The tale of ESG in corporate America is one of an extraordinary rise and an almost-as-extraordinary fall.
Less than a decade ago, barely anyone outside the impact investing world used the term ESG. Today, the acronym is everywhere in corporate America. But almost as quickly as it came, ESG is bound to disappear again and be replaced by its constituent parts, having become politicized and polarized.
That is my conclusion from this week’s Fortune Impact Initiative call, which gathered over 40 ESG executives under the Chatham House rule. Few executives defended continuing to use the term. But rather than bury the acronym’s themes—environmental, social, and governance issues—most said they are doubling down on them in practice.
Put another way: Nothing is changing about our plans, those on our call agreed. But they are increasingly avoiding using the term “ESG” per se because it’s become divisive and distracting.
“We don’t talk about ‘ESG,’ but about the specific actions we are taking,” one participant said, a sentiment echoed throughout the discussion. “Eliminating waste, reducing water consumption,…those are all good business decisions,” another participant said. “There is no arguing about that. But we are taking a step back to think about what [the term] ‘ESG’ was meant to do.”
It doesn’t take a Ph.D. in management to understand the reluctance, even among those dedicated to these initiatives, to continue embracing the term. “The politicization of this topic has been quite extraordinary,” as one participant put it. Everyone from presidential candidates to conspiracy theorists to activists with a “particular axe to grind” are now making the term a no-go even for its greatest advocates.
As a result, ESG has become a bit like Bruno in the Disney movie Encanto. We don’t talk about it, no, no. But it is still with us, lurking behind each spreadsheet, permeating everything we do.
As one participant said, semantic complexities have created the “longest identity crisis ever experienced” among the executives in charge of this work. Before ESG, many of them looked after corporate social responsibility (CSR), which also fell out of favor. The group generally agreed that the best course of action is to stay pragmatic and focused on the business case for environmental, social, and governance initiatives.
“We talk about the specific actions we are taking,” an executive shared. “We stay rooted in materiality, what we’re trying to achieve, and then talk about those facts.”
They also try to avoid “trip wires” like cultural issues around sexual orientation, activists “harnessing the ESG apparatus to advance their cause,” and the energy transition.
Fortune CEO Alan Murray, who moderated the discussion, noted, “Those are big wires. It’s hard to cross the [ESG] field without tripping over them.” And it points to another logical conclusion of the ESG debate: Whatever you do, and whichever language you use, “you’re going to alienate some people,” as one PR executive said.
For some, that means wrangling over using the term ESG—or other hot-button terms, like “inclusion” or “climate action”—is not worth it. “There are many people that just don’t want to be held accountable,” as one participant put it. “The opposition will simply pivot.”
But for most executives, the die is cast on the acronym ESG, and there’s no turning back. And not just in corporate America. As an executive at a Page Society event I attended in Brussels this week said, “The topic of ESG has become a lightning rod.”
It all leads to a rather odd conclusion: ESG is dead. Long live E, S, and G.
More news below.
Peter Vanham
Executive Editor, Fortune
peter.vanham@fortune.com
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