Reflections on Davos 2025: Defining the role of sustainability in Europe’s competitiveness challenge by Sytze Dijkstra, Netherlands Country Manager

The reinvention of a competitive Europe will have full focus of European leaders over the coming years. This will change – though not necessarily weaken – their approach to sustainability.

On the face of it, this year’s meeting was no different. All five thematic areas of the agenda touched on sustainability-related topics, and the theme of ‘Safeguarding the planet’ directly spoke to global climate and nature goals. The four-day event also saw the usual flurry of announcements about new sustainability-focused initiatives and partnerships, many on the intersection of nature and climate.

A $1.5 billion initiative, the 'Race to Belém,' was launched to protect the Amazon rainforest. Supported by a carbon markets investor in collaboration with non-profits Conservation International and The Nature Conservancy, and backed by Swiss trading house Mercuria, the project plans to sell carbon credits linked to Amazon conservation efforts. Also in Davos, Singapore's President Tharman Shanmugaratnam proposed integrating biodiversity credits with established carbon markets to address environmental degradation.

Coinciding with the WEF meeting, the Taskforce on Nature-related Financial Disclosures (TNFD) launched new guidance on how businesses in sectors including beverages, apparel, and construction materials can measure and disclose their nature impacts.

These are all important steps that show growing recognition that healthy natural ecosystems and addressing climate change must go hand in hand.

It was another key discussion point at Davos. However, that may have a more significant impact on the sustainability agenda of many companies.

Gloom about Europe's competitiveness permeated many of the discussions, heightened by the spate of political announcements from the US as Trump started his presidency. ECB President Christine Lagarde characterised the global economic challenges facing Europe as "an existential threat," while European Commission President Ursula von der Leyen warned that “we have entered a new era of harsh geostrategic competition. The world's major economies are vying for access to raw materials, new technologies, and global trade routes.”

The reinvention of a competitive Europe will have the full focus of European leaders over the coming years. This will change – though not necessarily weaken – their approach to sustainability.

Firstly, the focus is likely to narrow to the sustainability topics that align with Europe’s competitiveness challenges and opportunities – energy, raw materials, and the growth industries of a net-zero future. Investments in renewables, energy efficiency, electric mobility, and batteries may well accelerate the energy transition, spurred on by the rise of AI.

Secondly, the European Commission has already announced that it will reduce the sustainability reporting burden for companies, and this has become all the more urgent now Trump is pushing for deregulation in the United States. As part of this, the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD,) and the EU Taxonomy will be streamlined. Judging by recent letters from the German and French governments and the leaked draft of the EU Competitiveness Compass, this will involve a reduction of mandatory reporting items, with a focus on climate and energy, a reduction in the number of companies that need to report, and possibly a delay in the introduction of mandatory reporting.

For European companies, this adds unwelcome uncertainty at an inconvenient time. Companies have invested significant efforts in preparing for the CSRD and the first CSRD reports are about to be published. No wonder that there has been a lot of frustration.

Most European companies we speak to are continuing their CSRD preparation until there is more clarity about the new requirements, initially when the European Commission will publish the Omnibus simplification package on February 26, 2025.

Beyond that, many European companies are likely to continue investing in sustainability. The double materiality assessment, a mandatory element for CSRD compliance, has given companies new insights into how sustainability-related developments can positively and negatively impact their financial performance. Investments in energy efficiency, responsible access to raw materials, and supply chain resilience will continue as they mitigates key business risks. Similarly, companies will continue to invest in the energy transition and electric mobility as this offers significant business opportunities.?

Maybe less sustainability reporting is not such a bad thing, if it leads to more sustainability implementation.

Author: Sytze Dijkstra , Netherlands Country Manager, Simply Sustainable