Where geopolitics meets climate on the board

This is an era of instability fundamentally different from what most leaders – in government or business - have experienced. The rules of the international order that have made up the backbone for global business activities are eroding, hard power is reappearing, and states are reappraising alliances. Simultaneously, the global climate challenge demands coordinated action. To maintain climate ambitions as a business in this environment now requires navigating a new geopolitical reality.

The same is true for boards. Non-executive directors and Chairs must examine the global context when exercising their fiduciary duties if they are to be effective and build resilient long-term business strategy. This is a departure. Most boards may have given climate a seat at the table, but geopolitics may well be still at the boardroom door.

The new reality: disintegrating trust

Several shifts have accelerated recently. The taboo against using hard power was broken, old alliances have proven less robust than anticipated and the Europe-US relationship – and the trust that underpinned it – has started to fray. Meanwhile, new alliances are forming based on transactional arrangements – anchored in mutual economic growth or national security – rather than shared norms and values. The manifestation of these changes has been a tariff and trade war bonanza, but also a change in focus to strategic resilience and autonomy.

For the climate agenda this has meant some deprioritising commitments in favour of more immediate concerns like defence and growth (look to the ‘West’), whilst others seek to leverage natural resource or technology advantage to accelerate their engagement (look to Asia and Africa). A third group see opportunity on both sides and engage accordingly.

How to think about COP30 in this context?

As we see climate action shifting from moral imperative to industrial strategy, the language that drives progress may change fundamentally, as well as some of the actors who are in the driving seat.

Developing countries are embracing pragmatic ‘pollute as we green’ approaches that expand industrial capacity today while hoping to build renewable infrastructure for tomorrow. Others will look for synergies between priority agendas like energy security, defence and transition technologies to determine their level of commitment and investment.

This will likely mean that climate finance fractures further along bilateral lines, with strategic interests increasingly trumping environmental goals. But for some, strategic interest will very much align with a transition agenda – particularly where it reduces geopolitically challenging dependencies on hydrocarbons imports (look to China and Europe). China's recalibrated Belt and Road Initiative, Gulf sovereign wealth funds' and new ‘South-South’ financing arrangements (some under new multilateral arrangements) will change both what gets done and where. But, critically, it does not necessarily mean that progress halts.

What does it mean for business and governance?

For boards, fiduciary duty now necessarily needs to consider geopolitical change. The boards that have already embraced this approach when looking at climate – as a strategic imperative for growth rather than a compliance duty – will do well to replicate this for geopolitical pressure. They will also do well to look at these two critical dynamics together as delivering on climate ambitions will require geopolitical manoeuvring.

Most businesses today have global exposures, even when they don’t have global footprints. Supply chains, capital and markets invariably cross borders and often regions. Business leaders – and their governors – therefore need to understand where they fit within the new competitive landscape that is emerging as it is increasingly shaped by overt state competition. Where will government policies override traditional market rules and change a business’s access and ability to compete? Where might a public or private company be seen as an extension of its home government and with what impact? And, critically, what can the business do differently to position itself for success in light of these changes?

What are the concrete things a board can do to enable better geostrategy for their business?

Boards must recognise that the world they relied on is slowly changing, and change left unattended drives risk. Building capacity to ask better questions of the business to map geostrategic exposure (across politics, economics and climate) will be essential to enable proactive positioning.

In practice, they should empower and require the business to:

• Map its exposure to geopolitical pressure – what dependencies does the business have that are likely to be challenged by geopolitical change?
• Geopolitically stress-test the forward strategy and growth plan, including decarbonisation plans – what assumptions that underpin strategy may need to be revisited given geopolitical change and how could the business pivot?
• Use scenarios to build resilience to change, especially the ones that seem improbable, but select them to test your specific exposures.
• Expect to actively manage your geostrategy – this can no longer be a one-off exercise if you want to retain agency. Embed it in process and day-to-day decision making.

Finally, there is an opportunity for businesses to lead. As many democratic governments get caught up in ever shorter-term agendas to win electoral battles (or even internal governmental ones) against increasingly populist backdrops, their bandwidth for dealing with big systemic issues like climate is shrinking. Businesses will need to engage more pro-actively to shape their operating environment – with government partners and private sector peers.

In this context, many businesses may find that the most interesting conversations at COP30 are not with the usual suspects but with those that have an urgent and strategic imperative to drive change.