Business Resilience

How to Navigate Geopolitical Uncertainty? — A Detailed Summary of the United Nations Global Compact – Sustainability Trends Watch Panel Discussion “Business Resilience Under Threat: Navigating Geopolitics in an Era of Uncertainty”

Source: United Nations Global Compact – Sustainability Trends Watch, „Business Resilience Under Threat: Navigating Geopolitics in an Era of Uncertainty” című panelbeszélgetés.

Target audience: Our international outlook articles are primarily intended to provide useful insights for corporate decision-makers with particular exposure to exports and imports, as we seek to zoom in on the relationship between sustainability and geopolitical trends and risks.

The topic of the first Sustainability Trends Watch series of this year by the United Nations Global Compact (UNGC) was the relationship between geopolitics and sustainability strategies. As the organizers emphasized, the purpose of the discussion was not to repeat the daily news cycle, but to explore the trends underlying decision-making and to examine how resilient organizations can maintain a coherent sustainability strategy even when the geopolitical landscape beneath them is constantly shifting.

The panel featured Casey Maggard, Managing Director of the Geopolitics Center at Boston Consulting Group (BCG), who provided a comprehensive overview of the current situation, followed by practical insights from the sustainability leaders of two global corporations: Garrett Quinn of Smurfit WestRock and Dr. James Adenuga of Dangote Industries. The discussion was moderated by Michelle Breslauer, Head of Leadership and Policy at the UN Global Compact, following opening remarks by Program Director Tonilyn Lim.

A New Era of Geopolitical Uncertainty

The BCG Geopolitics Center — established only two years ago, in 2024, with the aim of separating “signal from noise” — conducted its annual survey for the third time this year, asking 175 global companies how geopolitics is affecting them. The result: more than 80% of companies perceive themselves as significantly exposed, rising to 93% among companies with revenues exceeding USD 20 billion.

The companies participating in the survey identified trade, critical industries, and conflicts as the three most important areas of concern — consistently across all regions examined.

Trade and FDI: A More Resilient System Than Expected

In 2025, U.S. trade policy accelerated dramatically: tariffs increased sixfold and affected 60% of goods. Nevertheless, the global trade collapse predicted by many did not materialize. After all, 88% of global trade does not directly involve the United States, and the widely anticipated “tit-for-tat” retaliation also failed to materialize to the extent expected. Although the WTO has weakened, 70% of global trade continues to operate under its rules.

BCG’s annually updated ten-year trade forecasting model outlined four possible scenarios:

1. Self-sufficiency – widespread protectionism, tariffs, export restrictions, and inward-looking countries
2. Return to rules-based trade – easing tensions, declining tariffs, and the application of the most-favoured-nation principle
3. Regional fortresses – a strengthened and renegotiated USMCA, deeper European integration, and regional agreements in Asia
4. A multinodal trade mosaic – this emerged as the most likely scenario: the United States and China operate as separate hubs, each pursuing their own domestic priorities, alongside a group of rules-based, free-trade-oriented “plurilateralist” countries deepening trade relations with one another, while BRICS countries strengthen trade among themselves

According to BCG’s modelling, in this scenario global trade would remain resilient overall, growing by 2.5% annually — slightly above global GDP growth — while its direction and structure would change significantly. The model highlights a further decline in U.S.–China trade, stronger trade among rules-based economies, and the continued growth of South–South trade, which has already been increasing for several years. BCG also pointed out that, alongside trade in goods, trade in services is becoming increasingly important, although this area often receives less attention.

Critical Industries: The Rise of Economic Statecraft

The category of “critical industries” is driven by the rapid increase in economic statecraft: between 2016 and 2025, the number of interventionist, economic-statecraft measures in the United States increased by 150%. In the EU and the United Kingdom, 55% of such measures are now explicitly justified on national security grounds, and they are highly concentrated: approximately 80% affect just ten industries.

BCG’s analysis identified the sectors scoring highly along both dimensions — strategic importance and supply chain vulnerability — including batteries, critical raw materials, biopharmaceuticals, aviation, and semiconductors. These sectors are important not only in their own right, but also because they have upstream and downstream effects on numerous other industries across the supply chain, making them particularly important to monitor.

Conflicts: The Impact of the Middle East and the Strait of Hormuz

The conflict in the Middle East and disruptions to traffic through the Strait of Hormuz illustrate how closely interconnected these risks are. The sectors initially affected were shipping and energy — particularly oil and gas — but the impacts quickly spread to aviation as well: 20% of global air cargo and approximately 450 million passengers annually pass through the Gulf region. The effects also spilled over into other sectors, including metals — nearly one-quarter of globally traded alumina originates in the Middle East — chemicals, particularly fertilizers, and even helium required for semiconductor manufacturing.

The impact is highly differentiated geographically: 20% of Pakistan’s imports and 12% of India’s imports pass through the Strait of Hormuz. For China, the proportion is smaller, at 5%, but still significant in absolute volume. BCG emphasized that the Strait of Hormuz is not the only global “chokepoint” — there are other hubs handling larger volumes — but it is particularly critical from an oil and gas perspective.

BCG also presented a model showing the steps through which “normal” operations may be restored following such a disruption — although this will most likely result in a new equilibrium that differs from the previous one. This requires the restoration, inspection, and restarting of infrastructure; the restoration of transportation routes and flows of goods; and the re-establishment of market conditions — including capital, labour, and insurance — that enable corporate investment. Overall, it takes considerable time for the system to return to a stable state.

The Five Elements of “Geopolitical Muscle”

One of the most striking findings of BCG’s research is that while 80–90% of companies are aware that geopolitics affects their business, only 15% systematically integrate it into decision-making.

Based on research conducted jointly with the World Economic Forum and IMD, BCG identified five building blocks that can help organizations develop genuine “geopolitical muscle”:

1. Mandate – defining clear roles and responsibilities for geopolitical issues within the organization
2. “Radar and sonar” – having the appropriate sources and tools to detect and synthesize relevant signals
3. Operating model – establishing clear organizational embedding: where the function sits within the organization and which reporting lines it belongs to
4. The right expertise – a team capable of interpreting incoming data and acting upon it
5. Integration into business decisions – ensuring that geopolitical analysis moves beyond the broader narrative to its concrete impact on the income statement and balance sheet

Corporate Practice: Sustainability as Resilience

Smurfit WestRock: The Role of Governance, Values and Stakeholders

Garrett Quinn, Head of Sustainability, Brand and Communications at Smurfit WestRock — the world’s largest paper-based packaging manufacturer — explained that the company has voluntarily published sustainability reports since 2007, while corporate governance has always placed strong emphasis on both short- and long-term risk management. Although the term “sustainability” has fallen out of fashion in some markets — as reflected, for example, in experiences at New York Climate Week — and the term “resilience” is increasingly being used instead, he considers this largely a semantic issue. The key point is that this is simply good business practice.

The company’s operations are driven primarily by stakeholder expectations — especially those of customers — with varying levels of intensity across markets: in some markets, these expectations are a basic requirement, while in others they are more of a “nice to have.” Smurfit WestRock is listed on the New York Stock Exchange and is a member of the S&P 500, and its investors — not only those in Europe — increasingly expect transparent management of social and environmental risks. According to Garrett Quinn, geopolitical noise should be treated as important context, but it does not justify changing the strategy. Sustainability, after all, simply contributes to profitability in nine out of ten cases.

Regarding the regulatory environment, Garrett Quinn highlighted that anyone subject to CSRD is likely to get “a nervous tic” when thinking about the past 12–24 months. While Europe has been trying to strike a balance between competitiveness and sustainability since the Draghi Report at the end of 2024, many have questioned the actual added value of compliance-related burdens. At the same time, certain SEC requirements in the United States appear to be easing. However, investor and customer expectations have not declined as a result; on the contrary, they are explicitly asking companies not to allow themselves to be distracted by short-term regulatory noise.

Looking ahead, Garrett Quinn highlighted two key trends:

• The strengthening of the business case: sustainability plans increasingly need to be translated into financially tangible business cases. For example, climate scenario analysis — originally undertaken in response to TCFD recommendations — has in practice also helped the company negotiate insurance premiums.
• The growing importance of nature: because paper manufacturing requires water and healthy, sustainably managed forests, the company aims to report in accordance with the recommendations of the TNFD (Taskforce on Nature-related Financial Disclosures) in its 2026 report, within a unified framework alongside its previous TCFD reporting and future ISRS S2 requirements.

A key insight is that at Dangote, sustainability and ESG considerations have by now become not consequences of operational resilience, but prerequisites for it. Energy security, supply chain diversification, local sourcing, and resource reallocation are all strategic responses to geopolitical uncertainty. Localization and the pursuit of self-sufficiency are not reactive measures, but proactive preparations for potential future risks. This forces the company to think long term even while managing short-term crises.

Dr. Adenuga shared two further concrete examples of how a resilience strategy can become a sustainability advantage:

• Transportation: Dangote operates the world’s largest single-train oil refinery, which significantly reduces the need to transport crude oil and refined products. Although some crude oil is still sourced overseas, processing takes place locally. What was originally a resilience-driven decision has now also generated a demonstrable sustainability benefit through emissions reductions.
• Circularity: circular solutions originally introduced for environmental reasons have now become tangible resource-efficiency advantages, which are also valued by investors and lenders.

From a regulatory perspective, Dr. Adenuga highlighted the forthcoming introduction of IFRS S1/S2 standards as global standards in 2028, which will increasingly treat sustainability as a financial issue rather than merely a standalone ESG topic. At the same time, he emphasized that genuinely responsible corporate conduct goes beyond mere compliance. Responsible investors and lenders are also increasingly expecting HSSE and sustainability practices to comply with international standards such as the IFC Performance Standards and the Equator Principles. While this was previously a less prominent consideration, it has now become an increasingly important requirement.

What Should We Take Away?

The panel concluded with three key messages:

• Geopolitics must be treated as a strategic decision-making factor, not merely as a compliance risk.
• Addressing geopolitical and sustainability challenges requires genuine cross-functional integration — involving strategy, capital allocation, and supply chains alike.
• Mapping sectoral vulnerabilities, trade chokepoints, and conflicts is now a basic requirement, rather than an optional addition to a sustainability strategy.

Mandy Fertetics, Managing Director of Alternate, confirmed that similar trends and phenomena can also be observed in the Hungarian market.

“Sustainability and ESG have not only fallen out of fashion, but have also become ambiguous in meaning. Due to pressures related to legal compliance and statutory reporting, the attention and resources of many organizations have shifted away from aligning sustainability with the business model. It is telling that sustainability managers spend 70–90% of their working time reporting, refining data in Excel, and completing questionnaires, instead of encouraging and facilitating the competencies, creativity, courage, and collaboration required for transformation.”

She added that although CSRD, as well as ESG legislation adopted in Hungary and other countries in preparation for the CSDDD, encourages companies to identify and manage negative sustainability impacts and risks more consciously across the entire supply chain, these risk management processes still seem to remain siloed and treated merely as another “reporting” task to tick off. The material topics and materiality matrices included in sustainability reports are not reflected in investor communications or in the risk management sections of financial reporting, and even less so in targets and resource allocation. Yet.

“Alternate is very confident that reporting will increasingly become an organizational development tool for more and more companies, and that, combined with genuine — rather than merely window-dressing — stakeholder dialogue and engagement strategies, this can lead to truly sustainable business models.”

Geopolitical risks should not be considered only as part of the risk assessment of global corporations and multinationals. For many companies operating in Hungary, the dependencies within their supplier networks or customer base are, in fact, geopolitical issues — ones that may affect them indirectly, but significantly. It is therefore worth examining these dependencies. Natural disasters, resource availability, water exposure, and the state of biodiversity are just a few of the relevant considerations, but numerous social and business ethics-related factors can also be identified.

To what extent does your materiality assessment incorporate the findings, recommendations, and lessons learned from geopolitical analyses?