.

Weaver advocates for a third era of sustainability centred on honesty, collaboration, and a strategic focus on what can genuinely be controlled. He points to the Transition Plan Taskforce framework as a roadmap for focusing on value creation and risk mitigation rather than aspirational targets. The challenge, he writes, is translating longer-term sustainability risks into actionable financial forecasts — a task requiring business leaders to balance short-term commercial pressure with long-term climate scenarios before existing commitments slip further.

Key figure — Diverging regulatory environment: ISSB-aligned standards advancing in Asia while U.S. moves toward deregulation