Climate And Environmental Governance: The business struggle on sustainability and the invisible hand of human bias

This article first appeared in Forum, The Edge Malaysia Weekly on November 24, 2025 - November 30, 2025

Across sectors and over recent years, increasingly sustainability has become part of every strategy presentation and annual report. Boards of directors have been signing on to net zero commitments, investors scrutinising environmental, social and governance (ESG) performance and consumers rewarding responsible brands. Yet, when it comes to decisive action on climate, progress appears to be falling short of ambition.

The sustainability paradox: Awareness doesn’t always lead to action

We have been witnessing pledges made — and postponed. Targets set — and quietly revised. It does not appear to be a lack of data, capital or capability. The true challenge perhaps lies elsewhere: in the way humans think and decide.

Businesses already know the risks, and scientists, insurers and economists have quantified them in painful detail. Climate disruptions are now made a culprit to affect everything from agricultural yield to supply chains, insurance premiums and consumer preferences, yet most organisations still treat sustainability as an initiative, not an operating principle.

Sustainability demands decisions that are long term, cross-functional and uncertain — conditions under which biases thrive. Even experienced executives fall back on habits of thought that prioritise the visible, immediate and familiar.

Our brains, shaped for short-term survival rather than long-term planetary stewardship, are prone to subtle distortions, known as cognitive biases. These mental shortcuts on the one hand help us simplify complex decisions but can also cloud judgment, especially on issues like climate change that have been unfolding for over a decade now, not days.

Understanding these biases makes leaders aware, as an important step toward designing decisions that account for human nature, rather than being blindsided by it.

1. Present bias: The tyranny of the quarter

Short-termism is one of corporate life’s most powerful gravitational pulls. Most incentive systems — from quarterly earnings to annual key performance indicators (KPIs) — reward the immediate. That makes climate action, whose benefits often unfold over a decade, a hard sell internally. An energy-intensive manufacturer may delay adopting renewable systems because the payback horizon exceeds its current planning cycle. A retailer may stick to low-cost packaging even when sustainable alternatives could yield long-term loyalty benefits.

In behavioural terms, this is present bias — our tendency to overvalue the “now”. To overcome it, even possibly incentives need to be redesigned: perhaps include three- to five-year sustainability outcomes with quarterly metrics to redesign executive rewards and growth plans, set near-term milestones visible through interim reporting and link immediate business value such as cost savings or risk mitigation to long-term climate goals.

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