As Talk of ESG Ebbs in Public, Companies Quietly Commit to Goals

The relationship between corporate America and the environmental, social and governance movement is following a well-trod pattern familiar to fans of the TV show Breaking the Band on REELZ. The Beatles, Van Halen, Spice Girls – splashy debuts shepherding critical and financial success are threatened by public criticism, power struggles and broken commitments. The drama typically results in spectacular and public splits, with the occasional promise of a quiet reconciliation.

Not long ago, ESG was all the rage in business circles. But lately, corporate ESG programs have started to encounter a tumultuous path. Criticisms from politicians, media personalities and influencers have led to some companies publicly backtracking on their ESG commitments or dropping their sustainability efforts entirely. But a new report indicates that a “silent majority” of U.S. corporations may be saying one thing publicly – that they are decreasing their focus on ESG matters – and quite another in private.

The report, released by Corporate Counsel in partnership with law firm Morrison & Foerster, surveyed 97 in-house corporate legal leaders this spring. The study found that negative publicity of ESG-related initiatives does not represent how they view their companies’ ESG efforts. Instead, respondents indicated that while their companies remain committed to their sustainability goals, the backlash has discouraged them from using the term “ESG” to describe these targets. Moreover, companies appear reluctant to release ESG-related metrics to the public, according to the report.

The report also noted that respondents said companies are seeing legitimate benefits from their ESG efforts in myriad ways. Pursuing sustainability goals “improves brand image and reputation among customers,” according to nearly 60% of those surveyed. About 40% said they believe ESG initiatives help their companies recruit and retain employees. In a sign that campaigns to tarnish ESG aren’t resonating inside the walls of corporations, both percentages increased significantly over the previous year.

But internal approval ratings for corporate ESG don’t necessarily reflect public support from customers and investors. Companies such as Tractor Supply Co. and Deere & Co. recently abandoned their corporate sustainability programs in the face of pressure campaigns orchestrated by conservative activists. Meanwhile, the interest of big institutional investors like BlackRock and Vanguard in ESG programs appears to be waning, and some investment firms are abandoning initiatives along the lines of Climate Action 100+, which seeks to compel companies to reduce carbon emissions.

Nevertheless, a closer look under the hood finds that corporations continue to talk about ESG in financial disclosures, so they’re not lacking for transparency about their initiatives. Nixing the Chevron doctrine in the United States didn’t negate multinational corporations’ ESG reporting responsibilities in the EU either.

All of that creates the impression companies are still locked in an on-again, off-again relationship with ESG. Given some of the evidence suggesting better performance on sustainability issues correlates with higher profitability, the public reunion between corporations and ESG may not be far away.