Why businesses aren’t hiding behind ‘ESG’ anymore

Corporate use of the term “ESG” is fading fast, with companies increasingly avoiding the term due to political backlash, regulatory complexities, and fears of greenwashing. But that doesn’t mean it’s not still business as usual. According to news organisation Eco-Business, a study of over 72,000 firms across Asia, Europe and North America reveals ESG mentions peaked in 2021 and have since plummeted, especially in Asia. Businesses are rebranding their sustainability efforts under terms such as “responsible business” to sidestep controversy, but the shift in language doesn’t reflect a retreat from sustainability itself. Companies are instead talking about their sustainability programs differently or less. ESG investing remains on track for 18% annual growth through 2030 and transition finance is booming in Asia. However, experts argue that ESG’s challenge is no longer about attention but about proving its value to business performance. GlobalData compared its trajectory to the plant-based food industry, which experienced rapid growth during the pandemic but later struggled with pricing, consumer scepticism, and media scrutiny. 

A recent report highlights that the planet is experiencing a historic drought, with significant impacts on major crops such as corn, coffee, cocoa, and sugar. Climate experts at Everstream Analytics have identified parts of Europe and the US as high-risk "hotspots" for severe drought conditions. These adverse weather patterns are jeopardizing food security and driving commodity prices upward. Sugar prices reached a 13-year high in 2024, and cocoa prices have also hit record levels, affecting manufacturers' profit projections. The ongoing drought is expected to persist, potentially leading to further reductions in crop yields and increased food costs. 

In the US, farmers are feeling the brunt of these climate-induced disasters. The American Farm Bureau Federation reports that in 2024, farmers and ranchers lost at least $20.3 billion due to disasters, including hurricanes and droughts. Texas reported the highest losses, followed by Minnesota and California. The USDA has authorised nearly $31 billion in emergency assistance, but only $10 billion of it is currently available for traditional commodity growers, leaving smaller farms at a disadvantage.

The remaining $21 billion, intended for those affected by weather-related disasters, lacks a clear timeline for disbursement. Farmers have expressed concern about relying on government aid for climate-induced disasters and question the effectiveness of current relief measures.

On top of this, a funding freeze at the USDA has put critical agricultural research and innovation on hold. News organisation Grist reports that the freeze has stalled grants from USDA, including the Sustainable Agriculture Research and Education program. The USDA has put a halt to funding for various programs, leading to widespread uncertainty and disruptions in agricultural research. Experts warn that without increased federal investment, US agriculture could face productivity declines of up to 12% annually by 2050 due to climate change and stagnant research funding. 

Companies are more likely to increase their climate targets than roll them back, despite economic and political pressures, news consulting firm PwC reports. In 2024, 37% of businesses raised their climate ambitions, while only 16% weakened their targets. Most companies have successfully covered Scope 1 and Scope 2 emissions, with healthcare, IT, and automotive sectors leading the way. However, progress on Scope 3 emissions, which include indirect emissions from suppliers and customers, remains a challenge. Despite this, momentum is building, with many businesses engaging suppliers and customers on decarbonisation. 

Businesses are beginning to see financial benefits from their decarbonisation efforts, with many predicting that low-carbon products will become a major revenue source in the coming years. However, PwC also cautions that for these climate claims to hold weight, companies must back them up with credible data, such as life cycle assessments, to ensure their claims are accurate.

New research by sustainable packaging company DS Smith shows that almost 7 billion plastic bags will be used for UK deliveries by 2030. DS Smith has called on the UK government to address plastic bag waste from e-commerce through upcoming circular economy regulations. While the UK's plastic bag levy applies to in-store purchases, it does not cover online sales, where plastic bag usage is rising. DS Smith’s research reveals that UK online fashion retailers sent nearly a billion plastic bags to shoppers in 2023, and the number could reach 6.9 billion by 2030. Despite some retailers, such as Zalando, switching to paper bags, many face challenges due to higher costs or lack of alternatives. DS Smith urges legislation to phase out certain plastics, encouraging innovation and competition in sustainable packaging solutions. This call comes amid new reporting requirements for small businesses under the UK’s Extended Producer Responsibility.