Why ESG continues to grow despite political resistance
In recent years, ESG principles have become a defining part of corporate strategy, reshaping how businesses operate and investors allocate capital. Despite political changes in some countries that downplay or ignore climate issues, ESG remains a steady and growing force in business. This article explains why ESG continues to thrive despite political opposition and how its integration into business practices is becoming more difficult to reverse.
The rise of ESG in corporate strategy
ESG refers to the three central factors used to measure the sustainability and social impact of a company or an investment. Environmental criteria consider how a company manages its impact on nature; social criteria look at how the company handles relationships with employees, suppliers and communities; governance covers leadership, executive pay and shareholder rights.
The rise of ESG can be attributed to several factors.
Investor demand
Institutional investors and asset managers are increasingly prioritising ESG factors in their decision-making. According to a 2023 report by the Global Sustainable Investment Alliances, global sustainable investment assets reached $35.3 trillion, representing over a third of all managed assets.
Regulatory pressure
Governments and regulatory bodies around the world are introducing stricter ESG disclosure requirements. For example, the European Corporate Sustainability Reporting Directive (CSRD) is pushing companies to adopt ESG practices.
Consumer expectations
Consumers favour brands that show a commitment to sustainability and social responsibility. A 2023 Nielsen study found that 66% of global consumers are willing to pay more for sustainable products.
Risk management
ESG factors are now recognised as material issues that can affect a company’s financial performance. Climate change, for example, poses serious risks to supply chains, operations and profitability.
Political challenges to ESG
Despite its growing importance, ESG has faced political backlash in some regions. In the United States, for example, some states and political leaders have criticised ESG initiatives, claiming they prioritise political agendas over financial returns. A few states have even introduced legislation to limit the use of ESG criteria in investment decisions.
Similarly, political shifts have led to a rollback of climate policies in other parts of the world. For example, changes in government in countries like Brazil and Australia have resulted in less focus on environmental protection and climate action.
These political challenges have raised concerns about the future of ESG. However, ESG is already embedded in corporate and financial systems, which makes it difficult to reverse.
Why ESG is here to stay
While some question the longevity of ESG, the evidence points to its continued relevance and influence. Various trends demonstrate why ESG is firmly embedded in the global business landscape.
Global market forces
ESG is no longer a niche concept but a global movement driven by market forces. Multinational corporations operate in a globalised economy where ESG standards are harmonised. Companies that fail to meet these standards risk losing access to international markets, investors and customers. For example, European and Asian investors are heavily focused on ESG, and companies seeking capital from these regions must align with their expectations.
Investor resilience
Investors are not easily swayed by political rhetoric. They recognise that ESG factors are material to long-term financial performance. Climate change, for example, poses systemic risks that cannot be ignored. According to a 2023 survey by PwC, 79% of investors consider ESG risks when making investment decisions. Even in regions where political leaders oppose ESG, institutional investors continue to prioritise it, driven by fiduciary duty and the need to manage risk.
Corporate commitments
Many companies have made public commitments to ESG goals, such as reaching net-zero emissions or improving diversity and inclusion. These commitments are often tied to long-term strategies and cannot be reversed without significant reputational damage. For example, companies like Microsoft, Unilever and Apple have set ambitious sustainability targets that are central to their brand identity and stakeholder trust.
Regulatory momentum
While some governments may roll back climate policies, others are doubling down on ESG regulations. The European Union, for instance, is leading the way with its Green Deal and the CSRD. These regulations create a ripple effect, influencing global supply chains and corporate practices. Companies operating in multiple jurisdictions must comply with the strictest standards, ensuring that ESG remains a priority.
Technological advancements
Technology is playing a key role in integrating ESG into corporate operations. ESG software, for example, enables companies to track and report on their sustainability performance with greater accuracy and efficiency. As ESG technology becomes more advanced, it becomes easier for companies to integrate ESG into decision-making, regardless of political changes.
Stakeholder pressure
Stakeholders, including employees, customers and communities, hold companies accountable for their ESG performance. In particular, employees increasingly prioritise sustainability and social responsibility when choosing employers. A 2023 survey by Deloitte found that 64% of millennials and Gen Z workers prefer to work for companies with strong ESG commitments. This internal pressure helps keep ESG high on the corporate agenda.
The future of ESG in a politically divided world
While political changes can create short-term challenges for ESG, they are unlikely to derail its long-term direction. Here are some trends that will shape the future of ESG.
Regional divergence
In the coming years, we may see a divergence in ESG adoption across regions. Countries with strong regulatory frameworks and investor support, such as those in the European Union, will continue to lead the way. In contrast, regions with political opposition to ESG may lag behind. However, global companies must manage these differences, ensuring compliance with the strictest standards.
Increased focus on social and governance factors
While environmental issues often dominate the ESG conversation, social and governance factors are gaining prominence. Issues such as human rights, corporate ethics, and diversity, equity and inclusion are becoming more important components of ESG strategies. Companies that excel in these areas will be advantaged.
ESG as a competitive differentiator
As ESG becomes more mainstream, it will increasingly serve as a competitive differentiator. Companies that demonstrate strong ESG performance will attract investors, customers and talent, while those that fail to adapt will face reputational and financial risks.
Collaboration and innovation
The challenges posed by climate change and social inequality require collective action. Companies, governments and civil society will need to collaborate to achieve meaningful progress. Innovation – particularly in areas such as renewable energy, circular economy and sustainable finance – will play a significant role in advancing ESG goals.
Schlussfolgerung
ESG is not a passing trend – it is a fundamental shift in how businesses operate and how value is created. While political changes in some countries may create temporary obstacles, the global momentum behind ESG is too strong to reverse. Market forces, investor priorities, corporate commitments and stakeholder pressure ensure that ESG remains an essential part of corporate life.
In a world facing climate change, social inequality and governance challenges, ESG provides a framework for building resilient, sustainable and inclusive businesses. Companies that adopt ESG will not only thrive despite political uncertainty but also contribute to a more sustainable and equitable future. As the saying goes, ‘You can’t fight the future’ – and the future is undeniably ESG.
