Key takeaways:

• • • Commercial awareness is a group goal 鈥� This must be a team capability and not just the GC’s responsibility.

    • Being “in the room” is critical 鈥� As standard practice, being present when decisions are made 鈥� like in the boardroom 鈥� helps position the legal function as a strategic partner rather than an emergency contact.

    • The keys to enabling the business 鈥� Strategic enablement means understanding business objectives and finding solutions to make them happen.

A Chief Legal Officer at a software company had a revealing interview question for the internal candidates who were seeking a senior role: “What’s your favorite product that we make, and what value does it give our customers?”

Many struggled. Some couldn’t answer on the spot. Others sounded like they were merely reciting the company website. Those who succeeded spoke easily and authentically about customer value, showing that they thought about the business regularly, not just when legal issues arose.

The message was clear: In order to enable the business, you need to know it as well as the business knows itself.

In this second part of our series on the “Four Spinning Plates” model, which frames the General Counsels鈥� evolving responsibilities as:

1. 1. 1. delivering effective advice
      2. operating efficiently
      3. protecting the business, and
      4. enabling strategic ambitions.

This article focuses on the Enable plate.

Building commercial muscle across the entire team

The above story about the CLO鈥檚 interviews reveals the uncomfortable truth that lawyers can be proficient in their legal skills yet disconnected from the business they serve. They know contract law but not what makes customers choose their company’s products or services. They understand regulatory compliance but not the competitive dynamics that are shaping strategic decisions within the company. And this gap doesn’t just limit individual careers; it prevents legal departments from becoming true strategic enablers.

Commercial awareness isn’t just the GC’s responsibility 鈥� every team member needs to understand the company’s products, its customers, strategic objectives, and values. Everyone should be able to articulate not just what the company does, but why it matters to customers and how it creates competitive advantage.

For many corporate legal departments, this cultural shift requires deliberate efforts to help lawyers understand the commercial context of their work, create opportunities for them to engage directly with business functions, and make commercial acumen a clear expectation for career advancement.

One GC shifted their team members from a stay in your lane mentality to one in which they saw themselves strategic advisors. The GC did this by redefining excellence as not just providing technically sound legal advice but also offering a point of view about how the business develops and grows. Now, lawyers are welcomed at every meeting, whether or not there’s a legal issue on the agenda. Legal team members strive to know the business as well as anyone and identify issues proactively

Being in the room as standard, not emergency contact

There’s a difference between being called in when there’s a crisis and being present as strategy develops. When the legal team only appears during emergencies, relationships remain transactional. However, when legal has a regular presence in strategic discussions, it builds trust as business partners can see how legal thinking sharpens strategy, identifies opportunities others may miss, and helps the organization make better-informed decisions. Then, engagement becomes organic as leaders naturally seek out legal input because the relationship already exists.

One GC described their department as focused on enhancing commercial performance, not just mitigating risk. This means developing a refined understanding of competing risks alongside opportunities and making strategic bets informed by business goals rather than by defaulting to the most conservative position.

Many GCs aspire to have a seat at the table but aren鈥檛 yet invited into strategic planning. However, there are ways to start building that level of involvement, including initiating cross functional meetings, asking to observe other department meetings, and leading technology and process improvements that showcase legal’s forward thinking.

Of course, better integration into the overall business creates its own challenges 鈥� as the in-house legal team becomes more approachable and visible, requests will increase and demand must be managed. As one GC put it, “the reward for good work is more work.” That鈥檚 why the most effective GCs must find the balance across all four plates by being accessible enough to be valuable and structured enough to be sustainable.

From Department of No to Department of How

Being a strategic enabler doesn’t mean saying Yes to everything. It means legal’s voice is sought out by business leaders and thus, carries weight. Rather than automatically saying No and explaining the risks of a business initiative, effective GCs ask Why? and then make an effort to understand objectives and find safer paths to yes that balance risk with ambition.

When regulatory changes created opportunities for an energy company to build pipeline infrastructure, the company鈥檚 GC ensured leadership understood all facets of the durability of those regulatory changes before committing billions of dollars. Regulatory shifts were likely to be contested, which meant that permits granted today could be overturned years later, leaving the company with unusable infrastructure and lost investment. By helping the business think through these scenarios, the legal department enabled an informed strategic decision, rather than a reactive one.

This mindset shows up in everyday legal work too. A GC at a fast-moving technology company described their focus as: “Helping evolve our contracts to keep up with the strategies or keep up with what the company is doing.” Rather than treating every new business model as requiring completely new contractual frameworks, the legal team modifies existing approaches to accommodate new risks without becoming “too intrusive on the business” or creating “weeks and weeks of negotiating.” This agility demonstrates how seemingly routine legal work 鈥� such as contract negotiation 鈥� has significant business impact when approached with a commercial lens.

Moving forward: Strategic enablement as ongoing practice

As complexity and change intensify, the GC’s role as strategic enabler is crucial. To jumpstart this process, GCs should assess their department in key areas, asking:

• • • How does senior leadership view legal? As a strategic partner, a necessary gatekeeper, or an emergency contact?
    • How integrated is your department into business operations? Are representatives from the in-house legal team present as strategy develops, or are they called in to review decisions already made?
    • How well is your team building commercial muscle? Can everyone on your team succinctly describe what your business does, who its customers are, where the company is headed, and what its values are?

GCs who can build commercial muscle across their teams, maintain consistent presence in business decisions, and approach challenges with a mindset of enabling solutions will become indispensable strategic leaders that help their organizations thrive.

You can learn more about how the 成人VR视频 Institute’s Value Alignment toolkit allows you to assess your legal department’s strategic positioning, here

Key highlights:

• • • “Nothing says strategic priority like funding鈥� 鈥� Ioannou’s most powerful insight is that directing capital through a sustainability lens is what enables companies to build lasting strategic resilience.

    • Progress typically involves tension 鈥� Acknowledging trade-offs across cost, timing, and stakeholder impact allows organizations to navigate complexity with greater clarity, reinforce internal alignment, and demonstrate that sustainability is being pursued through deliberate, not decorative, choices.

    • Preparing for difficult obstacles 鈥� The challenge is no longer whether sustainability matters, but what we are willing to do when it becomes inconvenient. Ioannou鈥檚 perspective challenges leaders to build resilient structures and processes that can withstand hostile terrain rather than fair-weather sustainability programs.听

In recent years, Environment, Social & Governance (ESG) issues have shifted from a period of mainstream momentum to an era marked by skepticism and backlash. For Prof. Ioannis Ioannou of the London Business School, the question is no longer whether sustainability matters. 鈥淭he real challenge,鈥� he writes in , 鈥渋s what we are willing to do when it becomes inconvenient to say so.鈥�

Unlike some typical ESG toolkits that focus on messaging or compliance, this playbook calls for deeper strategic reflection. It is designed for leaders who remain committed, even as external validation fades.

Here are three actions from the playbook that can help organizations move from performative commitments to those initiatives that can have a more enduring impact.

Action #1: Treat capital allocation as the litmus test of strategic intent

鈥淣othing says strategic priority like funding,鈥� says Prof. Ioannou, noting that capital allocation is where strategic commitment becomes visible. When sustainability priorities shape where capital flows 鈥� what gets funded, delayed, or redesigned 鈥� they move from rhetorical statements to structural choices.

This goes beyond simply adding ESG metrics to project evaluations. Indeed, sustainability must be embedded into the logic and architecture of investment decisions, Ioannou emphasizes. 鈥淚t needs to be present from the start 鈥� at the first gate 鈥� not treated as a reputational check once everything else is locked in.鈥� That includes integrating environmental and social criteria into how initiatives are assessed, which risks are priced in, and how long-term returns are understood.

鈥淚f ESG appears in reporting but doesn鈥檛 shape executive compensation, capital approvals, or promotion decisions, it鈥檚 a signal that the organization hasn鈥檛 yet internalized it,鈥� Ioannou explains, adding that financial and non-financial outcomes should be tied together across both individual and institutional metrics.

For many organizations, this shift requires challenging a deeply ingrained capital allocation mindset. 鈥淲e鈥檝e trained generations of business leaders鈥� to default to short-term financial returns,鈥� Ioannou says. 鈥淭hat logic often crowds out longer-term investments in resilience, innovation, and systemic adaptation.鈥� Overcoming this legacy of short-termism means rethinking how value is defined, especially under conditions of ecological, social, and geopolitical disruption.

Action #2: Make trade-offs visible and treat them as part of serious strategy

鈥淪ustainability work that avoids trade-offs isn鈥檛 strategy 鈥� it鈥檚 storytelling,鈥� says Ioannou. Indeed, a defining mark of credible ESG leadership is the willingness to address the inherent tensions involving costs, timelines, stakeholder impacts, and business models and to engage those conflicts directly, rather than trying to smooth them away.

Organizations frequently frame sustainability as universally beneficial. While that instinct may serve communications goals, it does little to strengthen strategic capacity. 鈥淩eal progress almost always introduces tension,鈥� Ioannou explains, adding that confronting these trade-offs should be made routine. 鈥淟eaders should ask: What shifts as a result of this decision? Who carries the burden? What timelines change, and what expectations must be reset?鈥�

These answers could help bring clarity into operations by translating difficult decisions into language that invites accountability. 鈥淚f a supplier shift increases costs by 8% but reduces water usage by 30%, that鈥檚 not a dilemma to hide. This is a strategic choice to make transparently,鈥� he explains.

Organizations need to normalize this mindset through scenario planning, making ESG-informed business cases, and promoting cross-functional alignment, Ioannou recommends. When sustainability decisions live only in specialist teams, they remain abstract; but when they鈥檙e interrogated through operational, financial, and reputational lenses, these trade-offs become manageable.

鈥淚t鈥檚 easy to achieve consensus when the work stays abstract,鈥� he adds. 鈥淭he question is what happens when hard choices emerge, such as when costs surface, when values compete, and when speed slows down? Navigating these tensions openly is what makes sustainability real 鈥� it鈥檚 how leadership moves from messaging to meaning.鈥�

Action #3: Distribute ownership and build governance depth across the business

鈥淩esilience doesn鈥檛 come from the brilliance of one ESG leader 鈥� it comes from what remains when the spotlight moves on,鈥� says Ioannou.

This means that boards of directors must develop the fluency to govern sustainability not as an adjacent risk, but as a core strategic focus. 鈥淒irectors don鈥檛 need to master every metric, but they need to understand how climate, inequality, and systemic disruption affect the business over time,鈥� he says, adding that boards need to treat ESG competence as a prerequisite for their directors in order to offer meaningful oversight. And this needs to be supported by tailored training, engagement with scenarios, and deepened dialogue around risk and resilience.

However, governance doesn鈥檛 stop at the boardroom. 鈥淪ustainability can鈥檛 thrive as a silo,鈥� Ioannou explains. 鈥淚t must be integrated into how the organization plans, executes, and adapts鈥� This includes embedding ESG considerations into stakeholder engagement, procurement processes, product development, capital budgeting, and performance management.

Other key elements of this, he notes, is identifying internal champions and the importance of succession. 鈥淟ook beyond the sustainability team. Who in finance, HR, or operations has the influence and insight to make sustainability actionable? 鈥f the work vanishes the moment someone leaves, then it was never embedded. The question isn鈥檛 just what you鈥檝e achieved 鈥� it鈥檚 what you鈥檝e institutionalized,鈥� he says.

As organizations seek to build governance structures that enable sustainability and continuity they also need to create lasting initiatives to support this strategy 鈥� such as ESG committees with cross-functional mandates, internal working groups linked to business planning cycles, and incentive systems that reward collaborative delivery 鈥� and foster the conditions under which the work can scale and endure.

鈥淲hen the political noise fades, what matters is what you鈥檝e built 鈥� structures, practices, and decisions that hold shape under pressure,鈥� Ioannou concludes. 鈥淭hat鈥檚 the difference between performative ESG and resilient leadership.鈥�

You can find more information in our听Sustainability Resource Center听here

Key insights:

• • • Digital transformation among top priorities 鈥� C-Suite leaders have identified enabling digital transformation, improving operational efficiency, and exploring the potential of AI as their top priorities for 2025.

    • Challenges for corporate functions 鈥� Corporate functions face significant constraints, including time-consuming compliance tasks, lack of risk alignment, difficulty keeping up with legislative changes, and ineffective data flows.

    • Opportunities for improvement 鈥� To enhance the contribution of corporate functions, C-Suite leaders suggest they focus on simplified compliance and reporting, technology and automation, and risk management and mitigation.

Corporate C-Suite leaders have been pretty clear about their priorities for their businesses. Indeed, business leaders have made digital transformation, improving operational efficiency, and exploring the potential of AI their top priorities for 2025, according to the 2025 C-Suite Survey, published recently by the 成人VR视频 Institute.

Almost two-thirds of these same leaders (62%) identified the rise of AI and generative AI (Gen AI) as the most likely transformational trend for today鈥檚 businesses. However, even with a clear vision of the potential for AI to be transformative, and indeed, a strong desire to drive digital transformation within their businesses, C-Suite leaders are not fully convinced their corporate functions are up to the task and able to contribute strongly to the corporation鈥檚 overall objectives.

The role that corporate functions play today

Corporate functions, sometimes called enabling functions are the support operations that keep businesses running and encompass everything from customer success and supply chain management to tax, audit, and legal departments.

Some of these enabling functions have already begun to play a significant role in driving business objectives.

More than half of C-Suite leaders surveyed said that their customer success, technology, operations, marketing, and finance functions have significantly contributed to overall business objectives. In fact, as one respondent stated: 鈥淥ur support functions, especially in technology and operations, were instrumental in driving a digital shift that improved organizational workflows and overall customer satisfaction.鈥�

Obviously, leaders of every enabling function would love to hear such statements made about the teams or departments they oversee.

A sliding scale of contribution

However, there is a general perception that enabling functions are generally not as effective as they could be, nor able to contribute significantly to the overall objectives of their organization. For example, only 17% of C-Suite leaders said that their internal legal function had played a significant role in attaining overall business objectives; and 42% of C-Suite leaders said that their legal function had contributed to the organization鈥檚 overall objectives only a little (36%), or worse, not at all (6%).

This is concerning, not only for the overall organization and its top-level leaders, but for the leaders of these specific internal functions; and it raises questions about the alignment of priorities and communication within the business.

There is a general perception that enabling functions are generally not as effective as they could be, nor able to contribute significantly to the overall objectives of their organization.

Yet, a few different explanations may exist simultaneously. First, the lack of apparent contribution of any given enabling function to broader business goals may be simply a lack of effective communication. In reality, the function may be completing many of the objectives it needs to do to drive the organization forward, but the function鈥檚 leaders may not be doing a good job of informing top leadership of their efforts.

Alternatively, C-Suite leaders may not be quite as clear about stating their desired objectives as they think they are, leaving function leaders with less guidance than needed for the team or department to otherwise meet their objectives. Another possibility is that there is, in fact, genuine misalignment between functions鈥� priorities and those of the C-Suite.

This is likely far from an exhaustive list of potential reasons why enabling functions may not be doing an effective job of contributing to the organization鈥檚 objectives, and many of these reasons likely exist simultaneously. There is, however, some insight into what might be constraining the effectiveness of these enabling functions.

What is getting in the way?

C-Suite leaders identified four key areas that have either a moderate or significant constraining effect on their enabling functions, including:

• • • Time-consuming compliance and reporting tasks that leave little time for value-add work (with 68% of C-Suite leaders surveyed saying this)
    • Lack of alignment around the organization鈥檚 risk appetite (58%)
    • Difficulty keeping abreast of legislative and regulatory change and emerging risks (54%)
    • Ineffective data and information flows between enabling functions (52%)

Interestingly, that last point was actually the most frequently cited as placing a significant constraint on enabling functions with 21% of respondents saying that a lack of effective data and information flow was hampering their enabling functions.

This is not a new concern. CEOs have long decried the existence of silos within their businesses; however, with the increasing volume of data generated by businesses and the acceleration of the business cycle, the impact of these silos can easily be magnified. For this reason, it is not surprising to see the long-time frustration around information silos rising to the level of the most significant impediment to enabling functions鈥� contributions.

What can be done

C-Suite leaders have identified three key opportunities to improve how their enabling functions contribute to overall business objectives:

• • • Simplified compliance and reporting
    • Technology and automation
    • Risk management and mitigation

These are important goals, to be sure. However, they fail to confront the silos that C-Suite leaders say are the biggest challenge to their enabling functions.

To effectively push toward a digital transformation, C-Suite leaders will need to find effective ways to improve data and information flows. This presents a bit of a double-edged sword. On the one hand, improved technology creates greater opportunities to improve inter-function collaboration and communication. And while all major business software suites have collaboration and sharing functions integrated into them, creating opportunities for teams to interact in ways they have not been able to before is critical.

To effectively push toward a digital transformation, C-Suite leaders will need to find effective ways to improve data and information flows.

On the other hand, those same technologies create even greater volumes of data and information for corporate functions to manage. By simply adopting a technology tool without making meaningful efforts to more successful integrate the new tool into existing team workflows, businesses run a real risk that technology intended to solve a problem could actually exacerbate it.

That word of caution, however, should not be seen as a reason for corporations to avoid pushing toward digital transformation. As discussed, C-Suite leaders see the digitization of their businesses as a key priority, and broader market indicators are proving them correct. The insights shared here around the challenges for enabling functions should not dissuade them of that notion.

Rather, leaders should be keenly aware of the potential pitfalls and incorporate solutions to these existing and potential problems into their tech rollout and adoption plans as they push into a digital future.

Successfully navigating digital transformation requires more than new technology 鈥� it demands intentional change management efforts to break down silos and improve information flow. Leaders who acknowledge these challenges upfront and build solutions into their transformation strategies will be best positioned to unlock their enabling functions’ full potential.

You can download a copy of the 成人VR视频 Institute鈥檚 recent听2025 C-Suite Survey听here

Key highlights:

• • • Corporate governance has become more critical but for different reasons 鈥� The importance of corporate governance has increased significantly in 2025, driven by unexpected factors like AI adoption uncertainty, geopolitical complexity, and tariff impacts rather than just traditional ESG concerns.

    • ESG integration into core business strategy remains limited 鈥� The prediction that most companies would fully integrate ESG into their core business strategies proved overly optimistic, with only 21% of CFOs now saying their companies are working toward full integration.

    • Relying solely on non-profits and research institutions to solve the climate change problem is unrealistic 鈥� The fragmented and localized regulatory landscape necessitates increased resources from private capital and innovative business models. Large-scale impact requires building business models that can sustain and expand on these solutions.

The 成人VR视频 Institute made several predictions in early 2025 around sustainability. And while the corporate landscape in this space continues to evolve, significant adaptations in the way companies approach environmental, social, and governance (ESG) initiatives in 2025 were initially anticipated. Early outlooks suggested an increasing importance of corporate governance and that companies were narrowing the scope of their ESG activities and giving more prioritization to embedding sustainability into their corporate business strategies.

Yet, by mid-2025, certain forecasts have altered. While companies are still moving forward with their sustainability strategies, few are taking advantage of the opportunity to use sustainability as a strategic lens for competitive advantage. In addition, many are narrowing their material impacts, risks, and opportunities to only those that are core to their business strategy and operations. In other words, they are maximizing material opportunities and mitigating material risks even as their traditional governance responsibilities are unlikely to change.

What we got right

Prediction: Material risks, opportunities & impact endure while the term 鈥淓SG鈥� fades

The acronym ESG was always a framework to identify corporate risks and opportunities; but unfortunately, the backlash to the term has forced companies to change the language used around their sustainability strategies. This was already underway at the beginning of 2025 and is still true now.

For example, many speakers at the recent , sponsored by Reuters Events, highlighted their success in moving sustainability strategies forward by focusing on the material issues that can be a way to future-proof financial success. Other key takeaways included spotlighting corporate actions that are now being taken and aligning these actions with the company鈥檚 purpose.

Prediction: Corporate governance more critical in 2025

This prediction about corporate governance increasing in importance remains factual, but the reasons are different than anticipated. Uncertainty around AI adoption, additional geopolitical complexity, and the impact of tariffs are the key factors driving the importance of corporate governance in mid-2025.

That said, however, other drivers are keeping corporate governance, in particular for corporate boards, elevated in importance as well. As Helle Bank Jorgensen, CEO of Competent Boards, : 鈥淎s climate shocks intensify, artificial intelligence reshapes industries, regulations shift and stakeholder expectations evolve, directors face a new reality 鈥� that traditional oversight models are no longer sufficient.鈥�

In addition, Jorgensen points out it鈥檚 expected by regulators, investors, and stakeholders that boards of directors will demonstrate fluency in climate and sustainability issues as they act as fiduciary stewards of companies鈥� strategies. She also cites more than 50 jurisdictions that have introduced requirements or expectations for directors to possess climate-related competence. This profound shift requires boards to take a much more aggressive, forward-looking orientation 鈥� one in which every operating assumption is questioned.

Prediction: Reverse of federal ESG-related regulations & rules accelerates

Six months into the year, the federal government鈥檚 efforts to roll back environmental tax credits as part of the Inflation Reduction Act from 2022 became a reality in the enactment of the One Big Beautiful Bill Act. Meanwhile, the U.S. Securities and Exchange Commission voted to in court in late March.

These actions show, as we predicted, that federal agencies are pulling back on ESG-related rules, especially around climate change. To fill this gap, pro-sustainability regulations and rules at the state and local levels may be needed. , a听former White House climate advisor, told attendees of the recent RB USA conference that the real momentum and focus on climate needs to be on states, local governments, and communities as these local efforts are crucial and deserve international attention and investment.

Prediction: Growth in greenwashing litigation and industry collaboration continues

Our prediction about the growth in greenwashing litigation continuing into 2025 turned out to be accurate. Looking at greenwashing trends in 2025, we can see that the risk of greenwashing has never been higher because of increased complexity and the expansion of groups to include non-governmental organizations, employees, consumer class actions, and investors. Key areas under scrutiny include allegations of contaminants in consumer products, net zero statements, and forced labor in supply chains.

What we got wrong

Prediction: ESG integration into core business strategy would go mainstream

The prediction that the majority of companies would be fully integrating ESG into their core business strategy was a little aggressive, in retrospect. Indeed, omnibus proposals to simplify the European Union鈥檚 Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive took shape in early 2025 and derailed the accuracy of this prediction. In fact, only 21% of CFOs now say their companies are working to , according to a听survey听conducted by accounting and advisory firm BDO. However, in that survey, ESG risk was cited among the top three concerns in financial planning with 45% of CFOs ranking it among their most pressing business risks.

In mid-2025, most companies may not be embracing ESG as a strategic lens to fundamentally transform the way they operate, despite our prediction. However, companies are developing the ability to anticipate and adapt their operational strategies to uncertain futures in response to AI and geopolitical and economic instability, and for many, climate change remains a major area of risk exposure.

To underscore that point, , CEO and co-founder of Voyacy Ventures, a blue-tech company that鈥檚 tackling the urgent global problem of coral reef ecosystem collapse and its severe consequences, told attendees of the recent RB USA conference: 鈥淚t is unfair for us to expect that non-profits and research institutions can solve this problem [by themselves]. We need to develop a business model to develop this solution on a large scale.鈥�

Cousteau鈥檚 comments ring true across the board on climate risk and other areas of sustainability risk. Private capital and large-scale corporate initiatives are necessary components for funding these solutions.

You can find more about听the challenges around Sustainability here

Key insights:

• • Litigation risk is evolving 鈥� Greenwashing litigation is rapidly increasing and evolving worldwide, with different drivers and enforcement priorities across regions, including NGOs in the EU and consumer class actions in the US.

  • Compliance becoming more challenging 鈥� Companies, especially multinationals, face heightened legal risks and complexity due to the lack of global alignment on sustainability regulations and standards, making compliance more challenging.

  • Proactive legal consultation is essential 鈥� Early legal guidance and comprehensive training for corporate teams are essential to help businesses navigate this shifting landscape, ensure compliance, and mitigate the risk of costly greenwashing claims.

Navigating the nuanced world of corporate sustainability claims has become more treacherous in 2025, as businesses face a proliferation of greenwashing lawsuits driven by distinct regional pressures and shifting enforcement priorities.

Indeed, the greenwashing trends are multifaceted with changes across regions and industries, as well as the expansion of which parties are bringing litigation, according to legal experts from Morgan, Lewis & Bockius. For example, private consumer-based litigation remained robust in the United States, despite changes in federal enforcement priorities, according to , a Partner in International Transactions, Finance and Trade at the firm.

In the European Union, non-governmental organizations (NGOs) are driving litigation because of new EU regulations regarding green claims and consumer protection, according to , Partner & Co-Leader of the ESG & Sustainability Advisory Group at Morgan Lewis. 鈥淲e see an increase in NGOs being very active because there is a pushback on sustainability as a whole, and the different governments around the world push now even harder in relation to greenwashing or even climate change litigation,鈥� Apetz-Dreier explains.

In addition, greenwashing claims continue to proliferate across several key industries, according to , a Morgan Lewis litigation partner and his peers. Oil and gas, consumer products, and transportation sectors, in particular, are facing added scrutiny, Corrado adds.

Consumer class actions and NGOs filling void

In the US, litigation activity by class action attorneys, NGOs, and state attorneys general has picked up in 2025 during a time in which federal enforcement has pulled back, according to Valenstein. More specifically, Corrado says he continues to see NGO-driven consumer litigation and NGOs taking advantage of consumer protection laws that permit derivative claims on behalf of consumers to seek injunctive relief to stop false advertising practices. 鈥淐onsumer class actions are targeting companies for the presence of contaminants like microplastics and PFAS” in a range of products from food packaging to apparel have proliferated, he adds.

In the area of supply chain integrity, Valenstein notes an increase in the US of civil litigation under the Victims of Trafficking and Violence Protection Act of 2000 to attack forced labor in the supply chain, which has led some companies to settle before such lawsuits are filed to sidestep negative publicity. In addition, there is more consumer protection class-action litigation challenging the reasonableness of reliance by companies on third-party supply chain audit firms, he says.

Further, companies are exercising caution in their diversity, equity & inclusion (DEI) public statements to avoid drawing negative attention. 鈥淚 think that the DEI space is unique in terms of complexity,鈥� Valenstein says. 鈥淐ompanies are worried about action from the federal government, but they’re also worried about litigation from stakeholders who feel disappointed that companies are walking back and no longer honoring commitments.鈥�

Greenwashing claims around statements regarding net zero commitments is still a key area of litigation as well. For example, companies in the airlines industry are being targeted for “emission statements and carbon neutrality goals,” in which the legal theory is that “these statements induced consumers to… pay a premium” under false pretenses, Corrado explains.

Outside assistance necessary to manage legal risk

Multinational companies are particularly challenged by the varying regulations and legal risks across different countries because of the lack of global alignment around sustainability laws and standards. “The big challenge for multinationals is that in the past, there was an alignment globally by most administrations and governments,鈥� says Apetz-Dreier. 鈥淏ut this is now changing. It is a big challenge to comply with the different national approaches and regulations.”

As companies seek to align their practices with new areas of legal risk exposure, Corrado, Valenstein, and Apetz-Dreier advise companies to consult proactively with legal counsel for guidance and training. For example, they suggest that legal counsel from several multidisciplinary areas review the company鈥檚 sustainability reports, website copy, product labels, and marketing messages before any product launch to better mitigate the murky multi-layered divergence in the legal landscape. Indeed, Valenstein describes the holistic approach he and his peers use with clients: Companies approaching outside counsel with the expertise in litigation, regulatory & compliance, and antitrust is a best practice, he explains.

They also recommend hiring external experts to conduct training sessions for corporate marketing department teams to better equip them with the necessary awareness and skills to craft messages that are both appealing to consumers and legally sound. By doing so, companies can balance their marketing strategies with compliance requirements and reduce the risk of facing costly legal disputes. Corrado describes how bringing in external experts to review 鈥渞eal world examples of claims and statements that seemed innocuous but led to litigation鈥� helps to 鈥渞ecalibrate the marketing department鈥檚 view鈥� on how their words can open up the company to risk exposure.

As the landscape of environmental claims continues to shift, companies must brace themselves for anticipated trends in both greenwashing legal claims and regulatory changes. 鈥淲e are living in a very quickly evolving legal environment and it’s important for our clients to be prepared for the unknown because there is a lot of insecurity about what is going to happen,鈥� says Apetz-Dreier. 鈥淲e prepare our clients for the different opportunities and challenges 鈥� that’s a big part of our work.鈥�

You can learn more about the concept of greenwashing here

Key insights:

• • • Traditional board oversight models are outdated 鈥� Amid multiple crises threats, corporate boards that still rely on legacy governance approaches risk falling behind as today鈥檚 interconnected crises demand proactive and adaptive oversight.

    • Questioning assumptions about growth 鈥� Boards must continually challenge their assumptions about growth and risk utilizing four key strategies, including red team exercises, translating trends into strategic trade-offs, embedding sustainability anticipation, and linking culture with capital.

    • Sustainability is a central filter for all board decisions 鈥� Boards that proactively integrate sustainability into their culture, risk management, and strategic planning are better positioned to thrive amid regulatory pressures, climate risks, and stakeholder expectations in a volatile global environment.

Last year, corporate boards demonstrated greater readiness to address sustainability issues with significant financial implications, especially compared to their preparedness in 2018, according to the . For example, Environment, Social & Governance (ESG) board committees among Fortune 100听companies increased to 89 in 2024, compared to 22 in 2018.

At the same time, it is hard to know if this progress is adequate. As climate shocks become more severe, AI transforms industries, and stakeholder expectations evolve, corporate boards of directors are encountering a dynamic business environment that contains multilayered risks.

Boards operating in the traditional oversight models may soon find themselves struggling as the governance tactics of the past prove inadequate in the face of these newer changes.听Furthermore, the future operating environment for companies is becoming increasingly complex, with a heightened risk of polycrises, in which multiple, interconnected crises converge to create unprecedented challenges.

Moreover, boards of directors as fiduciary stewards of companies鈥� strategies are now expected, by regulators, investors, and stakeholders, to demonstrate fluency in climate and sustainability issues. In fact, more than 50 jurisdictions have introduced requirements or expectations for directors to possess climate-related competence. This profound shift requires boards to take a much more aggressive, forward-looking orientation in which every operating assumption is questioned.

In this context, sustainability is no longer a peripheral concern, but rather a central filter through which every decision must pass, as companies must navigate the intricate relationships between environmental, social, and economic factors to ensure long-term resilience and success. This reality means that boards must take proactive and integrated approaches to effective governance and oversight. Indeed, those that prioritize sustainability, risk management, and strategic adaptability are more likely to thrive in a world characterized by uncertainty, interdependence, and accelerating change.

Embracing re-evaluation strategies

To meet these new expectations in an ever-changing business landscape fraught with multi-faceted risks, boards must also question their assumptions about growth and the lens through which they are examining systemic risks. A board also needs to understand where it is prioritizing short-term wins at the expense of long-term viability.

These four key strategies can help directors prompt a critical re-evaluation of their growth assumptions and framework they use for assessing systemic risks 鈥� they can also help directors determine whether the board is prioritizing short-term gains over long-term sustainability:

1. Execute 鈥渞ed team鈥� exercises

Boards often find themselves surrounded by confirmation bias because they rely on trusted advisors and management teams who often share familiar viewpoints. This environment can stifle innovation and obscure systemic risks. A red team exercise can help break this cycle by inviting a diverse group of external experts and internal challengers to pressure-test assumptions about growth, systemic risks, supply resilience, reputation, and the company鈥檚 license to operate. Such exercises encourage directors to confront uncomfortable truths and explore alternative scenarios.

Too many organizations still operate as if ESG and value-creation are in conflict when, in fact, they are not. Running red team exercises in the board room can better align their strategies with sustainable goals to better spur innovation while maintaining operational resilience as priorities.

2. Translate trends into strategic trade-offs

Boards must be adept at discerning emerging trends to better inform the difficult strategic听decisions about what to pursue and what to forego. Asking tough questions that frame trends as choices is an effective mechanism to analyze trade-offs. For example, 鈥淒o we invest in short-term returns with high-carbon lock-in, or reallocate capital toward regenerative business models that preserve long-term viability?鈥� is a common trade-off question that many companies across industries are asking. By engaging in debates about real dilemmas rather than passive updates, directors can make informed decisions that balance immediate gains with future sustainability.

3. Build 鈥渟ustainability anticipation鈥� into board culture

To lead effectively in an uncertain future, boards must build sustainability foresight into their culture. An effective means of doing so is embedding sustainability anticipation into every board committee鈥檚 mandate. Tools such as dynamic scenario planning, transition-readiness metrics, and real-time materiality assessments that address emerging risks can help boards to anticipate and adapt to future challenges.

4. Link culture and capital

Most companies view sustainability as just a function rather than a filter for every business decision. This is why linking culture and capital at the board level is an essential step in making boards genuine hubs of foresight. Indeed, pulse surveys, stakeholder feedback, and behavioral data are necessary sources boards can use to make sure that sustainability is a foundational principle across all business decisions and used as a lens for value creation.

Looking ahead

The time for passive governance is over. By adopting these strategies, boards can navigate the complexities of today’s business environment for long-term viability for tomorrow. As the risks of interconnected crises 鈥� polycrises 鈥� intensify, making sustainability a fundamental criterion for every business choice is crucial for companies and can provide a profitable operating path in the years to come.

You can find out more about how companies are addressing the challenge of sustainability here

Key takeaways:

• • • Frame sustainability as future-proofing the business 鈥� Corporate leaders should characterize sustainability investments in this way to better communicate their value and importance to stakeholders.

    • Strong governance enables clear sustainability messaging 鈥� Effective board oversight and governance can help companies maintain internal clarity and emphasize their commitment to sustainability.

    • Prioritize present action over future ambitions 鈥� Focusing on current sustainability actions and progress can aid corporate leaders in building credibility and trust with stakeholders, rather than just making long-term promises.

Sustainability leaders find themselves at a crossroads in a volatile landscape. While the urgency for climate action and responsible business has never been greater, the external environment is rife with uncertainty, politicization, and hostility. Indeed, the challenge for corporate leaders is how can they keep internal momentum, communicate with credibility, and maintain resilience in the face of skepticism and shifting regulatory winds?

At Reuters Events鈥� recent , sustainability professionals came to learn how their peers are approaching sustainability action and corporate communications during this tumultuous time. Community played a big part in the learning as attendees were organized into buddy groups categorized by their primary learning objectives, such how best to communicate with stakeholders with varying interests or how to navigate changing regulatory and compliance rules.

Across the board, attendees learned the essential tenets for effective sustainability actions and messaging. Indeed, a key insight heard multiple times from the event鈥檚 speakers was the success of characterizing sustainability investments as future-proofing the business in an environment in which the only certainty is uncertainty.

Elements for sustainability messaging & engagement

Achieving clear and impactful sustainability messaging, coupled with genuine engagement, necessitates a strategic approach grounded in several fundamental elements, including:

Rethinking sustainability to focus on how it secures future performance 鈥� By aligning communication and action to withstand external shocks 鈥� be they political, regulatory, or reputational 鈥� leaders can take the first step in future-proofing company operations. This lies at the heart of strategic sustainability activities and starts by reinforcing sustainability鈥檚 connection to the company鈥檚 core purpose and ensuring that every team member understands why these actions are being taken. Indeed, in the words of one speaker: 鈥淕aining buy-in is easier when it is closely tied to purpose.鈥� If a sustainability activity does not tie into the company鈥檚 purpose, it is time to rethink it.

To put this into practice, leaders should convey a consistent internal message that sustainability is not a passing trend but rather a vital strategy for long-term value and risk management. As one executive noted: 鈥淐lients are willing to pay for future proofing and resilience.鈥�

This future-ready mindset also means that leaders should seek to build agility and adaptability into their companies鈥� operations. And today, given the current politicized atmosphere, companies face a challenge in operating in a “volatile and even polarized” environment, said Jennifer Duran of , adding that this only underscores the need for “value protection” and a “resilience-building program.”

Enabling internal clarity through strong governance 鈥� In the words of one executive: 鈥淪trong governance is the foundation for steadfast commitment to sustainability.鈥� Clear messaging is easier when there is effective board oversight and strong governance with clearly defined roles and responsibilities, going from the C-Suite down to individual contributors.

When the external conversation grows noisy or hostile, internal clarity 鈥� from the board, the C-Suite, and the operational managers 鈥� becomes the organization鈥檚 shield. As boards grapple with key issues, sustainability is an effective strategic lens to consider, and during these debates, the cost and the return on investment (ROI) is often a major component. That said, several conference speakers highlighted another ROI 鈥� the risk of inaction 鈥� upon which chief sustainability officers must consistently keep their boards focused.

Building trust through data, transparency & accountability 鈥� Robust, actionable data is the foundation of credible sustainability communication. Stakeholders expect transparency not just on companies鈥� successes, but also on their challenges and setbacks. 鈥淚t is important to keep every stakeholder on the same page and invite them to engage more,鈥� said Dave Stangis of Apollo Global Management.

Internally, sustainability is a team sport. 鈥淕etting people on board and keeping them on board鈥� is the key to embedding sustainability across the organization, said Estee Lauder鈥檚 Al Iannuzzi. For example, consistent efforts to collect data from data owners while reminding them of the important role the data plays is key to operationalizing sustainability data for transparent and accountable reporting.

However, the biggest data challenge, according to several speakers, is the reliability of data coming from the supply chain, particularly partners based overseas. While there is no magic pill to solve this problem, embedding the requirement in vendor agreements that suppliers have to share data is a useful way of operationalizing this area of data collection.

Engagement & communication actions in hostile times

Sustainability executives shared their best lessons learned to ensure their corporate sustainability strategies remain funded and move forward during this tumultuous time, including:

Prioritize action now over ambitions in the future 鈥� In an era of skepticism, ambitious long-term promises, such as like 2050 net zero targets, can sound hollow because of the long time frame. Effective sustainability messaging involves the urgency of now, because stakeholders 鈥� whether employees, customers, or regulators 鈥� want to know what the company is doing today.

Executives from pharmaceutical giant Novartis and tech heavyweight Ericsson highlighted the power of storytelling that鈥檚 rooted in current action. The key message from both companies was: 鈥淒on鈥檛 focus on 2050, communicate what you are doing now.鈥�

Urging 鈥渁ctions over commitments,鈥� Sonya Gafsi Oblisk of Whole Foods Market echoed this attitude as well. 鈥淲e can impact change and lead change every day, and small actions across the stakeholder board is the way to get there.鈥�

Institute audience-centric, authentic messaging 鈥� Authenticity and transparency, rooted in the specific needs and context of each audience, are non-negotiable in both effective engagement and sustainability messaging. When speaking with investors, framing sustainability risks as business issues are crucial. Mindy Lubber of framed the challenge succinctly: 鈥淐limate issues, water issues are business issues 鈥� climate change is a fundamental risk to our economy.鈥�

Establish strength in numbers for collaboration & advocacy 鈥� Success in sustainability communications in a politicized environment is sometimes achieved through strength in numbers. Indeed, industry coalitions and trade associations offer credibility in a hostile political environment. 鈥淲e have to collaborate, and we need to make coalitions,鈥� said Gina McCarthy, former White House climate advisor. 鈥淭hat is how change works.鈥� Likewise, working together on standards, advocacy, and best practice-sharing not only amplifies the message but also provides a buffer against sector-specific backlash, other attendees said.

Communication as a tool for resilience

Insights from the Reuters Events鈥� Responsible Business USA 2025 conference made it clear that framing sustainability through the lens of resiliency is now mission-critical for sustainability leaders. By anchoring messaging in purpose, focusing on present action, and collaborating broadly, companies can weather any potential backlash while building lasting value.

鈥淚f you鈥檙e not adopting change, you are succumbing to it,鈥� Kenvue鈥檚 Duran explained, adding that sustainability leaders should let their communication be a tool for resilience, not retreat in order to keep pushing forward, together, toward a sustainable future.

You can find more information in our Sustainability Resource Center here

The majority of the research conducted for the State of the Corporate Law Department Report every year isn鈥檛 based on survey responses. Rather, it鈥檚 based on one-on-one interviews with GCs who are answering open-ended questions 鈥� nearly 2,500 GCs from all across the globe were interviewed last year alone. Their answers give a fairly clear picture about what鈥檚 top of minds for them.

With that in mind, it鈥檚 quite remarkable to see a thrice-fold increase in the number of mentions of the concept of value emerging from these interviews. It鈥檚 not a case of GCs selecting an answer from a pre-populated survey list; rather, three times as many GCs brought up the idea of value of their own accord.

Avoiding buzzwords

Value is a rather amorphous and subjective concept. What one person values deeply, another may dismiss out of hand.

Indeed, the Merriam-Webster鈥檚 online dictionary for the word value as a noun, and an additional three as a verb or adjective. Definitions range from concepts of monetary worth to utility, and even the duration of a musical note or the relative darkness of a color. With this broad spectrum of definitions available, it is no wonder that GCs find it challenging to clearly articulate what they value.

The following figure from the report illustrates this more clearly:

Unless a GC can clearly articulate what they mean when they talk about value, there is a genuine risk of the word losing all meaning.

Understanding the spectrum of value

From the table above, perhaps my two favorite examples to illustrate the need for clarity in defining value are the top and bottom boxes on the left-hand side. Most often when we think of value in the context of legal work, we think about the idea laid out in the middle of the table 鈥� value for the money spent. Indeed, we know that of all the metrics tracked by corporate GCs, metrics related to their total budget 鈥� and in particular their spend on outside counsel 鈥� are the most frequently tracked.

If our definition of value stopped there, measuring and communicating value would be a relatively easy exercise. However, the top and bottom boxes on the left-hand side very quickly show that such a definition is far too limited.

On the top left of the table is the idea of aligning to organizational values. This definition of value is far different than just dealing with money. Rather, it speaks to what the organization as a whole finds important or intrinsically desirable. 成人VR视频, like most organizations, dedicates full pages and more to our own statements on values, even articulating a robust set of Trust Principles that guide our work. For GCs, aligning to their organization鈥檚 values plays a critical role in how they understand and enable the business. It can be more challenging, however, to communicate that need for alignment to outside counsel and other legal services providers.

To get there, we must contrast the top box on the left side of the table with the one on the bottom left in which the idea of value is incorporated into a phrasal adjective. This example of value 鈥� citing value-based pricing 鈥� treads much closer to the common monetary understanding, but even then, understanding this example is not quite so simple.

True, value-based billing arrangements, often called alternative fee arrangements, are largely based on how much the work will cost. Yet, the value the firm is hoping to receive in such matters also depends on other factors, such as:

• • • how quickly the work is completed
    • whether the actual outcome of the work matches the desired outcome
    • the value of the settlement or judgement compared to the claimed amount
    • how effectively protracted litigation was avoided
    • the cost of the matter compared to similar past examples
    • the innovation displayed in solving the legal issues
    • and myriad other potential considerations.

In short, what is valued in a particular legal matter under a value-based billing arrangement can be a moving target. The concept of value-based billing might be generally understood, but the actual definition of the value of any given piece of legal work will vary.

Communication is key

Recognizing that the definition of value can be a shifting concept, it is vital that GCs facing this challenge engage in a high degree of communication. One of the action items laid out in the 2025 State of the Corporate Law Department report is a call for GCs to make settling on a definition of value 鈥� or at least the framework of a definition 鈥� a key focus for 2025.

As the report states:

鈥淚t should be a goal for each law department to determine what value means to them and to promulgate that definition to their key stakeholders. By doing so, GCs will accomplish several important tasks. First, they will give internal stakeholders in the business a better understanding of exactly what the legal function is hoping to contribute to the business鈥檚 broader interests. Second, it will clarify for those within the in-house legal team itself what goals and objectives they should be working to meet. Third, it will communicate to outside counsel and other service providers what those vendors should be working to deliver to the in-house legal team as the direct client.鈥�

Of course, this is not an easy task; but it is one which will help GCs ensure that they are capturing what matters most to the business and making those efforts known to key stakeholders.

You can download a copy of the full听听here

This , which came out February 12, reflects a return to a more traditional approach regarding the shareholder proposal process. In addition, it is also a shift back to previous principles-based rulemaking that focus primarily on financial materiality, according to , Special Counsel at Sullivan & Cromwell. The guidance also signals a potential reversal of previous rules passed in 2021, which had allowed stockholder proposals with 鈥渂road societal impact.鈥�

This move by the SEC has important implications for shareholder proposals that raise social and ethical issues because a company could choose to exclude a proposal based on economic relevance of the stockholders who are supporting a proposal, according to Hu. Indeed, this new guidance essentially reverses the SEC鈥檚 2021 action that allowed proposals touching on “broad societal significance” to bypass the ordinary business exclusion.

The 2021 action allowed such shareholder proposals to go forward based on two considerations: i) whether the proposal addresses issues essential to the management’s daily operation of the company and which makes it impractical for shareholders to directly oversee these matters; or ii) whether the proposal excessively controls or interferes with the company’s management processes.

Impact of this new SEC guidance on ESG

The effect of the ordinary business exclusion and the evaluation of shareholders鈥� economic relevance is expected to lead to , including those related to environmental, social & governance (ESG) and anti-ESG issues, according to analysis by Sullivan & Cromwell. In particular, the ordinary business exclusion emphasizes the need for a company-specific materiality analysis when determining whether shareholder proposals can be excluded from proxy materials. As a result, this shift is widely expected to make it easier for companies to exclude shareholder proposals from their proxy statements, particularly those related to ESG and political policies.

In addition, the return to principles-based and mandated reporting on financially material matters has two important implications for companies and their ESG reporting:

Strengthened separation of financial and sustainability data 鈥� This SEC guidance strengthens the likelihood that financial material information will be the sole focus of SEC filings and that non-financially significant information, like specific ESG disclosures, might be relocated to sustainability reports rather than being included in SEC filings, according to Hu. This distinction could help streamline SEC documents and makes sure that they remain focused on financial data relevant to investors.

Distinction between financial and sustainability reporting timelines 鈥� Before this new guidance, some companies were moving toward the simultaneous release of their annual financial reports and sustainability reports. This was a challenge for companies because 鈥渢he reliance on third-party data, especially for Scope 3 emissions, presents hurdles in timely and accurate reporting,鈥� Hu states. However, the focus now on principles-based reporting of financially impactful information ensures that the timelines are likely to remain different.

What should companies do now?

To navigate this murky environment, Hu advises companies to seek legal counsel to ensure compliance and strategic alignment with the evolving regulatory environment. In addition, companies should:

Monitor legal requirements 鈥� Make sure legal requirements are the foundation for their disclosures and decision-making processes. A company-specific materiality assessment is crucial in determining what issues are financially material and significant to the company’s business model, and thus, to shareholders.

Focus on principles in disclosures 鈥� Ensure that all filings align with the SEC鈥檚 principles-based approach to disclosure. Companies should focus only on financial information in their SEC filings and reserve other information for sustainability reports or other documents that cater to a wider stakeholder base.

Balance risks and benefits regarding what information to include in SEC filings 鈥� Hu also recommends that companies should conduct a cost-benefit analysis of disclosure placement and consistency. This means considering the potential risks and benefits of including certain information in their SEC filings rather than in other reports. By taking a thoughtful and company-specific approach to disclosure, companies can navigate the evolving regulatory landscape and make strategic decisions that align with their mission and the expectations of their stakeholders.

Caution is warranted on the horizon

Once fully staffed, the SEC will likely consider changes to existing rules around shareholder engagement. Likewise, Hu said she also expects the SEC to scrutinize those actions recommended by proxy advisors as signals for the proxy season’s voting patterns, particularly on proposals related to diversity, equity, and inclusion (DEI), especially as some companies narrow their activities in this area. However, it is a little early to know the impacts, she adds.

Either way, companies must proceed with caution and strike a balance between investor expectations and regulatory requirements, while primarily focusing on issues that are significant to their specific business model and bottom line.

You can find out more about how the Securities and Exchange Commission is managing the current regulatory environment here

Generative AI (GenAI) offers promising opportunities for efficiency and effectiveness on corporate sustainability strategy execution. In fact, 70% of respondents indicated that future innovation in sustainability will be driven by industrial AI applications and solutions, according to research on industrial AI and its impact on sustainability . Yet, 38% of these respondents said that the biggest challenge for AI鈥檚 further adoption is or projecting return on investment (ROI).

Indeed, this is particularly challenging for doing so in industries that consume natural resources intensively and that assess, predict, and optimize the design, production, sourcing, and operations of products.

Current and future state of industrial AI

Many predict that 2025 is the year that AI will be adopted on enterprise-wide scales. At the same time, industrial AI may lag this expectation. Operationally, industrial AI is more frequently applied to energy management and predictive maintenance with only 21% of respondents stating that industrial AI is being used today.

Conversely, at least 48% of respondents said they expect to implement industrial AI solutions and tools over the next three years in areas such as supply chain optimization (with 48% of respondents citing this area) and sustainability impact assessment (62%).

Of those respondents that said they are currently applying industrial AI, multiple use cases to optimize supply chains, production process, and sustainability impact assessments are being pursued.

Greening of AI processing & infrastructure

In addition to projecting the ROI of AI adoption, other challenges exist. The most prominent one is the computer processing power used and the amount of energy that is consumed in the use of AI. While innovations 鈥� like DeepSeek鈥檚 announcement that it engineered hacks to address pre-training costs in its reported efforts to achieve high performance with dramatically less computation power 鈥� are notable, many agree that the dropping cost of AI usage on a per token basis will actually increase demand of AI and thus increase the overall energy demand on a global scale. (A token is a unit of measurement that calculates the cost of processing power of large language models.)

In a recent podcast, Goldman Sachs experts referred to , which is the tendency of abundance increasing as the price of something declines. When applying this to industrial AI, this means that as the cost of AI usage on a per token basis declines, more people will use AI because it is more cost effective, and as a result, energy demand may increase overall.

To help scale industrial AI usage across enterprises, several developments must occur to help realize the potential of industrial AI鈥檚 positive impact on sustainability. According to our recent research, this includes:

• • • Net balance must be positive 鈥� The energy used to train and run AI should be net positive by the reduction of environmental impact achieved through product or end-process optimization.
    • Green data centers are the future 鈥� Smart infrastructure that propels decarbonization and energy efficiency is needed for sustainable AI development.
    • AI must become greener 鈥� The efficiency of an AI-compute-per-power unit needs to increase significantly, particularly for cooling. Data processing and storage demand is soaring, and sustainability transformation within the industry is critical to achieve net zero ambitions.

Solutions to other challenges

In addition to the greening of AI development and data infrastructure, the most prevalent challenges holding back more widespread adoption of industrial AI can be categorized into three specific areas, according to our research:

1. 1. 1. Financial 鈥� As mentioned earlier, almost 40% of respondents said they have difficulty in projecting the ROI of AI. To overcome this challenge, look at AI investments at the business strategy level rather than just at the product level to better realize the beneficial efficiency, productivity, and sustainability gains.
      2. Partnerships 鈥� Take an ecosystem approach in pursuit of organizational AI strategies with partners. To achieve this, an open approach to collaboration across expertise and skillsets, translates to more companies (both large and small), governments, and academia working together in pre-competitive spaces.
      3. Capabilities 鈥� Reskill and upskilling multidisciplinary teams is a key component in wide-scale adoption of industrial AI. The lack of small groups of data scientists, data engineers, and domain business experts who can partner to solve common problems, for example, is one reason pilot programs fall flat in AI experimentation. By bringing together teams from complimentary disciplines 鈥� such as data scientists to create and develop the algorithms, data engineers to help capture the right data and store it properly, and business professionals who understand both the technology and broader business contexts 鈥� is essential in developing new capabilities to successfully implement industrial AI into business models.

As the cusp of a new era in industrial AI and sustainability are imminent, the potential for transformative change is immense. The challenges industries face are significant, but so are the opportunities. It is time for businesses, governments, and individuals to take action and embrace the power of industrial AI to drive sustainability forward.

You can start by assessing your organization’s readiness for AI adoption, identifying key areas in which industrial AI can make the most impact, and investing in the necessary infrastructure and talent. Collaborate with partners, both within and outside your industry, to share knowledge and resources. Most importantly, commit to the ongoing development of greener AI technologies and practices.

By working together and pushing the boundaries of what is possible, the full potential of industrial AI can be harnessed to create a more sustainable, efficient, and prosperous future for all.

You can find out more about the challenges that many industries face with sustainability here