hile corporate social responsibility (CSR) began as a model for companies to manage their social accountability, by the late 2000s it had evolved into Environmental, Social, and Governance (ESG). This evolution included a focus on corporate citizenship, sustainability, and emphasizing the measurable environmental and social outcomes of doing business. In a globalized world, ESG goes beyond the company and its immediate environs to include society at large and the environment.
Capturing the zeitgeist
ESG quickly captured the public imagination. Fueled by growing fears of climate change and systemic inequity, companies embraced ESG as a pathway to demonstrate their values, attract investors, and earn public trust. Alongside ESG, new “purpose”–led strategies and activist CEOs, amplified by thinkers like Simon Sinek, created opportunities for the world’s largest consulting firms to turn sustainability into its own industry.
High profile pledges to go net–zero, carbon neutral, or climate positive—or any of the other buzzwords—became symbols of exemplary leadership. In the United States, the murder of George Floyd in 2020 galvanized corporate attention on diversity, equity, and inclusion and renewed focus on systemic racism and social inequity.
Alongside activists and protests and social movements, investors adopted new ways of doing business. BlackRock’s Larry Fink pushed companies to adopt sustainable models, while governments introduced stricter ESG regulations. The European Union led government regulation with its Corporate Sustainability Reporting Directive (CSRD). For a moment, it felt like the momentum behind ESG would never die out.
ESG loses its luster
Beneath the optimism, questions began to emerge—what is the true role of business in society? How do companies balance environmental targets with shareholder expectations? Can a sustainable world coexist with the relentless, capitalist pursuit of growth?
As ESG became more commonplace, cracks began to show:
- Greenwashing Erosion: Exaggerated, false, or misleading claims about environmental impact and sustainability damaged public trust and created scandal for corporations, like Lululemon recently being investigated for greenwashing by Canada’s Competition Bureau.
- Cultural Resistance: Transforming business models to meet ESG goals often requires significant internal changes and effective communication. If not, ESG can and has become a part of other “social battlegrounds” and been interchangeable with socio-political issues, like DEI.
- Rising Costs and Complexity: Stricter regulations and varying global standards have made compliance costly and operationally challenging. Even though the EU paved the road for government regulation, it now faces a reality where European companies are moving operations and manufacturing to other ESG-free jurisdictions like China and the United States.
Now, accusations of greenwashing are as commonplace as positive ESG strategies. The honeymoon period is over, and stakeholder skepticism is on the rise, compounded by the new economic pressures like rising costs of living.
A better way forward for ESG
But now, stepping into 2025, the realities of ESG are settling in. The current approach to integration remains difficult because of both stubborn internal organizational challenges and external undermining systems.
A new approach is needed, one that can align internal stakeholders with external interests, regulators, and systems. One that can create resilience and innovation by bringing leaders and teams together. An approach that can still create measurable—but perhaps more tenable—impact.
Pathway Forward with Collaborative Design
While companies are achieving success all in their own way, there are foundational strategies that offer a framework to move forward based on their capabilities and resources:
- Systems Thinking: Creating processes and policies that are addressing interconnected issues collectively, exposing tradeoffs, and aligning priorities so workforces can communicate easier and get to collaborative action faster.
- Integration with Business Strategy: Sustainability is not a side project—it must be embedded in the company’s core strategy. Alongside diversity initiatives, ESG strategies are more likely to be diminished the more siloed within an organization they are. If organizations are committed to improving the lives of people and the planet, it is going to need a new model of teamwork and hierarchy that places sustainability as a core business strategy.
- Stakeholder Engagement: Involving the traditional ideas of employees, communities, and customers with more modern ideas of investors, the public, and the environment to ensure ideas of sustainability are relevant and actionable.
Companies that integrate ESG factors into their core business models not only outperform peers but are also more resilient to disruptions. Organizations and companies shouldn’t be abandoning their ambition—but finding new innovative methodologies to make their goals and targets achievable.
Still Moving toward a Sustainable Future
The journey from CSR to ESG shows how corporate sustainability has evolved, with each stage revealing new challenges and opportunities. As the affair with ESG gives way to a new operational reality, companies need to rethink their strategies and achieve what’s possible, and not peddle lofty goals that were always impossible to persuade us into a purchase.
ESG now requires moving forward with eyes wide open–recognizing tradeoffs, making informed decisions, and committing to progress over perfection. Sustainability done right isn’t just good for the planet—it’s good for business.
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Don’t abandon ESG ambitions, evolve them
Image by Torsten Willimczik from Pixabay
December 10, 2024
ESG has lost its luster. But an enduring need for corporate sustainability means we need to evolve our ESG approach with practices like systems thinking, rather than abandon it altogether, write Charlie Ursell and Paul Twiney.
W
hile corporate social responsibility (CSR) began as a model for companies to manage their social accountability, by the late 2000s it had evolved into Environmental, Social, and Governance (ESG). This evolution included a focus on corporate citizenship, sustainability, and emphasizing the measurable environmental and social outcomes of doing business. In a globalized world, ESG goes beyond the company and its immediate environs to include society at large and the environment.
Capturing the zeitgeist
ESG quickly captured the public imagination. Fueled by growing fears of climate change and systemic inequity, companies embraced ESG as a pathway to demonstrate their values, attract investors, and earn public trust. Alongside ESG, new “purpose”–led strategies and activist CEOs, amplified by thinkers like Simon Sinek, created opportunities for the world’s largest consulting firms to turn sustainability into its own industry.
High profile pledges to go net–zero, carbon neutral, or climate positive—or any of the other buzzwords—became symbols of exemplary leadership. In the United States, the murder of George Floyd in 2020 galvanized corporate attention on diversity, equity, and inclusion and renewed focus on systemic racism and social inequity.
Alongside activists and protests and social movements, investors adopted new ways of doing business. BlackRock’s Larry Fink pushed companies to adopt sustainable models, while governments introduced stricter ESG regulations. The European Union led government regulation with its Corporate Sustainability Reporting Directive (CSRD). For a moment, it felt like the momentum behind ESG would never die out.
ESG loses its luster
Beneath the optimism, questions began to emerge—what is the true role of business in society? How do companies balance environmental targets with shareholder expectations? Can a sustainable world coexist with the relentless, capitalist pursuit of growth?
As ESG became more commonplace, cracks began to show:
- Greenwashing Erosion: Exaggerated, false, or misleading claims about environmental impact and sustainability damaged public trust and created scandal for corporations, like Lululemon recently being investigated for greenwashing by Canada’s Competition Bureau.
- Cultural Resistance: Transforming business models to meet ESG goals often requires significant internal changes and effective communication. If not, ESG can and has become a part of other “social battlegrounds” and been interchangeable with socio-political issues, like DEI.
- Rising Costs and Complexity: Stricter regulations and varying global standards have made compliance costly and operationally challenging. Even though the EU paved the road for government regulation, it now faces a reality where European companies are moving operations and manufacturing to other ESG-free jurisdictions like China and the United States.
Now, accusations of greenwashing are as commonplace as positive ESG strategies. The honeymoon period is over, and stakeholder skepticism is on the rise, compounded by the new economic pressures like rising costs of living.
A better way forward for ESG
But now, stepping into 2025, the realities of ESG are settling in. The current approach to integration remains difficult because of both stubborn internal organizational challenges and external undermining systems.
A new approach is needed, one that can align internal stakeholders with external interests, regulators, and systems. One that can create resilience and innovation by bringing leaders and teams together. An approach that can still create measurable—but perhaps more tenable—impact.
Pathway Forward with Collaborative Design
While companies are achieving success all in their own way, there are foundational strategies that offer a framework to move forward based on their capabilities and resources:
- Systems Thinking: Creating processes and policies that are addressing interconnected issues collectively, exposing tradeoffs, and aligning priorities so workforces can communicate easier and get to collaborative action faster.
- Integration with Business Strategy: Sustainability is not a side project—it must be embedded in the company’s core strategy. Alongside diversity initiatives, ESG strategies are more likely to be diminished the more siloed within an organization they are. If organizations are committed to improving the lives of people and the planet, it is going to need a new model of teamwork and hierarchy that places sustainability as a core business strategy.
- Stakeholder Engagement: Involving the traditional ideas of employees, communities, and customers with more modern ideas of investors, the public, and the environment to ensure ideas of sustainability are relevant and actionable.
Companies that integrate ESG factors into their core business models not only outperform peers but are also more resilient to disruptions. Organizations and companies shouldn’t be abandoning their ambition—but finding new innovative methodologies to make their goals and targets achievable.
Still Moving toward a Sustainable Future
The journey from CSR to ESG shows how corporate sustainability has evolved, with each stage revealing new challenges and opportunities. As the affair with ESG gives way to a new operational reality, companies need to rethink their strategies and achieve what’s possible, and not peddle lofty goals that were always impossible to persuade us into a purchase.
ESG now requires moving forward with eyes wide open–recognizing tradeoffs, making informed decisions, and committing to progress over perfection. Sustainability done right isn’t just good for the planet—it’s good for business.
