Many Mittelstand companies in Germany are currently under pressure from two sides. On the one hand, external developments require fundamental adjustments. High energy prices, supply chain disruptions, geopolitical tensions, regulatory requirements and a shortage of skilled labour are just a few examples. On the other hand, the dynamics and complexity of these combined changes increase planning uncertainty, which further complicates necessary strategic adjustments.
This situation is not a temporary phenomenon. Rather, structural challenges are intensifying that are permanently reshaping companies’ room for manoeuvre. For the Mittelstand, this means that strategic decisions increasingly have to be made under uncertain conditions. Costs, supply chains and sales markets can only be assessed reliably over longer periods to a limited extent. In addition, there are structural weaknesses at the German business location, particularly in the areas of infrastructure and public-sector efficiency.
Location Weaknesses and Investment Restraint
Current surveys confirm that financial executives are viewing Germany as a business location with increasing scepticism. The Deloitte CFO Survey Autumn 2025, for example, finds that many companies perceive Germany as structurally weakened despite individual political initiatives. High energy prices, complex regulation, infrastructure deficits and shortages of skilled labour are negatively affecting investment decisions and, in some cases, leading to considerations or concrete plans to relocate operations abroad.
This assessment is consistent with the findings of the Mittelstand survey conducted by BVR and DZ BANK. The survey published in autumn 2025 shows that while many medium-sized companies recognise a significant need for transformation, they remain very cautious when it comes to investments in innovation, digitalisation and decarbonisation. Uncertainty about political and regulatory frameworks is frequently cited as a key barrier to investment.
At the same time, KfW Research points out that this investment restraint is problematic from a macroeconomic perspective. In its position paper “Managing Transformation, Strengthening Growth”, investments in transforming one’s own company are described as a prerequisite for long-term competitiveness, particularly in the industrially oriented Mittelstand.
Sustainable Transformation Beyond Reporting Obligations
Against this backdrop, sustainable transformation in the Mittelstand stalled in many places in 2025. On the one hand, pressure is increasing from customers, financing partners and regulators to provide transparency on sustainability issues and, in particular, to decarbonise CO₂-intensive processes and products. On the other hand, 2025 was also a year of considerable regulatory uncertainty, triggered above all by the months-long discussions and negotiations surrounding the so-called EU Omnibus packages.
The Sustainability Transformation Monitor 2025 shows that this political uncertainty, in the context of the partial relativisation of the EU Green Deal, slowed the pace of many transformation initiatives. At the same time, a growing number of larger medium-sized companies have integrated sustainability more firmly into their strategic decision-making and increasingly anchored it in corporate strategy and risk management.
It can be expected that sustainable transformation will not be at the top of the agenda for most medium-sized companies in 2026 either. At the same time, current trends suggest that sustainability will continue to become embedded in organisational structures and strategies—particularly where it has a measurable positive impact on business performance.
Typical Misalignments in Transformation Practice
In practice, three recurring patterns can be observed that run counter to effective sustainable transformation.
First, sustainability is often reduced to reporting. Data are collected and documented without being systematically integrated into operational or strategic decision-making.
Second, catalogues of measures emerge without clear prioritisation. Individual projects on energy efficiency, supply chains or digitalisation run in parallel without a coherent economic logic or discernible strategic sequencing.
Third, uncertainty regarding regulatory frameworks leads to decision paralysis. Concrete steps towards sustainable transformation are postponed in the hope of more stable political or economic conditions. Paradoxically, this delay increases costs and risks in the medium to long term.
A Structured Approach to Strategic Capability
Decision-making under high uncertainty has become the norm and should therefore be addressed consciously and proactively. Strategic capability does not arise from perfect forecasts, but from robust decision-making logics. For many medium-sized companies, a structured approach has proven effective—one that treats sustainable transformation as a manageable programme.
The starting point is a business-model-based analysis: which factors actually influence cost structures, risk exposure or market access? The aim is not a comprehensive analysis, but a data-informed assessment of strategic relevance.
Building on this, a clear economic impact logic is required. Measures should be evaluated according to the contribution they make to stabilising costs, reducing risks or opening up new markets. Especially under uncertain conditions, this linkage is crucial in order to legitimise investments internally and externally.
A realistic roadmap for the next twelve to twenty-four months translates these priorities into actionable steps. It provides orientation without creating a false sense of certainty. This is complemented by lean governance with a small number of meaningful indicators and clearly defined responsibilities.
For many medium-sized companies, a pragmatic reporting framework such as the VSME Standard can be helpful. Developed by EFRAG on behalf of the European Commission specifically for SMEs, it serves as an internal management tool while enabling transparency vis-à-vis banks and business partners, without the complexity of the more extensive ESRS standards applicable to CSRD-reporting companies.
Transformation as a Lasting Strategic Capability
Studies such as the IW Transformation Compass 2025 make clear that decarbonisation, digitalisation, demographic change and geopolitical realignment are acting simultaneously and on a permanent basis. Transformation no longer takes place in stable phases, but under conditions of persistent uncertainty.
Against this backdrop, success depends less on having the perfect strategy on paper than on the ability to steer transformation continuously. Sustainable transformation becomes a strength when it systematically links cost, risk and future viability and enables decisions to be made even with incomplete information. Companies should resist the reflex to seek salvation in solutions from an era of cheap fossil energy and stable geopolitical frameworks. While sustainable transformation may initially appear more costly and demanding than clinging to fossil energy and outdated technologies or business models, the earlier a company embarks on a structured transformation, the more future-proof it will become in the medium and long term.
Next Steps
Many Mittelstand companies are currently facing the question of how to approach a sustainable transformation without jeopardising day-to-day operations: Where should we start? Where should we continue? And how can the necessary resources be mobilised?
These strategic questions should be discussed systematically, with some distance from daily operations, in order to arrive at robust answers. This is often difficult when management teams are already fully absorbed by operational responsibilities. External support in taking a clear-eyed stocktake of the current situation, key risks and potential priorities can help to move the process forward.
If you are open to this option, you are welcome to arrange a non-binding initial conversation with me via the contact form.
In an earlier article, I already examined the close interplay between resilience and sustainable transformation in the Mittelstand. The article published in November 2025 complements the considerations presented here:
Business Model Under Pressure – How Mittelstand Companies Can Emerge Stronger From Uncertain Times