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ESG backlash and the changing sustainability agenda

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:

  1. Reframing ESG in terms of risk, innovation, competitiveness, and resilience.
  2. Strengthening governance with clear roles, accountability, and board oversight.
  3. Investing in robust data systems for Scope 1-3 emissions, supplier visibility, and third-party verification.
  4. Preparing for increased scrutiny by aligning marketing and sustainability teams and ensuring all claims are evidence-based.
  5. Focusing on material issues such as climate, biodiversity, human rights, circularity, and governance.
  6. 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.


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Première mesure de l’impact social par rapport à la gestion traditionnelle des risques RSE de 55 grandes entreprises suisses

Commentaire sur la publication du Green Business CEO Rating 2021 dans le Magazine PME du 30.6.2021

Le moment est enfin venu, avec le lancement du Green Business CEO Rating, nous pouvons pour la première fois comparer la performance des entreprises du point de vue “inside-out” et “outside-in” (Dyllick & Muff, 2016). Les 50 plus grandes entreprises suisses ont ainsi été évaluées pour la première fois sur les deux dimensions essentielles de la durabilité des entreprises. À ce jour, la gestion de la durabilité est encore largement assimilée à la gestion des risques de l’entreprise (ou : inside-out). Aujourd’hui, cependant, il s’agit de bien plus que cela : de contributions positives à la résolution des grands défis sociaux qui ne peuvent être maîtrisés sans les entreprises et les sociétés (ou : outside-in). Ces défis peuvent et doivent être reconnus et exploités comme de nouveaux domaines d’activité plutôt que comme de simples risques. Nous sommes convaincus que ce n’est que de cette manière que les entreprises peuvent avoir un impact social pertinent dans des domaines tels que la protection du climat et l’approvisionnement en énergie, l’économie circulaire, la mobilité en réseau, l’alimentation durable ou les systèmes de santé résistant aux crises.

Pour encourager cette réflexion plus large, le Green Business CEO Rating mesure à la fois la gestion des risques et l’impact positif des entreprises :  

  • Inside-out : La gestion de la durabilité en tant que gestion des risques se concentre sur la réduction des coûts et des risques pour l’entreprise et exprime la perception de la responsabilité sociale. Il sert principalement à protéger l’entreprise et se fonde sur les résultats des évaluations ESG. La perspective dominante est celle de l’intérieur, de l’entreprise et de son impact sur la société. Les résultats consistent principalement en une réduction des impacts négatifs de l’entreprise (pollution par le CO2, consommation de ressources, déchets, émissions).
  • Outside-in : Il s’agit de contributions positives à la résolution des problèmes de durabilité de la société. Celles-ci exigent une perspective extérieure et intérieure, une vision de la société à l’entreprise et de l’avenir au présent. Cette perspective est orientée vers l’impact de l’entreprise sur la société, comme en témoignent les processus législatifs tels que le Green Deal européen ou sur le marché des capitaux sous le signe de l’investissement d’impact et d’une orientation explicite de la finalité des entreprises. Leur mesure est basée sur les contributions aux objectifs de développement durable des Nations unies, les ODD.

Le “Green Business CEO Rating” montre l’impact social et environnemental positif des meilleures grandes entreprises de Suisse. Pour la première fois, il évalue la performance des entreprises en termes de contribution positive à la résolution des défis mondiaux urgents.

  • Par souci de simplicité, la perspective inside-out est assimilée à l’évaluation ESG (Environmental, Social & Governance) bien connue.
  • Le point de vue extérieur-intérieur est succinctement appelé “impact”.
Figure 1 : Aperçu de la méthodologie

LA CONTRIBUTION DES ENTREPRISES À LA RÉSOLUTION DES PROBLÈMES LES PLUS PRESSANTS DE NOTRE ÉPOQUE

La performance des entreprises en matière de durabilité peut être divisée en quatre quadrants. Ils sont formés par les deux axes de la gestion des risques (ESG) et de “l’impact positif sur la société et l’environnement” (IMPACT) (voir figure 2). Sur une échelle de 10, la valeur moyenne mesurée pour l’ensemble des entreprises est de 4,0, ce qui montre à quel point le potentiel d’amélioration est encore important sur ces deux axes.

Groupe 1 – ORIENTÉ VERS L’EFFET

Vous trouverez ici des entreprises qui s’engagent de manière proactive à protéger leur société contre les risques liés au développement durable, et qui sont également situées sur des marchés ayant un impact positif sur les ODD. Voici les 5 premiers PDG et leurs entreprises, par exemple Swiss Re, Migros et Novartis. Ces entreprises sont actives sur des marchés socialement pertinents qui les ont amenées à prendre très tôt une position proactive sur les questions sociales et environnementales. En particulier, un réassureur comme Swiss Re est un excellent exemple d’une entreprise qui a dû reconnaître très tôt les coûts élevés des dommages naturels et climatiques – pour la société et pour elle-même – et en a tiré des conséquences stratégiques. Mais des entreprises comme Migros ou Coop ont également été directement confrontées à des problèmes écologiques et sanitaires sur leurs marchés et ont ressenti l’impact des attentes de la société. Ils ont adopté une position efficace dès le début.

Groupe 2 – EFFICACE

Vous trouverez ici des entreprises qui proposent des produits et des services sur des marchés présentant un grand intérêt pour la société et l’environnement. Soit parce qu’ils ont toujours été positionnés sur ces marchés, soit parce qu’ils ont délibérément développé des services en rapport avec les ODD pour résoudre des problèmes sociaux.  Ils passent inaperçus en termes de gestion des risques, ce qui peut également être dû à un manque de transparence ou de reporting. Des exemples de telles entreprises sont Stadler Rail, Partners Group ou Baloise.

Groupe 3 – ACTIF

Nous trouvons ici des entreprises qui s’engagent activement à réduire leur impact négatif, en servant des marchés qui n’ont qu’un faible impact positif sur la société et l’environnement. Des entreprises telles que SGS, Holcim et Schindler sont actives et engagées dans leur gestion des risques. Toutefois, leurs produits et services n’ont actuellement qu’un faible impact sur la résolution des problèmes de durabilité au sens des ODD.

Groupe 4 – PASSIF

Cette catégorie comprend les entreprises dont l’intérêt pour la durabilité est faible ou tout juste émergent, qui sont actives sur des marchés dont l’importance pour la société et l’environnement est mineure. Une entreprise figure également sur cette liste si elle communique ses performances en matière de durabilité de manière très peu transparente. Des exemples de telles entreprises sont Swatch, Ems Chemie et SFS Group. Les entreprises de ce groupe n’ont pas une bonne notation ESG et leurs produits et services ne sont pas positionnés sur des marchés ayant un impact sur les ODD.

Figure 2 : L’orientation vers l’impact positif des 55 entreprises étudiées

Les quatre catégories de la figure 2 résultent des deux notations de l’entreprise – d’une part, la notation ESG pour protéger l’entreprise et, d’autre part, la notation de l’impact SDG concernant une contribution positive à la société et à l’environnement. Les positionnements correspondants montrent bien où se situent les entreprises, tant au niveau de leur engagement en faveur de la durabilité qu’au niveau de l’impact de leurs produits et services. Les différences entre les deux méthodes d’évaluation montrent clairement qu’il s’agit de perspectives d’évaluation très différentes (voir figure 1).

  • Notation ESG pour les activités traditionnelles de RSE d’une entreprise : Les données sur les meilleures pratiques ESG de l’agence de notation ISS se concentrent sur les critères ESG classiques (environnement, social, gouvernance d’entreprise responsable) et sont basées sur une perspective de risque de durabilité. La gestion de la durabilité en tant que gestion des risques se concentre sur la réduction des coûts et des risques pour l’entreprise et exprime la perception d’une responsabilité sociale (perspective inside-out). Les résultats consistent principalement en une réduction des impacts négatifs de l’entreprise (charges de CO2, consommation de ressources, déchets, émissions), mais pas en une contribution positive à la résolution des problèmes de durabilité de la société.
  • SDG Impact Rating pour une perspective d'”impact positif” orientée vers l’avenir : Les données SDG Analytics de l’agence de notation Standard & Poor’s (S&P)/Trucost analysent l’impact positif et négatif de chaque entreprise au regard des 17 SDG (Objectifs de développement durable de l’ONU). L’accent est mis sur la vision de la société à l’entreprise et de l’avenir au présent. Cette perspective “outside-in” est basée sur l’impact de l’entreprise et l’orientation sociale de ses produits et services.

Il est très important de savoir si la protection de l’entreprise contre les risques liés au développement durable est évaluée à l’aide des données ESG ou si l’impact social de l’entreprise est mesuré par rapport aux ODD. Il y a des entreprises qui sont performantes en termes de protection ESG et d’autres qui le sont en termes d’impact sur les ODD. Il s’agit de l’alignement des activités de durabilité, et non de l’engagement de l’entreprise en faveur de la durabilité. Les entreprises “actives” peuvent consacrer beaucoup d’efforts à la protection de leur entreprise contre les risques liés à la durabilité et à la démonstration de leurs performances par rapport aux multiples indicateurs de mesure, sans faire grand-chose pour l’impact lié aux ODD. D’autre part, les entreprises “efficaces” atteignent des valeurs d’impact élevées sur les ODD grâce à leur orientation produit et marché, sans que cela ne nécessite nécessairement d’effort particulier.

En fin de compte, cependant, il ne s’agit pas d’opposer les performances d’un domaine à celles d’un autre.  Ces deux domaines sont importants et ont été pondérés de manière égale pour la notation de l’entreprise.

Votre avis nous intéresse. Nous attendons vos commentaires avec impatience !


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First-ever measurement of societal impact compared to traditional ESG risk management of 55 top Swiss companies

Comment on the publication of the Green Business CEO Rating 2021 in the Bilanz of 25.6.2021 and PME of 30.6.2021

The time has finally come, with the launch of the Green Business CEO Rating, we can for the first time compare corporate performance from the “inside-out” and “outside-in” perspectives (Dyllick & Muff, 2016). The 50 largest Swiss companies were thus assessed for the first time on the two core dimensions of corporate sustainability. To this day, sustainability management is still largely equated with corporate risk management (or: inside-out). Today, however, it is about much more: positive contributions to solving the major societal challenges that cannot be mastered without business and companies (or: outside-in). These challenges can and should be recognized and exploited as new areas of business rather than just as risks. We are convinced that only in this way can companies achieve a relevant social impact in areas such as climate protection and energy supply, circular economy, networked mobility, sustainable nutrition or crisis-resistant healthcare systems.

To encourage this broader thinking, the Green Business CEO Rating measures both risk management and the positive impact of companies:  

  • Inside-out: Sustainability management as risk management focuses on reducing costs and risks for the company and expressing the perception of a social responsibility. It primarily serves to safeguard the company and is based on findings from ESG ratings. An inside-out perspective dominates, of the company and its impact on society. The results mostly consist of reductions in the company’s negative impacts (CO2 pollution, resource consumption, waste, emissions).
  • Outside-in: The aim here is to make positive contributions to solving society’s sustainability challenges. These require an outside-in perspective, a view from society to the company and from the future to the present. This perspective is based on the impact of the company on society as reflected in legislative processes such as the European Green Deal or on the capital market in the context of impact investing and an explicit purpose orientation of companies. Their measurement is based on contributions to the UN Sustainable Development Goals, the SDGs.

The “Green Business CEO Rating” shows the positive social and environmental impact of the best large companies in Switzerland. For the first time, it evaluates the performance of companies in terms of a positive contribution to solving pressing global challenges.

  • For the sake of simplicity, the inside-out perspective is equated with the familiar ESG (Environmental, Social & Governance) assessment.
  • The outside-in perspective is briefly and succinctly referred to as “impact”.
Figure 1: Overview of the methodology

THE CONTRIBUTION OF BUSINESS TO SOLVING THE MOST PRESSING PROBLEMS OF OUR TIME

The sustainability performance of companies can be divided into four quadrants. They are formed by the two axes “risk management” (ESG) and “positive impact on society and the environment” (IMPACT) (see Figure 2). On a scale of 10, the measured mean value of all companies is 4.0, which shows how great the potential still is to improve on both axes.

Group 1 – IMPACTFUL

Here you will find companies with a proactive commitment to protecting their company against sustainability risks, which are also located in markets that have a positive impact on the SDGs. Here are the top 5 CEOs with their companies, e.g. Swiss Re, Migros and Novartis. These companies are in socially relevant markets that have led them early on to take a proactive stance on societal and environmental issues. In particular, a reinsurer like Swiss Re is an excellent example of a company that had to recognize the high costs of natural and climate damage – for society and for itself – at an early stage and derived strategic consequences from this. But companies such as Migros or Coop, have also been directly confronted with ecological and health problems in their markets and have felt the impact of society’s expectations. They took an effective stance early on.

Group 2 – EFFECTIVE

Here you will find companies that offer products and services in markets with great relevance for society and the environment. Either because they have always been positioned in these markets, or because they have deliberately developed SDG-relevant services to solve social problems.  They are inconspicuous in terms of their risk management, which may also be due to a lack of transparency or reporting. Examples of such companies are Stadler Rail, Partners Group or Baloise.

Group 3 – ACTIVE

Here we find companies with an active commitment to reducing their negative impact, serving markets with only a low positive impact on society and the environment. Companies such as SGS, Holcim and Schindler are active and committed in their risk management. However, their products and services currently have only a weak impact on solving sustainability challenges in the sense of the SDGs.

Group 4 – PASSIVE

This category includes companies with little or only just emerging interest in sustainability, which are active in markets with only minor relevance for society and the environment. Likewise, a company is listed here if it communicates its sustainability performance in a very non-transparent manner. Examples of such companies are Swatch, Ems Chemie or SFS Group. Companies in this group have neither a good ESG rating nor are they positioned with their products and services in SDG impact relevant markets.

Figure 2: The positive impact orientation of the 55 companies studied

The four categories in Figure 2 result from the two company ratings – on the one hand, the ESG Rating to safeguard the company and, on the other, the SDG-Impact Rating regarding a positive contribution to society and the environment. The corresponding positionings show well where companies stand, both in terms of their commitment to sustainability and in terms of the impact of their products and services. The differences between the two rating methods make it clear that these are quite different assessment perspectives (see Figure 1).

  • The ESG rating for the traditional CSR activities of a company: The ESG best practices data of the ISS rating agency focus on the classic ESG criteria (environmental, social, responsible corporate governance) and are based on a risk perspective of sustainability. Sustainability management as risk management focuses on reducing costs and risks for the company and expressing the perception of a social responsibility (inside-out perspective). The results mostly consist of reductions in the company’s negative impacts (CO2 burdens, resource consumption, waste, emissions), but not in positive contributions to solving societal sustainability challenges.
  • The SDG Impact Rating for the forward-looking “positive impact” perspective: The SDG Analytics data from Standard & Poor’s (S&P)/Trucost rating agency analyzes the positive and negative impact of each company with respect to all 17 SDGs (UN Sustainable Development Goals). The focus is on the view from society to the company and from the future to the present. This outside-in perspective is based on the impact of the company and the social orientation of its products and services.

It makes a big difference whether the company’s own protection against sustainability risks is assessed using ESG data or whether the company’s social impact is measured in relation to the SDGs. There are companies that perform well in terms of ESG protection and those that perform well in terms of SDG impact. The focus here is on the alignment of sustainability activities, not on the company’s commitment to sustainability. “Active” companies can put a lot of effort into protecting their company from sustainability risks and demonstrating performance against the multiple measurement indicators without doing much for SDG-relevant impact. On the other hand, “effective” companies achieve high SDG impact values due to their product and market orientation, without this necessarily requiring any special effort.

Ultimately, however, it is not a question of playing off performance in one area against the other.  Both areas are important and have been weighted equally for the company rating.

We are interested in your opinion. We look forward to your comments!