ESG: What it is and where it may be going

30 October 2025 Reading Time: 7 minutes

Gregg Feistman:

The concept of Environmental, Social and Governance (ESG) has been around a while. But recently, the lines have blurred and what it means to companies and communicators has become a little fuzzy. So let’s look at the origins, what it is, what it isn’t, how it has evolved, and where it may be going.

Contemporary ESG was originally a corporate governance and investment term used to help companies assess risk. It has since grown into a cottage industry of consultants, experts, and law firms working to advise small to mid-sized enterprises (SMEs) as well as multinationals on how to best promote, manage and communicate these risks. For some, ESG is subset of Corporate Social Responsibility (CSR). For others, it is a form of Corporate Social Advocacy (CSA). Today, the definition is often dependent on who’s defining it. But both terms can be found within an organization’s corporate social purpose and ESG is a significant contributor to a company’s reputation. And corporate reputation plays a major role in products bought, jobs chosen and stocks invested in.

The lack of a common definition is one of the problems with ESG, much like CSR and DEI. As communicators, we need to understand there’s no widely agreed-upon definition, leading to the terms’ weaponization on both the political right and the political left. 

So what exactly is and what isn’t ESG?

First, it’s important to realize CSR, ESG (and DEI, for that matter) aren’t a strategy; they’re an outcome. Thought of that way, we can move beyond the financial markets’ definition of ESG and see it as a set of guiding principles that provide a means of systematically applying organizational values to business practices. In other words, part of a company’s DNA. To break it down:

E

Environmental sustainability is probably the most well-known and easily understood concept within ESG. As the climate continues to change, effects are being seen and felt across the globe. From the Paris Agreement to the United Nation’s 2030 Agenda for Sustainable Goals, organizations in the public and private sector are actively working to create, implement, and promote environmental sustainability. Likewise, green energy transformation is a major focus in the venture philanthropy and private capital investment spaces. While it is not appropriate to declare ESG as the sole “purpose of business,” environmental initiatives clearly addressing an organization’s impact on the physical environment are central to the broader ESG discussion.

However, that’s a narrower view of the “E” than it deserves. What about the “environmental” landscape in which a company is doing business (its competitors, regulatory environment, socio-political environment, to name three)? What’s about the environment in the workplace? Clearly, the “E” should be thought of as more than just being friendly to the planet.

Another interesting trend around the “E” is happening with younger investors. According to 2023 data from U.S. Bank, young people are willing to sacrifice investment returns for strong ESG programs. Nearly 85% of Gen-Z members are willing to accept lesser returns than the S&P 500’s 12% average if the smaller returns mean investing in companies and funds that align with their values. That’s compared with 59% of millennials, 45% of Gen X and only 30% of baby boomers.

S

“Social” in ESG may appear to be a modern term, but the practice goes back

centuries. For example, 19th century British chocolate magnate George Cadbury helped educate and house residents of the factory town. Attending to his employees’ well-being, he paid their hospital bills, built a housing development, soccer and cricket fields, gymnasium, and outdoor pool. A more modern example is Colonial India textile manufacturer J. N. Tata who brought his Parsi and Zoroastrian spirituality to his business. He envisioned a hydroelectric plant, tree plantings, and a wildlife sanctuary to improve life in Mumbai, where the company is headquartered. His son completed the project after Tata’s death. Today, the Tata Group is one of the largest and most respected corporations in India.

The “social” aspect of ESG is often misconstrued as charity or philanthropy. Although addressing social issues and creating social impact often includes some form of charitable giving, they’re not the same thing. Generally, philanthropy involves making a financial, product or service donation to a cause or organization, usually an NGO (non-government organization). Social programs, on the other hand, can include a wide array of internal and external programs such as employee wellness, work-life balance, community relations, diversity, equity, and inclusion. 

The host of topics that can be included in “social” are far reaching, including labor standards, human rights, DEI, health and wellness, product safety, access to opportunity, education, anti-gun violence, etc.  As with ‘environment,’ the term ‘social’ can mean different things to different stakeholders. It is necessary for leadership teams to clearly define the concept for their own organization and prioritize the social issues that align with their organizational mission, values, and goals.

A 2023 USC Annenberg Global Communications Report notes “Many companies are placing increasing focus on the role and importance social purpose plays in shaping and sustaining a company’s reputation…All companies pondering this issue should be aware the majority of consumers, employees, and especially investors agree with PR professionals that companies have a significant responsibility to address the social issues affecting their stakeholders.”

In fact, according to a 2025 Morning Consult report, people issues are most likely to impact purchase. “When it comes to ESG issues that do impact consumer decisions, employee treatment, safe working conditions and wages lead consumers’ minds.” Yet, the report also noted “overall awareness of ESG initiatives is low: less than half of U.S. adults say they have seen, read, or heard about ESG initiatives across all categories in the past month.” In this respect, other parts of the world are ahead of the U.S., highlighting a challenge to leaders and communicators.

There’s also a strong financial benefit incentive to those with strong social commitments. 2023 research from NTT Corporation and ThoughtLab revealed “leading firms in social sustainability saw an 11.4% increase in employee productivity and added $675 billion in gross domestic product across eight countries and five industries.”

G

In the ESG equation, both the “E” and the “S” are hotly debated. However, the “G” (Governance) is rarely talked about, if at all. Governance starts with federal/national and state legal requirements all publicly and privately held companies must follow, although the rules and regulations will differ across industry and national and international government jurisdiction. This becomes especially challenging for companies doing regional, national, or international business. Beyond the labyrinth of legal and regulatory requirements in corporate governance, there are also board and executive governance to consider. Boards of Directors and Corporate Executive Boards must also create and carry out policies and procedures governing the organization’s operations, communications, security, compliance, transparency, and accountability. This is where it gets interesting.

Most executives tend to think of governance as two things: legal and compliance. That makes sense given the vast number of regulatory and compliance issues companies face in today’s economy. However, governance is more than simply filing reports and meeting minimum standards. Indeed, those standards exist to hold companies accountable, but the mere concept of ESG suggests companies should not be checking boxes to simply comply with the law. Doing so almost mocks the entire premise of good governance. Governance should serve as a framework for virtuous ESG. 

When companies lead with ethical governance, then more nuanced conversations can surface. For example, which part of the leadership team will lead green energy transformation efforts? How will the company responsibly ensure human rights, sustainability and fair trade throughout the supply chain? Simply put, good governance includes creating organizational specific rules, policies, guidelines, and procedures to create the pathways and guardrails for environmental and social initiatives to flourish. Most importantly, governance should not be isolated to the C-suite. Boards of Directors need to be involved, as do employees, vendors, and suppliers. This may be radical thinking to some, while others have been practicing this form of good governance for many years.

In the absence of good governance, organizations become susceptible to performative actions that simply check a box on the reporting checklist. This is where unethical practices such as greenwashing and pinkwashing come into play. Once found out, companies using these deceptive practices lose trust, credibility and reputation with a host of important constituencies.

ESG, like many corporate efforts, can always be improved to add value. Some companies would like to be certified across international standards with environmental, social, and governance policies. Those behind DEI efforts understand it’s a challenging topic in some quarters today, but want fewer performative programs, and start to make real differences in transforming corporate culture with starting or better using employee resource groups (ERGs) to help senior decision makers. Still others want to enhance their community engagement programs.  

One of the challenges facing leadership teams lies in effectively communicating with various stakeholder groups. In the world of communication, there is no one formula for effective communication, but there are guiding principles such as honesty, transparency, and tailored messaging.

Forces Opposing ESG

Sadly, we don’t live in a utopian world of ESG. While rhetoric has been weaponized to intimidate companies, especially on social media, the roots of the backlash against ESG derives from different perspectives: skepticism (ESG ratings are a scam), philosophical opposition (the focus should be on shareholder value exclusively), and opportunism (it’s seen or purposely positioned as elitist). And the backlash is increasing and expected to increase over the next few years from social media activists, government officials, politicians, the media, employees, institutional investors, business partners and consumers.

Partly because of this, annual sustainability reporting among U.S. corporations is significantly down in the first half of 2025, according to a July report from the Conference Board (from 831 in the Russell 3000 index in 2024, to 432). Other factors contributing to the decline include preparing for mandatory ESG disclosures under the EU’s Corporate Sustainability Reporting Directive (CSRD) and in the U.S., California’s climate laws.

In the U.S., the headwinds are strong while stakeholders in other parts of the world seem to be more comfortable. Historic inflation, social unrest, political polarization, partisan media, and a general post-pandemic angst weighs heavily.  

That said, it’s nearly impossible for companies to be on the sidelines anymore. The simple truth is, there are no sidelines. Whether or not you want to be in the game, you’re in it – or soon will be. One of the keys to meeting this trial is consistency and authenticity. Companies who have supported a particular cause for years can’t suddenly announce one day they’re no longer supporting it, at least not without explaining why. Consumers and business partners understand priorities change, economics change, technologies change, the competitive landscape changes, but unless companies are communicating the rationale with all their constituents, a sudden change in position comes off as inauthentic, hypocritical or worse. And that loses trust.

Communicators are challenged again by a lack of standard definitions and the current political climate; the culture wars and internet outrage. As a result, companies are turning to terms such as “impact” and “responsible business.” (Question: does anyone want to run or work in an irresponsible business?) As an example of how far the language has been stretched, recently one U.S. utility called their efforts “energy utilization.” (Personally, I’m confused – does that mean they turn the lights off when they leave a room?) It’s incumbent on us as communicators not to get caught up in corporate-speak, where words lose their meaning and vague terminology can mean anything – after all, Orwell warned us about this in 1984. 

I believe it’s our obligation and our job to advise senior management to remain committed to established values in the face of sometimes withering criticism from a variety of sources. Some of them may be legitimate and you have to have an answer ready to address realistic concerns. Others should just be treated as clickbait. We need to be able to distinguish between the two. Because doing so is good for us and good for the bottom line.

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Gregg Feistman is Professor of Practice, Public Relations at Temple University and co-author of Raising Social Capital: Corporate Social Advocacy in a Changing World 

 

 

 

Written by: Editor