This week, CEOs from major global corporations convene in Davos for the World Economic Forum (WEF). Yet don’t anticipate environmental, social, and governance (ESG) practices dominating their discussions. Once deemed the “holy grail” of WEF founder Klaus Schwab’s vision of “stakeholder capitalism,” ESG has become a contentious term amid America’s cultural battles. However, is the movement it represents truly waning, or are companies merely rebranding their efforts while the original forces behind ESG persist? The latter scenario wouldn’t be unprecedented.

In 2020, Business for Social Responsibility head and long-term WEF attendee Aron Cramer declared that ESG—a term used interchangeably to describe socially responsible investing or a set of sustainability standards to screen investors—had finally “come in from the cold.” WEF had become the hub for discussions on the corporation’s role in defending human rights, promoting LGBTQI+ issues, and spurring climate action. At last year’s WEF, however, as critics like GOP contender Vivek Ramaswamy locked ESG in their crosshairs, business executives reportedly wished ESG to “just go away.”

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ESG by Another Name

However, as Davos approaches this year, although the term ESG may have fallen out of fashion, many corporate sustainability initiatives are actively gaining momentum. The recent COP28 climate conference in Dubai earned a reputation as a new Davos. Media attention focused on the negative presence of corporate lobbyists. But at least 200 companies in the We Mean Business Coalition, representing over $1.5 trillion in global annual revenue, were there to press national governments “to address the primary cause of climate change: burning fossil fuels.” 

In a parallel vein, a survey by advisory firm Teneo revealed that a mere 8% of CEOs are actively reducing their ESG programs. Instead, the majority are maintaining these initiatives, making nuanced adjustments around the edges. Many are becoming more explicit and specific in describing their program goals, focusing on particular issues. Alternatively, some companies continue their sustainability efforts but operate below the radar. As one chief sustainability officer recently remarked to me, “Companies might be labeling ESG differently, but the momentum remains steadfast.”

Undeterred by political opposition, the sustained momentum stems from two key factors. First and foremost, companies are notably reacting to mounting regulatory pressure. The EU, for instance, implemented comprehensive sustainability disclosure and reporting rules last year, demanding detailed disclosures from companies regarding their sustainability endeavors. In the U.S. the SEC is deliberating its own rules, slated for release in the first part of this year, despite several delays. This proposed rule will enforce detailed emissions disclosure, climate risks, and strategies for achieving net-zero emissions.

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Positive Financial Returns

The second pivotal factor lies in the continued business viability of investing in sustainability efforts. Research demonstrates a clear correlation between financial performance and sustainability initiatives, affirming the profitability of going green. Generous subsidies by the Inflation Reduction Act (IRA) further provide an incentive. Sixty percent of all private investments connected with the IRA have reportedly been in Republican states. Furthermore, recent macro-level data in the U.S. indicates a decoupling of economic growth from emissions reduction, illustrating the feasibility of pursuing both objectives simultaneously. 

Despite political opposition, the ongoing resilience of corporate sustainability initiatives reflect the strategic framing that has been used throughout U.S. history to navigate periods of division. The dysfunction of the free enterprise system in the 1930s prompted President Franklin Delano Roosevelt to introduce tighter coordination of business activities, aligning them more closely with the public interest. By 1936, all states, except one, had established a state planning board, crucial for implementing extensive social and economic policies that played a pivotal role in lifting America out of the Depression. Additionally, these boards, with the authority to address exploitative corporate behavior, attracted and stimulated private investment.

A History of Rebranding Social Initiatives

However, as the 1940s ushered in the Cold War, the idea of “planning” business investments faced political resistance. Márcia Balisciano, global head of corporate responsibility at RELX, noted that the term ”planning,” perceived as too aligned with Soviet practices, was derided as ”socialist.” Even FDR’s planning expert, Rexford Tugwell, labeled ”Rex the Red” by detractors, faced criticism as un-American and Communist, leading to his departure from the administration. Although state planning boards seemed poised for dissolution, in reality, nothing changed. 

Over time, Balisciano explained, planning boards were simply rebranded as ”economic development corporations” rather than being abolished. Their functions had become indispensable. This shift in terminology represents a classic case of navigating policy nuances, moving from one polarized dimension—free-market capitalism vs. planned economy—into a less ideologically contentious spectrum. Economic development, focusing on ”partnering” with the private sector and attracting investment, emerged as the new, “more American-sounding” narrative. Today, many states receiving substantial private investments in clean energy and electric vehicle manufacturing owe their success to federal and state tax credits and economic development plans.

To be fair, the continued momentum in sustainability issues doesn’t encompass the entirety of the agenda ESG initially represented. For instance, there’s been substantial debate about the corporate world’s commitment to DEI (diversity, equity, and inclusion) initiatives. However, when it comes to the climate and sustainability perspective, the long-term trajectory appears evident. There won’t be significant changes in substance regarding private sector investment, except, perhaps, for another rebranding exercise in the age-old debate on the relationship between corporations and society.