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Companies are becoming increasingly wary of the term ESG—used by businesses to highlight their social and environmental mission—even if they continue to support the principles behind the acronym that is under attack by conservatives as “woke capitalism.”
“The trouble with the term is it’s become a boogeyman,” Kathleen McLaughlin, Walmart’s chief sustainability officer and president of the Walmart foundation, said on stage at Fortune’s Impact Initiative conference in Atlanta this week. “It means a lot of different things to different people.”
Many companies are still focusing on the tenets of ESG in their decision making, but they’re avoiding the term. “When you talk about ESG, those aren’t letters—we necessarily don’t use those silos internally,” said General Electric chief sustainability officer Roger Martella. “We cover the topics that are part of ESG, but we don’t really use those silos internally.”
For example, Colgate-Palmolive generally uses the term “sustainability and social impact,” the company’s chief sustainability officer, Ann Tracy, said during the panel. Although all three executives on the panel said they still use the ESG term with some stakeholders like institutional investors, likely because there is evidence that links those policies to better financial performance.
“Certain institutional investors have said to us ‘please, on your website, can you just have an ESG microsite so we know where to go. Don’t call it something weird that we don’t know what that is. We need to know where to go to get the data that we need for our own governance,” McLaughlin said.
Executives differed in describing the importance ESG, or whatever language they happen to use, plays in setting their company’s overall strategy. Martella said that GE’s sustainability goals, even if the world’s best, would be for nothing if the company didn’t succeed first as a business because it would otherwise be unable to address those goals. “We have to be unapologetic about that,” Martella said.
Meanwhile, McLaughlin says Walmart prefers to make its business decisions through the lens of what was formerly known as ESG. “For us, the way we get the business right is by addressing the things that matter” to customers, employees, suppliers, and the communities that have Walmart stores.
Some companies are moving away from the term ESG
Even just having the acronyms on a website—or not—has become newsworthy. In August, after McDonalds removed the term ESG from some portions of its website, Bloomberg reported about it. Under political pressure, some companies are becoming cautious about their ESG efforts. On one side, conservatives are waging war against ESG because it’s seen as too liberal for its focus on climate change and diversity instead of just profits. In Florida the backlash even led to legislation banning ESG investing. On the other side of the political spectrum, some democrats have attacked the ESG branding at some companies—particularly big polluters—as mere greenwashing of their less than stellar environmental records.
Some of the financial firms that were among the first movers on the ESG trend have also toned down their public commitments about ESG. Vanguard, BlackRock, and State Street—among the country’s biggest asset managers—all removed language regarding their ESG investment opportunities from their website, The Washington Post found.
Some, like Bob Rubin founder and president of Rubin Wealth Management, commended BlackRock and Vanguard’s decision to move away from environmental and social criteria in their investing.
BlackRock, among the first firms in any industry to focus on ESG investing, came under especially heavy fire. Its CEO, Larry Fink, expressed frustration over how the term has come to be interpreted. “It was never meant to be a political statement,” he said at the Aspen Ideas Festival in July. It was meant “to identify long-term issues to our long-term investors.”
Fink adopted a similar approach to the Impact Initiative panelists. “I’m not going to use the word ESG because it’s been misused by the far left and the far right,” he said.
Update and correction, Sept. 13, 2023: This article’s headline has been updated. The spelling of Roger Martella’s name was misspelled in the original version of the story and has been fixed.
