Sustainability is no longer a corporate buzzword, nor has it ever been a fading trend. In today’s business world, it is and will continue to be serious business.
From increased regulatory pressures to rising insurance costs, business owners who fail to prioritize sustainability in their operations are facing financial exposure.
Here are five of the biggest financial risks in 2026 from ignoring sustainability, and how Hoosier executives can navigate away from those threats.
In the last decade, environmental regulations have increased dramatically on the federal, state and even global levels. The Indiana Department of Environmental Management (IDEM) has increased its focus on sustainability, providing resources for businesses to reduce environmental impact and detailing the risks of penalties for failure to follow the state laws. On a national level, the Securities and Exchange Commission (SEC) adopted rules to enhance climate disclosures for publicly traded companies, and Indiana businesses must comply with global standards for financial reporting, including the Task Force on Climate-related Financial Disclosures, now managed by the International Financial Reporting Standards Foundation.
To avoid costly fines or other penalties, businesses can prioritize adopting reporting standards and staying ahead of any changes.
Climate change brings with it financial implications, and insurers are factoring that into their policies. This is especially impactful for industries such as agriculture and manufacturing, which are prevalent sectors in Indiana. Business owners may find their insurance premiums increase or coverage reduced if they fail to demonstrate their efforts in sustainability.
Company owners can learn more about insurance and credit risks through the Indiana Department of Insurance. It is also wise to work with insurance providers to identify any climate risks and incorporate solutions into business operations.
Consumers have increasingly become more demanding for more responsible business practices in developing goods and services. Businesses that are not transparent about their own sustainability efforts, or practice greenwashing, are at risk of losing customer trust. In an article published by Deloitte, sustainability strategists warn business owners that “Ultimately, the greatest cost of inaction comes through loss of market share to competitors that are innovating and effectively incorporating sustainability into their business and product strategy.”
To boost credibility, Hoosier businesses can engage in sustainability practices that align with certificate programs and become involved with local sustainability nonprofit organizations such as the Hoosier Environmental Council.
Accurate and consistent environmental, social and governance (ESG) reporting has become a crucial factor for investors. Banks and investors rely on that data to determine whether to lend money or invest in projects. Poor or missing data could result in the company being perceived as a higher risk. If a company does not keep good track of its ESG data, it could lead to poor decision-making or missed future opportunities as well as reputational damage, fines, or even legal action.
Develop a strong data tracking system for things like electricity and water use, gas emissions and generated waste to ensure the company is being as transparent as possible.
Climate change is a major disruption to supply chains. In Indiana, where agriculture and manufacturing are dominant industries, those sectors can be especially vulnerable to things like extreme weather, which can disrupt supply chains affecting operations. Companies that do not have safeguards in place, like diversified suppliers and energy alternatives, could incur a financial loss.
Hoosier business owners can tap into the knowledge of the Indiana Sustainability and Resilience Conference to help establish more resilience and connect with other business leaders who have the same goal.
