The idea of Environmental, Social, and Governance (ESG) standards has, for some time, served as a foundational element of the corporate sustainability agenda, shaping how businesses understand their responsibilities towards society and the environment. However, ESG has recently come under significant scrutiny, particularly in the United States, where political and ideological disagreements have called into question the role of business in achieving social and environmental goals. Understanding the complexities of this backlash is vital to navigating the evolving landscape of sustainable business practices.

The Roots of the ESG Backlash

The ESG backlash is not merely a fleeting development but reflects deep-seated conflicts that have persisted in political economy. At its core, this opposition arises from the tension between shareholder and stakeholder capitalism. Critics argue that prioritizing ESG distracts from a company’s financial performance and imposes unwarranted regulatory burdens (Sætra, 2025). For many opponents, the backlash represents a broader rejection of the values embedded in sustainability, which are perceived as being at odds with conventional capitalist principles. Recent provocations, such as Elon Musk’s declaration that ESG is a "scam" and "the devil," highlight the ideological divide that has emerged around corporate sustainability (Gordon, 2023).

Conservative political forces have played a significant role in amplifying anti-ESG sentiments. This resistance has translated into legislation and policies designed to curtail the use of ESG metrics in corporate decision-making, drawing inspiration from the arguments of Milton Friedman, who famously argued that a corporation’s primary responsibility is to maximize shareholder value (Smith, 2024).

From ESG to Competitive Sustainability

Against this backdrop, it is instructive to consider a broader perspective on corporate sustainability, such as the one presented in the recent report by the Cambridge Institute for Sustainability Leadership (CISL), titled Survival of the Fittest: From ESG to Competitive Sustainability (Hooper & Gilding, 2024). The report calls for a shift away from symbolic gestures and compliance towards an approach where sustainability becomes a key driver of competitive advantage. The core issue, according to CISL, lies in the inadequacy of existing market mechanisms to foster the level of transformation required. They argue that only robust government policy can reconcile the apparent tension between profitability and sustainability.

Rather than treating ESG as an additional component of corporate strategy, the report advocates for embedding sustainability within the very essence of business models. This idea of “competitive sustainability” provides a potential pathway for businesses to navigate the ESG backlash, not by abandoning sustainability, but by embracing it as an integral part of their competitive positioning.

The Future Scenarios for ESG

In a forthcoming book chapter, our CEO Henrik Skaug Sætra outlines several possible futures for ESG in the face of growing opposition (Sætra, 2025). The most pessimistic scenario envisions companies abandoning sustainability efforts altogether, reverting to a model that emphasizes short-term shareholder gains above all else. A more pragmatic scenario suggests that businesses could adapt to the backlash by rebranding ESG principles, thereby continuing their sustainability efforts under less controversial labels—a strategy known as "greenhushing."

Conversely, the most hopeful scenario envisions a concerted pushback against anti-ESG forces, with corporations, governments, and stakeholders working collaboratively to refine and strengthen ESG frameworks. This scenario aligns closely with CISL’s concept of “competitive sustainability,” where businesses not only adopt sustainable practices but also actively work to reshape market conditions to foster both profitability and positive social outcomes.

Pathwais and the Role of AI-Driven Foresight in Sustainability

At Pathwais, we understand the implications of the ESG backlash for our clients and the broader business community. As the conversation shifts from ESG compliance to competitive sustainability, our AI-driven scenario planning platform equips businesses with the tools they need to navigate these turbulent waters. By providing data-driven insights, Pathwais helps companies develop strategies that align with shifting regulatory and socio-political landscapes, including new requirements like the EU’s Corporate Sustainability Reporting Directive (CSRD).

Our platform is designed to support businesses in overcoming the polarization surrounding ESG and focusing instead on long-term resilience and sustainable value creation. Whether companies aim to mitigate risks posed by political opposition or to lead in emerging sustainable markets, Pathwais offers the guidance they need to chart a course towards a viable and competitive future.

References

• Sætra, H.S. (2025). The ESG Backlash: Politics, Ideology, and the Future of Sustainable Business. In J. Jay Choi & Jimi Kim (Eds.) Responsible Firms: CSR, ESG, and Global Sustainability. Emerald Publishing Limited.
• Hooper, L., & Gilding, P. (2024). Survival of the Fittest: From ESG to Competitive Sustainability. Cambridge Institute for Sustainability Leadership.
• Gordon, J. (2023). "ETF Wrap: Musk says 'ESG is the devil'." ETF Stream.
• Smith, D.C. (2024). The Intellectual History of Milton Friedman's Criticism of Corporate Social Responsibility. Modern Intellectual History.