News & Insights

Is ESG doomed?

ESG has long aspired to be cohesive. To bring together the multiple aspects of environmental, social and governance factors that impact a businesses’ broadest group of stakeholders with balance to form a single guiding doctrine.

But with pressure building to tighten definitions and clamp down on misleading or unrealistic claims, the case to make some of those factors severable seems to be growing too, with some coming into conflict with each other.

It’s a direction of travel covered comprehensively by the Financial Times this week and outlined in a weekly column in PRMoment. The article opens with the stark perspective that “The term ESG is less than two decades old, but it may already be coming to the end of its useful life”.

Yet it’s just the latest in a series of major media articles that have sought to raise questions about whether ESG remains fit-for-purpose, given both its need for standard measurement and reporting frameworks to harmonise corporate information-sharing and investment approaches, and address the world’s changing short-term priorities in the wake of the havoc caused by the war in Ukraine. Not least those quoting Elon Musk denouncing ESG as a “scam”.

The FT’s article this week, ‘How ESG investing came to a reckoning’, sets out the big factors causing such tension for corporations wanting to demonstrate long-term ESG progress to please investors, but wrestling with immediate commercial realities. Besides the headlines over severe greenwashing concerns, Russia’s invasion of Ukraine is forcing companies, investors and governments to juggle priorities that can set E, S and G factors against each other.

It’s a reality-check piece that covers some old ground around the need for investing frameworks, but lands the point that ESG and ethical business – or ethical investing – should be parallel undertakings. And it points to a need for ESG to evolve not only through clearer definition and standards, but for E, S and G factors to be divorced from each other when it comes to business stewardship.

Another FT long read, ‘ESG exposed in a world of changing priorities’, shared the view that responsible investing will survive the wall of criticism that has been brought to ESG’s door, though it will need to evolve and adapt in an era when “energy security and poverty reduction have suddenly become as important as the green transition”. And “The idea of just focusing on shareholder interests, as the 20th century economist Milton Friedman urged company boards to do, looks increasingly risky — even for those shareholders.”

The Wall Street Journal’s piece about ‘Taking the E out of ESG investing’ was a similar critique.

Does this all mean that we’re witnessing the unravelling of the very fabric of ESG, on the frontline of the notion of stakeholder capitalism, and the three three-letter acronym which has come to be a driving force in investment, corporate transformation and reporting is ultimately doomed?

The logic may be difficult to argue with. But set that against the likelihood of a 20-year-old ‘movement’ having survived world events of the last couple of years unscathed.


What does seem increasingly likely is that ESG-as-we-know-it will not survive intact. Reform has been in the works anyway; the frameworks are becoming more specific and the legislative agenda is developing, such as the SEC’s new funds disclosure regulations. ESG will doubtless have to evolve into something more specific, more transparent and more pragmatic. 

Where does that leave corporate communications teams who’ve been working to communicate purposeful progress and transformation, and in some cases have been right at the heart of developing ESG strategy? That will have to evolve too of course, with teams challenged to understand the legislative changes that will reshape what is shared and prioritised, as well as what is material to reputation.

If anything, the reality-check and subsequent reform that awaits ESG should make corporate affairs functions even more integral to long-term transformation in future, regardless of whether  a cohesive ESG agenda is central to business reporting and reputation-building, or a more nuanced approach to the E, the S and the G is applied across the business.