As I have noted in prior posts, due to a political “backlash” against ESG, many companies have found it expedient to avoid talking about ESG altogether – a developing that has been referred to as “greenhushing.” Indeed, some academics have even suggested that it may be time to say “RIP” to ESG. But if the expression “ESG” is now verboten, how are we going to talk collectively about the various topics encompassed by the term “ESG”?
According to a January 10, 2024, front-page Wall Street Journal article entitled “The Latest Dirty Word in Corporate America: ESG” (here), as “ESG” has become the three letters that corporate officials dare not utter, they have found other ways to talk about “responsible business.” Meanwhile, corporate environmental and social responsibility efforts continue despite the apparent banishment of “ESG” as an expression. Moreover, as also discussed below, due to regulatory changes, the likelihood is that discussion of the concepts underlying what was referred to in past as “ESG” are only going to increase, regardless whether or not the term “ESG” is used.
As the Journal article notes, due to “investor backlash, political pressure, and legal threats,” business leaders are now “making a conscious effort to avoid the once widely used acronym for such initiatives.” ESG has become that which must not be named, sort of like Voldemort. Companies are “stripping ESG” from program titles, initiatives, and presentation headings. The key here seems to be that companies are not dropping what they had previously called their ESG initiatives; rather, companies are using different terms to describe them, focusing on “alternative ways to describe their efforts,” using such terms as “responsible business.”
The fact is, as a commentator quoted in the Journal article notes, “ESG is complicated.” The use of the term has become “divisive,” particularly given the campaigns of certain state officials to decry what they call “woke capitalism.” To be sure, the Journal reports, many companies “continue to follow sustainability commitments,” but they “are no longer talking about them as often publicly.”
The problem for the companies is that, if they have to avoid particular phraseology, how are they to refer to their ongoing efforts?
The Journal quotes various commentators as suggesting that companies should discuss their initiatives in “clear language,” using terms such as “our people” and “our natural resources.” One commentator suggest that businesses should adopt the phrase “responsible business,” on the theory that you can be anti-ESG but “it’s hard to be anti-responsibility.”
At one level, this is all very unfortunate, and yet another reflection of the way that in our polarized political environment, certain voices manage to scramble the dialog through massive efforts to suppress ideas and actions with which they disagree.
On the other hand, I have long said that the expression “ESG” itself is unfortunate, as it encompasses a host of disparate topics in a way that leaves many speakers using the expression talking about different things. It may not be altogether a bad thing if we retire the expression “ESG” – I have long thought that the overall dialog would be improved if instead of lumping a bunch of topics together into “ESG,” that we instead separated out the three pillars of Environmental, Social and Governance into separate topics for separate discussion.
In any event, it should be emphasized that what is happening is a change in terminology, not a wholesale abandonment of the principles and concerns formerly housed within the term “ESG.” As the Journal article makes clear, many companies remain committed to environmental and sustainability goals. And in that regard, it is probably worth noting that at a time when the climate data is becoming increasingly worrisome, nothing would be more unfortunate than if a small number of tinpot politicians managed to so impoverish the public dialog — simply to advance their own short term political interests — that we could not even talk about matters of potentially grave concern.
A January 10, 2024, survey report by the Littler Mendelson law firm underscores the point that even given the ESG backlash, many firms are continuing social responsibility efforts. The law firm surveyed over 300 corporate executives about their firms’ diversity, equity and inclusion efforts. The survey reports notes that “despite legal challenges and backlash toward corporate diversity programs, the survey finds most employers staying committed to, or even expanding, their efforts.”
In other words, corporate executives may find it expedient to avoid using the expression “ESG,” but the underlying environmental and social responsibility efforts are likely to continue, albeit perhaps under a different guise.
It is worth noting that regardless of the terminology, many companies, particularly publicly traded companies, increasingly are going to find, as a result of regulatory requirements, that they are required to discuss the constituent components of ESG, even if they no longer otherwise use the expression “ESG.” Recent disclosure requirements enacted by California and the EU (as discussed here and here, respectively) will require many companies (not just in California and not just in the EU) to discuss both the climate impacts of the companies’ operations and the impact of changing climate conditions on their operations and financial performance, among other things. Moreover, the SEC is likely to issue its final climate change disclosure guidelines some time in 2024.
The bottom line is that using the term “ESG” may now be ill-advised, but talking about the concerns behind “ESG” may become more important than ever, even if couched in terms of “responsible business.”