The Future of ESG: End of the Hype, Back to Reality

For five years, ESG has invaded everything: reports, labels, ratings, ratings, rankings, green bonds, sustainable funds, sustainable funds, cascading acronyms.

But as is often the case with successful movements, the wave is falling again.

And that's good, to separate the wheat from the chaff.

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Because beyond the fading wind, a conviction is essential: sustainability is a new strategic skill that the company must learn to master.

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Just as we went from “personnel management” to “human resources management” in the 2000s, we will move from a “CSR direction” to real sustainability management, certainly by the CFO.

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But before we get to that, let's take a quick look at how far we've come.

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1. The End of a Cycle: From Belief to Measurement

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ESG started as a promise: to reconcile the management of extra-financial risks with a positive impact. In other words, for fans of Discounted Cash Flow, learn to seriously calculate the terminal value to infinity, in a finite world.

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But the vagueness of methodologies, the proliferation of rating agencies, and the poverty of corporate ESG data have muddled the message and eroded trust.

The result: a politicized subject, often discredited.

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Today, some want to get out of it or simplify it to the extreme. On the contrary, others, like our customers, require verifiable, comparable and actionable data.

ESG is leaving marketing to enter the world of figures (accounting and finance).

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2. CSRD and VSME: A Silent Turning Point

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I've been saying it for years: the CSRD, CS3D guidelines and the future VSME format are not simple means of reporting. These are the first extra-financial accounting frameworks at European level, based on a consistent approach, in simple or double materiality.

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Despite the doctrinal setback of the Green Deal and the restriction to large companies (until the adoption of Omnibus), their effect will be systemic:

• SMEs will have to align themselves with it via their customers,
• Banks and insurers will use them to price ESG risk and deploy their balance sheets,
• Investors will integrate them into their valuation models (the famous terminal value.)

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The future of sustainability will depend on these standards: simplified, yes, but above all connected.

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3. Towards Multi-Capital Accounting

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The real revolution - driven in particular by Alexandre Rambaud and the CARE model - is multi-capital accounting.

We no longer only measure financial capital, but also:

• human capital,

• natural capital,

• social and relational capital,

• organizational capital.

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A more complete vision of performance... and better risk management.

Because a company that exhausts its natural resources or its social trust destroys its own value.

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But let's be realistic: it will probably take a decade for this approach to become established.

In the meantime, the lifeblood remains money, and it will go to projects and companies that control their risks in a +2°C world.

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4. The era of financing and green insurance

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The next frontier of ESG is financial flows. Real sustainable finance, at last.

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We were promised it through capital allocation; we were all disappointed by greenwashing, symbolized by the “net zero” coalitions, which are now self-dissolved.

But she comes back through the front door via the historical players: the old ladies who are banks and insurance companies, and in whom I put all my trust in view of the discussions I am having at the moment with them.

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These institutions, which are often slow, have taken years to build their governance, their investment policies and their risk grids. Their slowness is our chance: they are now connecting sustainability data to their risk models.

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A credible ESG action plan will soon allow:

• a subsidized credit rate (Greenium),
• better insurance coverage,
• easier access to public devices,
• and better valorization in the data room.

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It's no longer about communication: it's about the real economy.

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5. The key role of technology and data

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Technology is becoming the invisible infrastructure for sustainability.

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In fact, this is why I have invested my time and energy in it for years:

from Manaus (with BNP Paribas) to Dataland (with EY), from Sustainable Open Data Platform (with Doublemateriality.org) in Harnest (with Sabine, Fabien, Sophie, Ahmad), each project has the same objective: to make extra-financial data interoperable, auditable and useful.

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Collect, link, trace, verify, compare: everything now depends on data quality.

Otherwise, ESG reports will remain mere decorative PDFs.

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Platforms like ours (#Harnest) are emerging to change the situation: they orchestrate, they connect frameworks, action plans, partners, auditors and funders.

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Sustainability is becoming a competency based on an information system, far beyond sterile relationships.

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6. And after ESG rating agencies?

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ESG rating agencies have had their uses, but their model is running out of steam. Too many differences, too much opacity, too little granularity. They continue to earn a lot of money thanks to ETF indices but the new European and British regulations mark the end of a cycle.

Investors know it: privately, everyone criticizes the MSCIs of this world, but no one dares to do without them.

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On the contrary, I believe that the future is in distributed scoring: based on shared, verified and contextualized data. Tomorrow, every company will be able to show its evidence of good management rather than defend its score.

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7. From Hype to Maturity: An Opportunity for Europe

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ESG is entering adulthood. It is no longer a subject of communication, but of governance, finance and economic sovereignty.

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Europe has a unique card to play: that of demanding regulation, sovereign technology, and a multi-capital approach to progress.

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The end of the hype marks the beginning of a new era: that of sustainability driven by data (but not in ESAP, I will have the opportunity to come back to it).

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And now?

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Each week, I will continue this exploration:

• ESG risks and the resilience of value chains,

• green finance and Greenium,

• the sovereignty of sustainability data,

• the necessary infrastructures

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Objective: to link the financial and the extra-financial to build European companies that are prosperous, sustainable and happy to contribute to their environment.

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