Over the past decade, ESG has risen from a niche concern to a strategic pillar for many industrials companies. Today, however, the framework is being drawn into cultural debates, becoming entangled with political agendas. In many regions, particularly in the US, the once-clear focus on environmental outcomes has been blurred, leading to a perception that ESG lacks tangible results and measurable impact.
‘ESG is dead.’ While this may be an overstatement, its role is undeniably shifting. In the industrials sector, executives are no longer embracing ESG as a guiding narrative. They are now scrutinizing its practical impact on growth, resilience, and competitiveness.
BlackRock’s CEO Larry Fink captures this dilemma succinctly: “stakeholder capitalism is not woke. It is capitalism, driven by mutually beneficial relationships.” Despite efforts to reposition ESG as a value-based business practice, the term has become highly politicized in the US. Meanwhile, in Europe, its momentum persists while being increasingly burdened by regulatory complexity.
Under the EU’s Corporate Sustainability Reporting Directive (CSRD) alone, over 50,000 companies will face new ESG disclosure obligations, many of them mid-sized firms entering the reporting backdrop for the first time. As WirtschaftsWoche recently noted, the effect is visible: executives are shifting time and resources from transformation to templates. Behind closed doors, a growing number of executives are questioning if their sustainability narrative still aligns with operational realities or if it needs a sharper, more pragmatic rewrite.
Meanwhile, the policy divide between the US and the EU is widening. While the US channels over USD 369 billion into clean energy under the Inflation Reduction Act (IRA), including upto $3 per kg of hydrogen support based on achieving emission reductions regardless the production method, the EU’s approach remains more fragmented.
| Policy contrast drives different strategic results | |
 |  |
| $369B IRA clean energy funding | 50,000+ companies affected by CSRD |
| $3/kg H2 subsidy, color-agnostic | complex approval processes, fragmented subsidies |
| Fast M&A momentum in clean tech | High reporting burden risk of 'transformation fatigue' |
| 'you get dollars' | 'you get documents' |
Investment reactions reflect strategic recalibration
This divergence is no longer theoretical. According to a 2024 BCG/VCI survey, over two-thirds of German chemical companies are now prioritizing investments outside of Germany citing energy prices, planning uncertainty, and regulatory burden. Domestic investment in the sector dropped by more than 40% in 2023, while companies like BASF committed EUR 660 million to new production capacities in China. Preferred destinations include the US, where IRA incentives create favorable economics, and emerging markets in the Middle East and Asia.
Similar tensions play out across the broader Chemical, Energy, and Materials value chain. In the energy sector, global majors are recalibrating. BP recently scaled back its 2030 emissions targets, citing investor pressure and the need to balance decarbonization with profitability. Utilities like Vattenfall and E.ON have postponed major renewables investments due to rising costs and unclear regulatory support. Meanwhile, in France, EDF is doubling down on nuclear – further highlighting the EU’s fragmented energy landscape.
In upstream chemicals, high Scope 1 emissions and limited green premium visibility leave base producers with little incentive to decarbonize without policy clarity. Steel and aluminum companies such as ArcelorMittal and Norsk Hydro are navigating surge in energy costs and carbon leakage risks, often dependent on green power access to de-risk CAPEX. For materials producers like those in the cement industry, emissions intensity is deeply structural, making ESG not just a brand or pricing issue, but a long-term license to operate.
Strategic priorities for industrials growth
As geopolitical tensions and sustainability mandates reshape global markets, industrials leaders must rethink their growth agendas. The key question is no longer whether ESG is still relevant. It's how to turn structural disruption into sustainable, profitable growth. Here are three strategic priorities for Chemicals, Energy, and Materials companies:
1. Defining growth strategies in the new energy economy
Companies are reassessing how and where to invest in emerging growth fields – from hydrogen and bio-based chemicals to low-carbon materials and circular business models. This is especially pressing for energy suppliers, base chemicals, and metal producers facing capital allocation trade-offs between decarbonization and competitiveness.
Key factors to consider:
Areas where sustainability investments deliver not just compliance but also growth and margin upside
Technologies and regions best positioned for scale
Steps to position the company as a market shaper and not a follower
2. Turning sustainability into commercial advantage
Today’s customer expects low-impact products but often challenges green premiums. Companies need to translate ESG into value that resonates commercially. This applies across the board but is most acute in downstream materials or packaging, where pricing pressure is high, and specification-driven buyers dominate.
Key factors to consider:
Making sustainability a credible part of customer value proposition
Identifying sales, pricing, and offering structures that support both environmental and profitability goals
Ways to differentiate in green markets before commoditization erodes margins
3. Capturing value through strategic transactions
As regulation, carbon exposure, and localization pressure reshape value drivers, sustainability is playing a growing role in M&A and investment decisions. Brown-to-green repositioning is particularly relevant in asset-heavy sectors like cement, refining, and industrial utilities, where valuation increasingly depends on future CO2 resilience.
Key factors to consider:
Effect of frameworks like the IRA or Green Deal on valuations, deal activity, and future returns
Credibility of brown-to-green transformation strategies in deal rationale and value creation
Evolution of due diligence to reflect future-fit asset competitiveness (not just past performance)
From compliance to competitive edge: How Simon-Kucher can help
The pragmatic rewrite of sustainability narrative will decide which companies emerge stronger from disruption and which may struggle to adapt. Our upcoming Chemicals, Energy & Materials (CEM) Study 2025 will quantify how executives across North America and Europe are prioritizing growth levers in a time of political, economic, and environmental realignment.
At Simon-Kucher, we believe now is the time for pragmatic, growth-driven sustainability strategies. Your perspective is critical in shaping the CEM study and ensuring it reflects the real challenges and priorities facing the industrials sector. Where have your sustainability efforts paid off or stalled? Which regulatory or policy shifts are most relevant to your business? Where do you see new opportunities emerging from market disruption? Connect with our experts to take this conversation forward.
In our next article, we will explore how energy prices, site economics, and subsidy frameworks like the IRA and Green Deal are shifting where and how companies choose to invest. Stay tuned for the second part of our Chemicals, Energy, and Materials series and sign up for early access to our next study.
Our upcoming Chemicals, Energy & Materials Study 2025 will dive deeper into how industrial leaders across North America and Europe are managing this shift, and which commercialization strategies are emerging as the most effective.
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