Businesses around the world are standing at the brink of transformation as they approach 2025, with various trends and risks shaping their future operations. According to insights from faculty at INSEAD, one of the world's leading business schools, factors like climate change, geopolitical crises, and income inequality have emerged as significant threats, making it imperative for companies to adapt and evolve.
A report by the Edelman Trust Barometer shows public sentiment favoring businesses as the most capable institution to solve pressing societal issues. Notably, respondents viewed businesses as more competent and ethical compared to governments and non-governmental organizations. Despite this trust, the survey found a “crisis of grievance” with many believing businesses are not doing enough to tackle affordability, climate change, misinformation, and discrimination.
Foremost among these issues is climate change, highlighted by INSEAD faculty members as the primary societal challenge facing businesses today. Approximately 50 percent of the faculty identified climate change as the issue businesses should address. The World Economic Forum (WEF), through its Global Risks Report, echoes these concerns, citing rapid increases in climate risks and extreme weather events across the globe.
During the last year, significant weather events, including hurricanes and heatwaves, underscored the pressing reality of climate impacts, particularly on lower-income countries. Johan Rockström, the director of the Potsdam Institute, noted at the recent World Economic Forum Annual Meeting 2025, the potential for substantial GDP losses driven by climate-induced productivity declines.
According to the WEF report, the immediate and looming consequences of extreme weather are alarming, with predictions of biodiversity loss and resource shortages becoming increasingly prevalent. This sets the stage for 2025, where businesses must take decisive actions to counter climate threats or risk dire financial repercussions and reputational damage.
Next, geopolitical crises have raised alarm bells within business circles. The INSEAD faculty identified political instability and the shift toward protectionist policies as considerable risks. A report from the Eurasia Group suggests the likelihood of conflict is currently higher than ever, with rising tensions potentially impacting global trade and cooperation efforts.
The third major concern highlighted is income and wealth inequality, viewed differently across various demographics. While many see potential for businesses to influence positive change, only 12 percent regard it as the leading threat. The Edelman Trust Barometer indicates vast differences in trust levels between rich and poor individuals, underscoring societal polarization.
Several countries are still grappling with the aftereffects of the COVID-19 pandemic, with skyrocketing food inflation piling pressure on the poor and increasing employment challenges. This financial strain can escalate societal unrest and push inequality to the forefront of business agendas. Businesses are urged to recognize these dynamics as they craft their corporate social responsibility strategies.
Social stability, too, plays a pivotal role in the business world. INSEAD faculty cited it as both high potential for improvement and as the second-highest threat for 2025. The spread of misinformation, particularly through social media platforms, creates divisive narratives, which can lead to significant disruptions for brands and services. The Edelman survey revealed troubling sentiments, with many believing various leaders, including business figures, mislead the public.
Lastly, faculty addressed economic instability and inflation concerns, ranking it among the top business risks. Despite projections of declining global inflation rates, uncertainties due to government policies and international trade conflicts could create ripples throughout global markets. The United Nations noted uneven growth trends across developing nations, casting doubt on the economic prospects for many businesses operating there.
While there is cautious optimism about future economic conditions, businesses need to remain vigilant and adaptable. Embracing technological advancements and integrating sustainability can be seen as strategic avenues—first-time homebuyers and the affordable housing market may witness shifts as companies cater to changing consumer demands—all these factors indicate a universe of new opportunities and challenges.
Understanding the interplay of these phenomena, businesses must formulate strategic responses well-suited for unforeseen challenges. Hence, as they enter 2025, the clarity of risks and awareness of the challenges will dictate how organizations formulate their operations, focusing not just on profit but also on purpose-driven initiatives.