The Cost of Short-Termism: Why Ignoring Sustainability Erodes Business Value

In the wake of stark warnings from the Intergovernmental Panel on Climate Change (IPCC), the need for nations and businesses to expedite climate action has never been more urgent. Yet 2024 offered a sobering backdrop. More than 60 countries went to the polls, including the US, UK, India, South Africa, Pakistan, and Russia, but climate scarcely featured in their manifestos.

Global temperatures soared, making 2024 the hottest year on record, breaching the Paris Agreement’s 1.5°C threshold with an average global rise of 1.6°C. Instead of urgency, we saw political backtracking and rising public scepticism, as nationalist politics reshaped climate discourse.

The second Trump Administration has already reversed US environmental policies, Russia’s approach was deemed “critically insufficient,” and nations like India and Pakistan are prioritising growth over emissions reduction.

Against this backdrop, businesses are echoing the same short-termism. In 2025, the focus has shifted toward low-value investments and fast paybacks rather than the long-term strategies needed for net zero. Governments and businesses alike are kicking the climate can down the road just when decisive action is most needed.

Taking a long-term view on sustainability, particularly decarbonisation, delivers significant benefits, increases company valuation, and supports growth.

Short-term Thinking Has Taken Hold

Shareholder expectations and competitive pressures have always shaped decision-making. But what we now see is a narrowing of focus. Instead of aligning investment with the multi-decade challenge of decarbonisation, many firms prioritise projects with immediate returns, often within a 2–3-year window.

This is dangerous because:

• The reporting landscape is tightening: Regulations such as the EU’s Corporate Sustainability Reporting Directive (CSRD), the UK’s Transition Plan Taskforce (TPT), and International Sustainability Standards Board (ISSB) alignment are forcing greater transparency. But disclosure is not action.
• The transition window is closing: Science shows emissions must peak before 2030 and fall nearly half by 2035. Short-term finance cycles are incompatible with this.
• Competitive positioning is at risk: Companies that delay risk stranded assets, supply chain disruption, and reputational damage as customers and investors demand resilience.

The Retreat from Net Zero: Sentiment vs Reality

Across boardrooms in 2025, enthusiasm for net zero is cooling. Where once CEOs boasted of ambitious targets, now there is widespread retreat.

• Economic volatility: Inflation, higher interest rates, and supply chain disruption push firms to defer sustainability projects.
• Investor pressure: Mainstream investors still reward quarterly earnings, not 2040 climate goals.
• Political cover: With governments slowing ambition, businesses feel less exposed when reducing their own commitments.

This sentiment shift is dangerous. Net zero is not just good PR but a structural transition. Companies stepping back risk missing climate targets and financial benefits.

Why Short-Term Planning Fails

1. Misaligned Investment Horizons

Sustainability requires investments that yield over decades. Projects like renewable infrastructure or efficiency retrofits often need 7–15 years for ROI. 2–3-year payback criteria exclude exactly the projects that build resilience.

2. Greenwashing Over Governance

Short-term optics - branding, offsets, marginal improvements – are favoured over transformation. Trust erodes among investors, employees, and consumers.

3. Regulatory Lag Becomes Risk Exposure

Carbon disclosure requirements are accelerating. Businesses unprepared for compliance will face costs, penalties, and reputational harm.

4. Failure to Secure Financing

Lenders increasingly evaluate transition risk. Firms without credible long-term plans will pay higher financing costs or lose access to capital.

The Case for Long-Term Value

Research shows sustainability and profitability are not mutually exclusive.

• Higher returns: ESG-aligned portfolios have outperformed benchmarks over the past decade.
• Company valuation: Investment in carbon reduction and efficiency raises asset value and valuation multiples.
• Resilience: Firms that invested early in renewables benefit from reduced exposure to fossil fuel volatility.
• Investor sentiment: Global frameworks like the UN COP26 initiated Glasgow Financial Alliance for Net Zero (GFANZ) embed climate criteria into long-term capital allocation.

The lesson: businesses that look beyond immediate paybacks are better positioned to attract capital, manage risk, and capture growth opportunities.

How Businesses Must Reframe Sustainability

To break from short-termism, businesses should adopt three principles:

1. Transition Planning as Strategy

Carbon disclosures must be integrated into long-term strategy, aligning investments and risk management around net zero.

2. Evolving Investment Criteria

Payback periods should include avoided carbon costs, resilience, brand equity, and financing conditions - embracing total value, not just financial return.

3. Aligning Incentives

Boards should link executive compensation not only to annual results but to long-term climate and sustainability delivery.

Conclusion: Choosing Lasting Value over Quick Wins

The world in 2025 is defined by contradiction. The climate crisis accelerates, yet business sentiment retreats into short-term paybacks.

This is unsustainable. Businesses that chase immediate returns risk competitiveness, resilience, and relevance. Those that embrace sustainability as core strategy will unlock profitability, resilience, and trust.

Pushing this problem into the long grass only makes the future more expensive - for businesses, investors, and society alike. The choice is clear: chase short-term gains or invest in lasting value.

To learn more about how edenseven can support your business to design a robust, long-term sustainability strategy, find out more about their data-driven services here: https://www.edenseven.co.uk/