The rules of business are shifting fast. Climate risks are materialising, regulators are tightening requirements, and investors are placing a price on transition plans. Companies across industries increasingly accept that the move toward sustainable business is no longer optional. The real question is whether today’s leaders are prepared to guide it.
Johnny Gutierrez, a senior project manager at ADNOC with more than 20 years in the energy sector, has seen these changes from the inside. “Working for a leading oil and gas company that is strongly committed to the net zero vision, I felt the need to become a true sustainability ambassador. My goal is to go beyond compliance and deliver real impact for both my company and the UAE’s sustainability agenda.” His perspective reflects a growing reality. Technical knowledge is valuable, but the ability to translate sustainability into strategy and measurable results is what organisations are searching for.
The new rules of the game
Nowhere is the shift clearer than in regulation. In Europe, the Corporate Sustainability Reporting Directive (CSRD) has taken effect, requiring nearly 50,000 companies to publish extensive ESG data. For many, this will be the first time they are held to such detailed disclosure standards. Boards that once treated sustainability as a matter for annual reports must now ensure that financial and non-financial performance are integrated and consistent.
The Corporate Sustainability Due Diligence Directive (CSDDD) expands this responsibility across global supply chains. European companies will be expected to track environmental and human rights practices of suppliers, contractors, and subsidiaries around the world. The implications are far-reaching. Large companies will be required to redesign procurement systems, monitor performance, and prove that they are addressing risks effectively.
The EU Taxonomy, meanwhile, defines which activities can be classified as sustainable. This is more than a label. It sets the parameters for access to financing. Activities that fall outside the definition may struggle to attract investors or qualify for preferential lending rates.
Finally, the Carbon Border Adjustment Mechanism (CBAM) will soon attach a tangible cost to carbon-intensive imports. For industries such as steel, aluminium, and cement, this will reshape competitive dynamics overnight. Producers with cleaner processes will gain a clear advantage. Those without will see their costs rise.
Together, these measures represent a fundamental change in the way companies operate. Sustainability is no longer a matter of reputation. Non-compliance can mean financial penalties, legal liabilities, or exclusion from markets.
Stakeholder expectations rising
Regulation is only part of the story. Pressure is mounting from stakeholders on every side. Investors are treating climate risk as financial risk and pressing companies for credible transition plans. The days of broad pledges with little follow-through are over. Detailed roadmaps, with evidence of implementation, are now demanded.
Consumers are also becoming more discerning. In Europe, purchasing decisions are increasingly influenced by environmental credentials. From packaging materials to product footprints, customers are willing to switch brands when they see a difference in commitment. For industries ranging from food to fashion, this shift is reshaping competitive advantage.
Employees are another driving force. Younger generations in particular weigh purpose alongside pay. They want to work for organisations that align with their values, and they are prepared to leave when those values are not reflected. Surveys consistently show that employees expect their employers to take a clear stance on climate and social issues. Talent retention and recruitment now depend on credibility in sustainability.
The impact of climate change itself adds another layer of urgency. Extreme weather events are disrupting supply chains, damaging assets, and raising insurance costs. Rising carbon prices, whether through trading schemes or taxation, further increase the pressure on companies to reduce their footprint.
For leaders, the message is clear. Sustainability is no longer confined to one department. It cuts across strategy, finance, operations, and culture.
A gap in leadership capacity
Despite widespread recognition of the challenge, many organisations are not equipped to respond at the pace required. Most have technical specialists who understand carbon accounting, lifecycle assessment, or ESG reporting. These skills are vital, but they do not guarantee transformation.
The gap is leadership. Boards often approve ambitious targets for emissions reductions or circularity. Middle managers are often aware of the need for change. Yet the translation of those targets into everyday decision-making falters. Teams operate in silos. Functions compete for resources. Short-term priorities overshadow long-term commitments. The result is a pattern of ambition without delivery.
Recruiting leaders from outside the organisation has proven difficult. The global pool of executives who combine sustainability expertise with business transformation experience is still limited, and competition for them is fierce. Many companies conclude that the only viable solution is to develop leaders internally. This requires equipping experienced managers with new skills, broadening their perspective, and giving them the confidence to drive change across functions.
Preparing leaders for transformation
This was the motivation that led Gutierrez to IMD’s Executive Master in Sustainable Business Transformation. “I initially looked for a sustainability program, but what I found is much deeper and more relevant,” he explains. “The business transformation component, in addition to sustainability, makes it unique and directly aligned with my future career aspirations.”
The business transformation component, in addition to sustainability, makes it unique and directly aligned with my future career aspirations.
The program was designed to meet the leadership gap head-on. Its modular structure allows executives to balance study with demanding professional roles. Digital modules build deep expertise in sustainability, while transformation modules focus on cross-functional skills such as strategy execution, stakeholder engagement, and organisational change. Electives provide flexibility to tailor the experience to specific career goals.
At the centre is a capstone project that requires participants to apply their learning to a real challenge. Some use the project to tackle pressing issues within their current organisation, such as decarbonising operations or redesigning a supply chain. Others work with new partners, providing consulting-style support to demonstrate impact in a different context. In both cases, the outcome is tangible evidence of leadership capacity in action.
Gutierrez values this practical orientation. “Academically, I am gaining far more than I expected. The faculty are outstanding, my classmates bring unique global perspectives, and the dedicated coaches are an unexpected but highly valuable element. Personally, the program has reignited my passion for purpose-driven business transformation.”
Why peer learning matters
Another distinctive element is the diversity of the participants. Executives join from industries as varied as finance, healthcare, manufacturing, and technology. Each brings a different lens on the sustainability challenge. For example, a healthcare executive might focus on supply chain transparency, while a manufacturing leader explores energy efficiency. The exchange of perspectives enriches the learning experience and highlights the universal relevance of sustainability.
For Gutierrez, this was reassuring. With more than two decades of industry experience, he initially wondered whether he might be among the oldest in the cohort. Instead, he found that his experience was an asset. Sustainability is a relatively new field. No one arrives as a complete expert. This creates a learning environment where contributions from different backgrounds are valued.
Implications for business and society
The implications extend beyond individual development. Companies with leaders who can connect sustainability with strategy will be better positioned to comply with regulation, secure investment, and attract talent. They will also be able to identify opportunities for innovation, from new business models to partnerships that create shared value.
Those without such leaders face growing risks. Failure to comply with regulation can close off markets. Weak sustainability performance can deter investors and lenders. Poor credibility on climate action can damage employer branding.
For society, the stakes are even higher. The transition to sustainable business is about more than competitiveness. It is about ensuring that economies remain viable within environmental limits while also addressing social expectations. Leaders who can guide this transition will shape not only the future of their organisations, but the resilience of communities and ecosystems.
The time to step up
The window for action is narrow. By 2026, CBAM enforcement will begin. By 2028, many of the new European directives will be fully operational. Stakeholders are already showing limited patience for incremental change.
Gutierrez captures this urgency clearly: “The world is at an inflection point where sustainability and transformation are no longer optional. Companies must rethink business models, embrace innovation, and deliver measurable impact. Leaders need the skills to bridge sustainability with strategy and execution.”
The transition will happen regardless of whether companies are ready. The pace and the outcome will depend on the leadership available.
The executives who step up now will be the ones who turn ambition into action, align purpose with profit, and deliver results that matter. For them, and for the companies they serve, the time to act is not tomorrow. It is now.
About the International Institute for Management Development (IMD)
The International Institute for Management Development (IMD) has been a pioneering force in developing leaders and organizations that contribute to a more prosperous, sustainable, and inclusive world for more than 75 years. Led by an expert and diverse faculty, with campuses in Lausanne and Singapore, a Management Development Hub in Shenzhen and an Innovation Hub in Cape Town, IMD strives to be the trusted learning partner of choice for ambitious individuals and organizations worldwide. Our executive education and degree programs are consistently ranked among the world’s best. Through our research, programs, and advisory work, we enable business leaders to find new and better solutions, challenging what is and inspiring what could be. To learn more, visit www.imd.org.
