ESG policies face challenges

Anti-ESG activists bring culture war to the board room

What you probably already know: Environmental and social governance (ESG) has become a huge topic of discussion in the business community in recent years. The concept has also been tied to diversity, equity and inclusion work, as well as environmental sustainability, and companies are increasingly being asked to report publicly how they’re performing against these metrics. At the same time, however, some groups are pushing back.

Why? So called “anti-woke” activists are showing up and pushing shareholders to vote against ESG policies. On Wednesday, Target shareholders rejected a proposal that would have encouraged the company to pay its workers a higher hourly wage. That’s just one of many similar proposals that are facing challenges. The Wall Street Journal reported that shareholders have voted on 70 measures that oppose ESG initiatives this year, up from 30 total in all of 2022.

What it means: This is creating a culture war that’s playing out in boardrooms large and small. In 2023, there was a significant drop in investor support for ESG policies, according to global business advisory firm FTI Consulting. The firm pointed a macro-economic issues as part of the reason for the drop, but also called out the anti-ESG agenda as the principal reason these issues aren’t getting the support they used it.

What happens now? In Europe, there are laws that force companies to publicly report ESG data. In the U.S., most laws are at the state level and penalties for noncompliance truly run the gamut. Now, though, many anti-ESG laws are being proposed, also at the state level. Some relate to specific state functions, like prohibiting ESG language from being added to state pension funds, for example. A Reuters report from earlier this year found 61 anti-ESG bills pending across the country.

More please: This issue isn’t going away any time soon. Who should we talk to about what this means and how leaders can prepare? Do you know an expert (or, better yet, are you the expert?) or do you have experience on a board that’s worked through this issue? Let’s chat.