In 2015, Paris was buzzing with anticipation as world leaders gathered for the UN's annual Climate Change Conference (COP21). After weeks of intense debate, on 12 December, they emerged with a promise: 196 nations pledged to take on climate change with the goal of net zero emissions by 2050.
For businesses, this signalled the beginning of the "ESG" movement: a focus on environmental, social and governance issues in business decisions. Across the globe, companies rolled out individual, ambitious campaigns towards net zero objectives; ESG-focused investment strategies ranged, but often included transitions to green energy and divestment from fossil fuels.
US telecoms company Verizon, for instance, committed to generate renewable energy equivalent to 50% of its annual electricity consumption by 2025. French insurance company Axa vowed to cut ties with the coal industry by 2030. And after George Floyd's murder, global companies including Apple, AbbVie, Facebook, Pfizer, Johnson & Johnson and Procter & Gamble pledged a combined $340bn (£279bn) to furthering racial justice causes.
However, in the years since firms announced these splashy ESG commitments, often boosting share prices and bolstering corporate reputations, the term has created more confusion – even trouble – than positive change. In fact, some of those ESG commitments have created myriad problems for executives, says Alison Taylor, a clinical associate professor at NYU Stern School of Business, US. Increasingly, the ESG movement has been labelled as "woke" capitalism, and accused of enabling greenwashing.
As a result, Taylor says that even as businesses continue to issue net zero pledges, they've stopped labelling their business decisions as "ESG". This could spell relief for firms that have faced increasing backlash for leaning into the term while failing to make any substantial changes, particularly in a time of growing public expectations around corporate responsibility.