6 reasons why sustainability business cases break down, and how to ensure yours doesn’t

Andreas Rasche, Professor of Business in Society at Copenhagen Business School, presented his diagnosis at Position Act 2026: That sustainability and profitability naturally align has collided with operational and structural reality. Market conditions are changing, risk signals are hardening, yet corporate confidence in achieving net-zero targets remains stuck below 55% across the G7. The gap between knowing sustainability matters and being able to finance it has become a board-level problem.

Rasche’s argument rests on a fundamental distinction: business cases for decarbonization exist in principle. In practice, they remain locked away. The barriers are not mysterious. They are systemic, measurable, and demand a reframing of how boards position sustainability within their capital allocation and governance structures.

1. The win-win narrative has structural limits

For over a decade, the sustainability movement has been sold on a proposition: doing good increases profitability. Companies bought the narrative. They also hit its limits. A survey of 688 firms published in March 2026 found that only 17% reported financial benefits exceeding costs. Another 43% reported costs higher than benefits. Another 27% reported no financial benefits at all. Only 13% could not quantify their position. This is not ambiguity. This is a signal of structural misalignment.

The problem is not that business cases are invented or theoretical. Rasche’s research, drawing on Bain & Co.’s decarbonisation lever library, shows that approximately 25% of global emissions can be abated today at positive ROI. The gap lies between potential and activation.

Companies know where the economic logic exists. They cannot deploy capital to realize it. “The important point is companies can often not activate these business cases,” Rasche noted. “And this is where the challenge is.” This distinction matters enormously for boards. If the business case existed but firms lacked discipline or clarity, the solution would be internal. Because the barrier is structural, the problem demands external reform, in corporate governance, regulatory frameworks, and data infrastructure.

2. Short-termism in corporate governance blocks long-term ROI

The first structural barrier is temporal. Short-term corporate governance—driven by quarterly earnings cycles, annual bonus metrics, and equity markets that reward immediate returns, makes multi-year sustainability investments appear economically irrational. A firm cannot justify a five-year payback on decarbonization when its CFO faces quarterly pressure and its executives are compensated on annual performance. The incentive structure works against activation of positive-ROI projects.

Rasche cites research on foundation-owned companies, which by definition operate on longer time horizons. These firms, freed from quarterly reporting pressure and short-term shareholder expectations, show “much better sustainability profiles.” The implication is direct: governance structure predicts sustainability outcome.

If boards want to unlock the 25% of abatement opportunity available at positive ROI, they must reform fiduciary duties to explicitly acknowledge long-term value creation. This is not aspirational. It is a precondition. Without explicit governance change at the board level, aligning compensation, board evaluation, and capital allocation timelines to multi-year horizons, positive-ROI projects will continue to lose to short-term alternatives.

3. Missing data makes ROI calculations impossible

The second barrier is informational. Companies cannot quantify benefits on the scale needed to build credible business cases. This is especially acute on the social side of ESG, where impact is real but indirect and difficult to monetise. Rasche observed in interviews with major companies that “it is very difficult to quantify some of the benefits that we implicitly are seeing.” Without quantification, boards cannot make capital allocation decisions. Without data, CFOs cannot defend investment to stakeholders. The positive-ROI opportunity remains locked in principle but invisible in practice.

This is not a data collection problem. This is a data strategy problem. Companies that want to activate their sustainability ROI need to build measurement infrastructure before they deploy capital. Strategic focus on the business case for sustainability reporting software in 2026 reflects this shift, boards are beginning to recognize that reporting infrastructure is not overhead. It is the foundation of decision-making. Without it, even high-conviction projects lack the quantitative discipline needed for approval.

4. Regulatory fragmentation creates investment paralysis

The third barrier is external: regulatory unpredictability. Rasche’s data on net-zero confidence shows substantial variance across G7 nations. The EU’s shift from the “Green Deal Logic” (green transition as competitiveness) to the “Resilience Logic” (green transition as energy independence) signals regulatory volatility. Companies cannot build 10-year capital plans on a foundation of shifting policy frameworks.

This is not a theoretical concern. Banks already factor climate risk into loan pricing and credit standards. The European Central Bank’s 2025/26 lending survey shows climate risk raises loan costs for high-emitting firms by approximately 0.4%, a material impact across large balance sheets. Yet regulatory unpredictability means firms cannot assume these cost pressures will remain stable or predictable, making long-term mitigation investment appear too risky.

Boards face a paradox: delay decarbonization and face rising borrowing costs and stranded assets; accelerate and risk over-investing in mitigation that may become redundant if regulation shifts. Only regulatory clarity, harmonized standards, predictable timelines, and internalized externalities through mechanisms like carbon pricing, allows positive-ROI projects to be approved with confidence. Rasche argues that “companies will only see business cases the moment that regulation sets the framework where externalities are internalized.” This is not a call for light-touch regulation. It is a call for regulatory clarity as a precondition of capital activation.

5. Market signals are hardening, but narrowly

Market discipline is beginning to bite, though unevenly. Physical climate risk has moved from tail risk to priced risk. Home insurance costs in the US have risen 46% since 2021, three times inflation. Food price spikes driven by extreme weather are feeding inflation and straining public finances. Banks are incorporating climate risk into credit decisioning. These signals are not abstract. They hit balance sheets directly, through higher borrowing costs, stranded inventory, operational disruption, and supply chain exposure.

Yet this market pressure has not yet generalized into broad-based sustainability investment. Why? Because the market signals are sectoral and delayed. A pharmaceutical company may see climate risk as material to supply chain resilience but immaterial to core profitability. A financial services firm may face immediate regulatory pressure on climate risk disclosures but unclear pressure on actual emissions reduction. The market is creating incentives for risk management and disclosure, not necessarily for decarbonization investment. Rasche’s argument is that boards need to move beyond the binary of “business case exists / does not exist” and instead think in terms of resilience and risk protection as a distinct value proposition from growth and efficiency.

6. Resilience, not just ROI, should frame the sustainability conversation

This is where Rasche’s framing becomes prescriptive. The move from “Green Deal Logic” to “Resilience Logic” in EU policy reflects a deeper reorientation that boards should adopt internally. Sustainability is not simply a growth story. It is also a risk mitigation story. It enables firms to withstand supply shocks, reduce geopolitical dependencies, and maintain operational continuity under uncertainty. This reframing opens a wider aperture for investment decision-making.

Consider the geopolitical evidence Rasche presented. The EU imports 58% of its energy. Critical raw materials for net-zero technologies are concentrated in a handful of countries, primarily China. European firms face a double dependency: reliance on imported raw materials and imported manufacturing capacity.

A firm operating in this environment has two types of sustainability motivation: the business case (growth, efficiency, competitive advantage) and the resilience case (supply security, cost stability, operational continuity). A positive-ROI decarbonization project might also reduce dependence on volatile energy markets or mitigate supply chain concentration risk. Building a sustainability business case that actually holds up requires both framings. Boards that position sustainability purely as a growth story will continue to struggle with activation. Boards that position it as both growth and resilience unlock a wider range of investment justifications.

What this means for boards making decisions now

The sustainability sector is at an inflection point. The “business case” narrative, doing well by doing good, has delivered sufficient value for some firms and sufficient disappointment for others that it can no longer carry the entire weight of strategic commitment. Rasche’s data shows this clearly: most firms cannot activate positive-ROI sustainability projects because the structural conditions do not support activation. This is not a failure of corporate will or sustainability ambition. It is a failure of governance, data infrastructure, and regulatory architecture.

Boards face three immediate decisions:

• First, audit your own governance: are compensation structures, board evaluation metrics, and capital allocation timelines genuinely aligned to multi-year sustainability outcomes, or do they punish long-term investment in favour of short-term returns?
• Second, invest in measurement infrastructure before deploying decarbonization capital. You cannot build a business case on intuition or hope. You need the data to quantify both financial return and resilience benefit.
• Third, reframe your sustainability narrative internally. The business case for efficiency and growth is real but incomplete. The resilience case: Supply security, cost stability, operational continuity under geopolitical stress, is equally material and often easier to defend to sceptical board members and investors.

Activation of the 25% of global emissions that can be abated at positive ROI depends on boards making these three moves simultaneously. It is a structural problem, not a marketing problem. It requires governance reform, data discipline, and narrative clarity, all of which are board-level responsibilities.

Organizations building the data infrastructure needed to quantify both financial return and risk mitigation—and making that infrastructure visible to decision-makers—will be the ones that move from knowing sustainability matters to actually funding it at scale.

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