If ESG is dead... long live ESG!

After a decade of rise, ESG is going through its most serious legitimacy crisis.

Discreet withdrawals of commitments, political criticisms, abandonment of labels: the signs of reflux are multiplying.

But behind this distrust, one observation: ESG has too often been reduced to a reporting exercise, forgetting its raison d'être: managing systemic risks and strengthening business resilience.

While the institutional consensus is cracking, the time is now for a Cultural surge : putting sustainability back on at the heart of decisions, action plans and business models.

It is under this condition that it will once again become a strategic lever.

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A giant with feet of clay

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Since the 1990s, ESG has emerged as an analytical framework. Integrated into reporting, governance and extra-financial ratings, it has brought together regulators, investors and managers.

But between geopolitical tensions, energy crisis, and rising skepticism, Doubt sets in.

In question? The gap between growing technicality and concrete citizen concerns (employment, purchasing power, economic security). As @Ioannis Ioannou (LBS) notes, The ESG story failed to reach society. It was quickly replaced by a simplistic, but powerful counter-narrative: that of an elitist, woke, liberticidal ESG.

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Professionals break their favorite toy

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Since the Trump era, a lot of players (companies, banks, investors) have downgraded on ESG : disappearance in the annual reports, abandonment of Net Zero...

In the United States, the shift is mainly cultural and political.

In Europe, criticism targets over-regulation. The Draghi report sounded the alarm about the “Green Deal Overload”, immediately followed by a promise of simplification. Ironically, these measures will... take the form of new guidelines.

Critics focus on two major texts:

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• The CSRD, described as a “bureaucratic delirium”: we forget that reliable reporting requires time. The implementation of IFRS standards did not elicit as much protests — although it was more complex.
  
• The CS3D, criticized as a competitive disadvantage... when it was precisely aimed at balancing the rules of the game against non-European companies.

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In both cases, the requirement for clarity on ESG impacts and risks requires a review of the business model. It was this requirement — not the technical complexity — that bothered.

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ESG, creator of value: myth or reality?

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McKinsey (2024) has quantified the economic value of sustainability: Up to 18% of EBITDA at stake in certain sectors, between risk reduction and opportunity creation.

But too many businesses continue to see ESG as:

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• a report to be produced;
• or an expanded version of carbon-centered CSR.

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The true value of ESG, is to help leaders to anticipate systemic transformations, strengthen their strategic agility, and preserve their right to operate.

In a world under energy, ecological and social constraints, sustainability is becoming a key competency, in the same way as purchases or finance.

It requires expertise, investments, and management. But in the medium term, it creates a competitive advantage.