State of Sustainability Podcast

Solo Episode: The Iran War and Its Impact on Sustainability

SAIF: Welcome back to another episode of the State of Sustainability. I'm your host Saif Hamid, founder and CEO of Altruistiq.

Today we're going to talk about the Iran War and its impact on the sustainability environment. But before we get into that, I'd just like to mention that we're hosting the State of Sustainability Summit in Chicago on the 15th of April. If you'd love to meet us in person, have a chat, and tell me what you like and don't like about the podcast, please drop me a note at saif@altruistiq.com — my email will be in the show notes. We would love to see you in person on the 15th of April in Chicago.

In the meantime, this episode is going to cover the four big themes we see coming out of the Iran War that are relevant and consequential for every sustainability team, particularly across the global consumer space. We'll also share some suggested approaches for how to navigate this and make sure your sustainability strategy safely navigates its way through the Strait of Hormuz.

We would be remiss not to talk about the Iran War and its impact on the state of sustainability. This is the main event in global markets right now — it seems everyone is talking about this and AI. We've covered AI; let's talk about the war.

One of the commitments we've made on this podcast is to always take the big picture — not just to talk about software, which is our bread and butter, but to address what actually impacts your careers, your lives, and your daily work as sustainability professionals.

This is also a little personal for me. About a hundred years ago, my ancestors made the migration from Shiraz and Isfahan in Iran to Kolkata — what is now India — and from there eventually to Pakistan. So there's a small piece of Iran in me, and I'm genuinely sympathetic to what the people of that country are going through right now. Whatever one thinks of the geopolitics, it is a massive human tragedy.

But here we're going to talk about what this means for your businesses, the sustainability environment, and the companies you work with. There are four impacts I consider particularly consequential, and we'll work through each one.

Theme 1: Commodity Prices

The first and most immediate impact is oil prices. The Gulf remains a major source of global crude, fossil fuels, and petrochemicals. The Iran War is inflationary for oil prices and all their derivatives.

My view is that this will, net-net, accelerate the sustainability transition on two fronts.

First, as Brent crude rises significantly, the business case for renewable energy improves. Fossil fuels becoming more expensive makes renewables comparatively cheaper — onsite generation, in particular, starts to look more attractive. We've already seen this dynamic in countries like Pakistan, where the high cost of heavy furnace oil and grid-based fossil fuel power has driven a dramatic rollout of solar. I expect that transition to accelerate and to have an analogous effect in Europe.

Second, derivatives of oil — most notably plastic packaging — are likely to become more expensive. As virgin plastic raw material costs rise, recycled content becomes more cost-competitive, and alternative substrates like pulp and paper also start to look more attractive relative to virgin plastic. For sustainability teams, the business cases for transitioning away from virgin plastic and fossil fuel energy are both moving in a more favourable direction.

The second major commodity to watch is fertilizer inputs, specifically ammonia and phosphate — the two key inputs in the most common fertilizers used in food production. Egypt and Jordan are major sources of phosphate; Qatar and other Gulf countries are major sources of ammonia and natural gas. My analysis suggests that urea prices jumped approximately 32% in the week following the war's escalation.

For branded food and FMCG companies, the direct hit may not be as large as it sounds. Fertilizer typically represents around 25% of input costs at the farm level, but by the time you layer on logistics, processing, packaging, marketing, and distribution, that fertilizer component shrinks substantially as a share of the final product price. Consumer-facing price impacts may be more modest than the headlines suggest.

However, procurement teams will feel it — and farmers will feel it most directly. For anyone whose input costs are 25% fertilizer, often financed through debt from intermediaries, this is a real and immediate pressure.

From a sustainability transition perspective, this is actually the moment to revisit your marginal abatement cost analysis. Any initiative that reduces fertilizer dependency — biofertilizers, soil conditioners, composting, precision application, green ammonia — is now meaningfully more cost-competitive. Many farms overfertilize out of risk aversion and often poor advice, so there is genuine low-hanging fruit here. The caution is that farmers are also going to be harder to engage right now. They have a great deal of noise coming their way and limited margin space to absorb cost shocks, so sustainability programme conversations may need to be timed carefully.

To summarise the commodity theme: this is a genuinely good moment to revisit your initiative stack and refresh your return-on-investment assumptions. Shifts to renewable energy, away from virgin plastic, towards fertilizer alternatives — all of these are likely moving into the money right now.

Theme 2: Financial Markets

Anyone who follows the global stock markets will have noticed that virtually every index has taken a hit. That matters for sustainability teams in a specific way.

A share price is driven by two things: earnings and market expectations. With global markets in decline, expectation-based valuation has compressed. The only lever companies can directly control to defend their share price is earnings — and the fastest way to protect earnings is to cut costs.

Unfortunately, this means sustainability teams should expect increased pressure on their budgets. I know that's hard to hear, but I think it's realistic to flag it.

There is a second dimension to this. The Iran War has significantly increased market volatility — tracked by the VIX, colloquially known as the fear index. At the time of recording, the VIX sits somewhere between 24 and 27. That's not the highest it's been — it was higher during COVID — but it's elevated. In a high-VIX environment, the rational corporate response is to de-risk the business and build cash. With share prices depressed, you can't raise cash through equity; the only available mechanism is cost reduction.

The financial markets theme therefore points in the same direction as the commodity theme for sustainability teams: expect more internal scrutiny, more pressure to justify investment, and more need to speak the language of financial returns.

Theme 3: Emerging Markets and Sovereign Risk

The third theme is the impact on emerging markets, which get hit on two fronts simultaneously.

First, most emerging markets trade in dollars. In a crisis, there is a classic flight to safety — investors buy dollars, the dollar strengthens, and this makes it immediately more expensive for countries like Vietnam, Bangladesh, Egypt, and Pakistan to conduct trade. They need to buy more of their own currency to acquire the dollars required to purchase imports.

Second, two of the things they are most dependent on importing — energy and petrochemicals — have just become significantly more expensive. Most emerging markets are net importers of these goods, which they need to keep their energy systems running and their manufacturing and agriculture sectors operational.

The combination of a stronger dollar and more expensive commodities puts severe pressure on foreign exchange reserves. To give one concrete example: Pakistan at the time of this recording holds approximately 30 days of foreign exchange reserves. If the war continues for 30 days, the country effectively becomes insolvent from a trade perspective. And Pakistan is far from unique — most of your trade partners across the Global South are facing some version of this equation.

When a country can no longer afford its imports, supply chains break. Countries like Vietnam, which import cotton for textile value-addition before exporting finished goods, or markets that import fertilizer to grow the grain they export — all of these nodes in the global supply chain come under strain.

Procurement teams will respond to this by seeking alternative sources. Initially they will give the situation a few months to stabilise. But if the conflict proves protracted — and most forecasts do not suggest a quick resolution — they will start making longer-term sourcing shifts. Those shifts will restructure your Scope 3 emissions footprint in ways that are difficult to predict and that your current models are unlikely to have anticipated.

In some cases, Scope 3 may actually improve, because procurement teams pivot to more expensive but more decarbonised geographies. In other cases, it may worsen, as longer and more circuitous supply routes are used to avoid disrupted corridors like the Strait of Hormuz. Either way, expect your Scope 3 map to look meaningfully different in twelve months.

Theme 4: Consumer Buying Habits

The fourth theme is the hardest to predict in precise terms, but the direction of travel is fairly clear. The commodity price increases, financial market pressure, and emerging market disruption described above will all, in aggregate, squeeze the consumer wallet.

Consumers will see their savings and investment portfolios decline as equity markets fall. They will face higher energy and fuel costs. Discretionary income will shrink.

For sustainability teams, this has two implications. The first is the obvious headwind: it becomes harder to justify sustainability-related premiums or to pitch investment in new programmes when budget pressure is everywhere.

The second is an opportunity to reframe. Disruption always creates space to rebuild your narrative. You can choose to treat this as another headwind — another reason sustainability looks unaffordable. Or you can treat it as an opportunity to sharpen and articulate a more compelling value proposition.

In that latter framing, there are two directions worth considering. One is doubling down on the higher-income consumer segment, which tends to carry stronger sustainability preferences and has more resilience to economic pressure. The other is reinforcing the "guilt-free purchase" proposition for more mass-market impulse categories. When discretionary income is tight, the psychological cost of a purchase that feels bad — unhealthy, environmentally harmful — weighs more heavily. If your product can credibly alleviate that guilt, the value of that positioning increases at exactly the moment consumers feel most squeezed.

Pulling It Together

These four themes — commodity price volatility, financial market pressure, emerging market sovereign risk, and shifting consumer behaviour — all point to the same practical imperative for sustainability teams: revisit the plan.

The cost of every initiative in your pipeline has shifted. Some have become cheaper; some have become more expensive. We've done a piece of analysis at Altruistiq identifying what we think are the five initiatives that have moved most into the money and the five that have moved most out of it — you can find the link in the show notes.

The framework we used was a simple two-by-two: initiatives ranked by their emissions impact on one axis, and by how much their economics have improved or deteriorated on the other. Initiatives that were always high-impact and have now become significantly cheaper should move up your priority stack immediately. Initiatives that were meaningful but have just become harder to finance may need to be revisited before you take them to your finance team.

On the question of how to do this analysis: I have spent three years trying to sell marginal abatement cost curves to clients as a McKinsey consultant and failed almost every time, so I'll spare you the full MAC curve prescription. A well-structured Excel spreadsheet with initiatives, their abatement impact, and their cost per tonne of abatement will get you most of the way there without overcomplicating things.

One broader observation: we are increasingly seeing businesses build multiple scenario-based glide paths for their decarbonisation targets. This started because every time SBTi guidance changed, or a major business event occurred, internal stakeholders would ask: "How does our pathway look now? Is the scenario still valid?" Teams would have to go back and remodel everything from scratch. What we're seeing now is businesses getting ahead of this by building agile initiative libraries and scenario tools that can be updated as conditions change.

I would encourage every sustainability team — whether you use Altruistiq or not — to invest in that kind of agility. The world is not going to become less volatile. In the wake of a macroeconomic event of this magnitude, the ability to rapidly refresh your glide paths and reprioritise your initiative stack is not a nice-to-have; it's table stakes.

That's our episode on the Iran War and its implications for sustainability. I hope you found it useful — or at least worth writing to me about, even if you disagree with my analysis. The link to our impact assessment will be in the show notes.

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