Is ESG dead? And if so, who killed it?
ESG has become increasingly politicised. Has it reached the end of the line? Asks Neil MacLeod
You wouldn’t be a fool for thinking that ESG might have had its day. Negativity surrounding the acronym (which stands for Environment, Social and Governance) has been growing – one recent headline in a popular broadsheet even declared “ESG is dead – and good riddance”. Times really have changed since it was introduced as a buzzword for industry some 20 years ago.
Why? Engaging in ESG can complicate things for businesses: as scrutiny around sustainability claims increases, companies are increasingly tempted to stay quiet rather than risk putting themselves in the firing line. After all, why get caught up in what has become a highly politicised, left-versus-right battle of ideals and beliefs?
The rise of ESG
It’s clear ESG has been on a media rollercoaster in the past five years. This is evident in the sharp increase in coverage of the term across major business titles – like CityAM, the Financial Times and the Wall Street Journal.
But it’s not just the volume of coverage that’s changing – online analysis tools show that sentiment has taken a decidedly negative turn. Negative ESG stories rose from virtually zero in July 2019 to a substantial proportion of total coverage by 2022.
The trend isn’t limited to the UK. The Wall Street Journal, with its global readership of 36m, has seen a steep rise in both ESG coverage and negative sentiment. Since 2004, it has published 1,651 ESG-related stories, with an increasingly negative slant.
That said, you don’t need data to see this. Diving into the pages of said publications will show the shift in tone very clearly.
Shifting landscapes
Several factors have contributed to this transformation. Following the war in Ukraine and Covid, economic headwinds have forced businesses to tighten their belts, often at the expense of sustainability initiatives.
Geopolitical tensions have further muddied the waters. In the United States, there’s clearly a Republican move against ESG, with Texas implementing anti-ESG legislation turning sustainability into a political football. This has sparked broader debates about the role of ESG in investment decisions and corporate governance.
The politicisation of ESG is evident in the media coverage, with a clear left-versus-right divide emerging. A study compiled by the PR firm for which I work, The PHA Group, shows right-leaning publications like The Telegraph and The Wall Street Journal taking a more aggressive anti-ESG stance compared to their left-leaning counterparts. This polarisation has transformed ESG from a corporate strategy into a battleground for ideological conflicts.
Not dead yet
But let’s not write ESG’s obituary yet. Despite the media’s growing scepticism, ESG is far from dead – instead, arguably, it’s evolving. The increased security, although challenging, is pushing businesses to adopt more impactful ESG practices. This is objectively better for maximising impact in the long term.
Businesses should not be terrified into silence. But they must be prepared for pushback, to accept the role of the media in scrutinising best practice. With major news publications taking an aggressive stance, companies must be ready to defend their ESG initiatives with hard data, genuine motivations and tangible results.
In this climate, authenticity is king. In a world where ‘greenwashing’ is the media’s favourite buzzword, genuine commitment to ESG principles will separate the wheat from the chaff. Businesses that cling to outdated practices risk being left behind in both the boardroom and the headlines.
Looking forwards
Scrutiny should not be confused with failure. Instead, it presents businesses with a unique opportunity to stand out from the crowd.
We’ve also seen compelling evidence that ESG is still seen as important. Norway’s Sovereign Wealth Fund recently urged nations to stick to ESG reporting standards, while UK regulators like the Federation of Communication Services and Advertising Standards Authority are cracking down on greenwashing claims.
As the media continues to dissect ESG, the businesses embracing its evolution will shape the future, while those who resist it risk their own irrelevance. The stakes are high – but so are the rewards.
Neil McLeod is divisional managing director of corporate at The PHA Group