ESG is Under Fire: What Must be Saved?
ESG is under fire — politically, ideologically, and operationally. After more than a decade of encouraging companies to report and embed ESG practices throughout their organizations, backlash has intensified. While some critiques are valid, including claims of moral overreach and overly performative rhetoric, throwing out the entire ESG toolkit would be a mistake. Company-specific, data-driven analyses are necessary to thrive in this new economic order.
The Rise and Fall (?) of ESG
ESG was originally designed to help investors assess non-financial material factors, encompassed by environmental, social, and governance, that could have a financial impact on companies. ESG’s rise was fueled by increasing stakeholder demands for transparency, standardization, and mandatory reporting. It provided investors with a common language to identify how companies were addressing sustainability considerations, such as climate change and human rights (Sustainability Directory).
In the past two years, ESG has become a political target, both in North America and Europe.
In a confounding paradox, ESG is labelled both dangerously radical and deceptively performative.
BlackRock CEO Larry Fink admitted that certain terms have been “weaponized,” reflecting how polarized the conversation has become (Reuters). Some companies have pulled back and dropped targets, exited alliances like the Net-Zero Banking Alliance, and regulators, like the EU, are walking back the scope of certain rules (ESG Today, KPMG).
The Business Roundtable, an influential association of American CEOs, updated in 2019 its ‘Statement on the Purpose of a Corporation’, moving away from the previous principles of “shareholder primacy” to a “modern standard for corporate responsibility.” The CEOs committed, among other things, to invest in employees (and foster diversity and inclusion, dignity and respect), dealing fairly and ethically with suppliers, supporting communities, and protecting the environment. The Business Roundtable’s previous ESG-aligned commitments now appear undermined by a recent white paper they released in April 2025. In the report, the Business Roundtable criticized “environmental, social, and political” shareholder proposals for having “little to no connection to long-term shareholder value”(Business Roundtable). Illustrative of the changing attitudes, the third pillar of ESG, ‘governance’, has been replaced with ‘political’.
These shifting positions risk eroding public trust in business and leaving companies vulnerable to stakeholder scrutiny and unpredictable legal risks.
A Black woman is picking up from the trash documents labelled “2025 Net Zero Target”, “ESG”, “Diversity, Equity & Inclusion”
What to Leave Behind
We cannot ignore or dismiss the backlash. Some politicians have been elected on the promise of rolling back ESG policies and prioritization. It’s time to retire contested language. Instead of ‘ESG’, we should embrace established terms like ‘responsible business’, ‘sustainability’, or ‘responsible investment’.
We can also do without 200+ page sustainability reports. Data, especially aligned with industry-recognized standards like GRI, SASB, and IFRS S1 & S2 is, however, crucial. I spent years developing ESG metrics and supporting private equity firms on how to analyze them. Investors rely on standardized ESG data to benchmark performance, and other stakeholders — from ratings agencies to civil society — depend on credible, comparable data. Reports should be concise and impact-focused.
From a lawyer’s perspective, it is better to say less and ensure everything disclosed is defensible.
ESG teams siloed in marketing departments rarely drive cross-functional change. And ambitious carbon-neutrality targets, announced without operational buy-in or credible plans, damage trust when they inevitably fail.
Let’s call time on buzzwords, vague promises, and disconnect from core strategy.
What to Save: Strategic, Data-Driven Tools
Far from empty rhetoric, ESG tools are necessary to keep up with global changes. They measure real and significant business risks and opportunities.
Tools like materiality assessments are invaluable and closely linked to established business practices, such as enterprise risk management (ERM). When conducted correctly, ESG materiality assessments leverage existing ERM frameworks to assess and prioritize ESG risks and opportunities. Conversely, incorporating the results of materiality assessments into ERM enables boards and executives to better understand ESG factors’ impact on the business and develop strategies to address them directly (Thomson Reuters).
Climate change is an environmental risk that is at the core of ESG assessments. Climate change exposes companies to “both systemic risks arising from lower global economic growth and individual physical risks threatening supply chains and operations” (World Economic Forum). More tangibly, damages caused by climate change are set to cost $38 trillion per year by 2049 (Forbes). Green economy opportunities are valued to reach $11 trillion globally by 2040 (BCG). These sums are not trivial. It is therefore imperative that businesses, big and small, understand and plan for how climate change will impact their business, their customers, their suppliers, and their employees. Data-driven climate risk assessments identify the specific physical and transition risks and opportunities individual companies face (Ramboll).
Other issues like fair and living wages and human rights were amplified thanks to ESG assessments. These will continue to present real human, economic, and reputational costs for companies in the years to come.
Overall, research-based, data-driven ESG tools unlock new revenue sources, reduce costs, and identify medium-term concerns. The path forward isn’t retreat. It’s a strategic reset.
Curious how to preserve value while resetting your ESG approach? Let’s talk.
