Over the past decade, ESG (environmental, social, and governance) performance became synonymous with responsible, forward-looking business. Companies invested heavily in dedicated teams, reporting systems, and KPIs; investors integrated ESG data into financial analysis; consumers scrutinized supply chains; and policymakers created regulatory frameworks that placed sustainability at the center of economic strategy.
But as ESG moved into the mainstream, a counter-movement emerged. Today’s backlash – fueled by political polarization, misunderstanding, and regulatory fatigue – is reshaping how organizations communicate, prioritize, and operationalize sustainability. Some now argue ESG distracts from “real business,” while others insist it remains essential but requires reform. The result is strategic uncertainty.
Yet this moment is not about the end of ESG. Rather, it signals a shift toward a more mature phase of sustainability, where credibility, transparency, and measurable outcomes matter more than labels. Understanding the roots of resistance and adjusting corporate strategy is now critical for leaders.
1. The rise of ESG and the roots of resistance
ESG’s rapid ascent builds on decades of environmental and social progress. The environmental movement of the 1960s–80s raised public awareness of pollution and resource depletion; the Brundtland Report (1987) gave sustainable development a global policy foundation; and frameworks like the Millennium Development Goals and the 2015 Paris Agreement embedded sustainability in global economic planning. Between 2015 and 2020, ESG commitments surged, sustainable finance accelerated, and companies with strong ESG credentials enjoyed valuation premiums.
But this momentum also set the stage for backlash. In the United States, ESG became entangled in ideological battles. Critics framed it as political overreach, unnecessary DEI activism, or a threat to competitiveness. Several states introduced legislation restricting ESG-oriented investment, fueling the narrative that ESG is “anti-business.”
Europe’s backlash is more technocratic and political than ideological. Companies cite compliance overload, reporting complexity, cost pressure on SMEs, and concerns about competitiveness. Regulatory adjustments, such as phased CSRD (Corporate sustainability reporting directive) implementation and delayed deforestation rules, reflect these tensions.
2. Why ESG became a target
Several structural issues made ESG susceptible to criticism:
Overstretch and overpromising
ESG became a catch-all concept expected to serve as climate strategy, social policy, risk indicator, and investor communications tool. Its expanding scope blurred its meaning and fueled skepticism.
Overlapping standards
Companies navigated an ecosystem of overlapping standards—GRI, SASB, TCFD, ISSB, CSRD—creating duplication, inconsistency, and reporting fatigue. This burden fell hardest on smaller companies without large sustainability teams.
Greenwashing and greenhushing
High-profile accusations of greenwashing undermined trust. Fear of scrutiny pushed many companies into greenhushing: quietly continuing sustainability work while reducing public communication.
Politicization
In the US, sustainability, diversity, and governance became cultural identifiers. What began as risk management turned into an ideological battleground.
3. Diverging global pathways
While the backlash is most visible in the US, global ESG pathways are diverging:
United States: ESG under pressure
Political polarization shapes public debate. Some states restrict ESG integration in public investments, and fund managers rebrand ESG products. Yet private companies continue sustainability work behind the scenes, driven by risk management, customer expectations, and regulatory exposure.
Europe: Reduce and reform
Rather than rejecting ESG, Europe is reducing and reforming it. While existing legislation remains in place, new regulations are slowed and scaled down. While investments remain strong companies demand clearer guidance and less administrative burden. Europe is entering a phase of “doing less ESG and better” not abandoning it.
Asia and Emerging Markets: Acceleration
In contrast, momentum is accelerating in Asia and in emerging markets. Governments treat climate and nature risk as economic realities rather than political controversies. Supply-chain legislation from Europe forces sustainability requirements downstream, and emerging markets increasingly shape global standards through manufacturing, infrastructure, and resource industries.
4. The impact on business
The ESG backlash has concrete implications for companies:
Capital allocation is more demanding
Investors now expect verified emissions data, credible governance, and detailed transition plans. Narrative-driven sustainability is no longer enough.
Reputation is harder to manage
Companies face pressure from both anti-ESG critics and advocates demanding faster, deeper action.
Supply chain expectations are rising
Companies must demonstrate deforestation-free sourcing, human rights due diligence, Scope 3 emissions transparency, and circularity strategies—requiring new data and closer supplier engagement.
Talent and culture are affected
Younger employees value purposeful work. Reducing sustainability ambitions risks weakening morale and employer branding.
5. How leading companies are responding
Companies that remain ahead of the curve are shifting from ESG as a reporting function to ESG as a strategic capability:
- Embedding sustainability into corporate strategy (operations, procurement, finance, R&D)
- Prioritizing measurable impact over polished storytelling
- Investing in high-quality data—real-time carbon management, audited LCAs, digital product passports
- Pushing for simplification and alignment across regulatory frameworks
- Moving away from the politically charged “ESG” label toward terms like positive impact, transition strategy or responsible business
6. What leaders can do now
Executives can navigate this new phase by:
- Reframing ESG in terms of risk, innovation, competitiveness, and resilience.
- Strengthening governance with clear roles, accountability, and board oversight.
- Investing in robust data systems for Scope 1-3 emissions, supplier visibility, and third-party verification.
- Preparing for increased scrutiny by aligning marketing and sustainability teams and ensuring all claims are evidence-based.
- Focusing on material issues such as climate, biodiversity, human rights, circularity, and governance.
- Collaborating across value chains, recognizing sustainability as a shared challenge.
Conclusion
Despite the political noise, the direction of travel is clear: climate risk is financial risk; biodiversity loss affects economic stability; resource constraints shape competitiveness; and regulation – whether streamlined or expanded – is here to stay. ESG is not disappearing, but it is evolving.
The organizations that succeed in this new landscape will be those that build credibility, demonstrate real impact, manage risks rigorously, and innovate within new constraints. ESG and sustainability may no longer dominate headlines, but they have become a core element of corporate strategy and a foundation of long-term business resilience.
This blog post was revised with the help of Chat GPT.

















