ESG is Dead…Long Live ESG

A couple of years ago, public intellectuals and political analysts alike announced the untimely demise of the golden child framework that worked towards assessing environmental and social impact of corporate investments as well as its ethical integrity. There were articles and podcasts from pundits that dominated newsrooms, popular media channels and every space imaginable.

The arguments ranged from

1. how ESG started as a measure of goodness and responsible investing but has inherent flaws such as being a burden for public companies that must invest heavily and is doomed to fail due to lower returns

2. how the war in Ukraine and other geopolitical shifts have tilted the scales away from governance centric measure like ESG to more primal instincts to survive

3. how ESG is being selectively used to ostracize certain sectors and their traditional investors (fossil fuel lobby)

4. how the headwinds of political changes will crush ESG programs in corporate

and many more ingenious arguments that skeptics kept building to dissuade the untrained observer.

Some of these arguments have merits that are beyond doubt, risks that must be sincerely examined. The origins of parts of these arguments could be traced back to sheer resistance to ring in the new or pure political rhetorics piggy backing partisan agenda. There are polarizing opinions across the aisle. But neither the origins of these arguments nor iron-clad opinions are as important as where we are now.

Let us ask some simple questions – What does the data say about where we are collectively headed?

1. In the second quarter of 2025, global sustainable funds appear to have rebounded from the earlier skepticism and registered net inflows of $4.9bn.

2. Investment in climate-driven growth businesses increased sixfold between 2019 and 2023, to a cumulative total of $683 billion

3. There is a consensus across governments to drive transition finance backed by initiatives to adopt existing climate taxonomies or building them afresh

4. There are now voluntary disclosure standards for medium and small enterprises signaling maturity of disclosure standards across the globe

5. Governments across the globe have also made strides towards adoption of sustainability reporting along with financial disclosures. Earlier this week, ECB president warned lawmakers against watering down reporting requirements.

I’m particularly interested is the last one which reinforces the belief that there is now the political will to have consensus mechanisms to mobilize capital and drive meaningful changes to how we look at governance. The whole story unfolds in the way corporations across the globe have whole heartedly adopted disclosures in the fabric of their governance structures.

ESG has already transformed into a much broader vision comprising of –

1. Climate initiatives – Companies are no longer focused solely on emissions; they are embedding decarbonization, resource efficiency, and climate risk sensing (for both physical and financial impacts) into strategy.

2. Social mandates – From modern slavery initiatives to supplier engagement, CSR programs, and workforce sustainability, companies are treating people as central to resilience.

3. Governance – Disclosure standards, legal compliance, and ethical oversight have shifted from box-ticking exercises to the backbone of long-term value.

This slow but undeniable transformation reinforces a simple truth: sustainability is not a passing fad — it is a structural shift.

The timing of the AI revolution could not be better. Companies are already using AI to track carbon emissions, monitor supplier compliance, and forecast climate risks. In supply chains — historically the weakest link in corporate resilience — ESG programs are now providing not only metrics but also decision intelligence.

From our experience working with Supply chain sustainability programs, it is evident that most companies are keen to do more – not less. Supply chains are particularly vulnerable to sudden policy changes as we have experienced throughout the Ukraine war.

When tariff shocks or conflicts force sudden supply chain realignments, ESG frameworks offer companies more than compliance numbers; they provide insights to act with speed and foresight. Data driven decision making makes these exercises meaningful and will help us reach our climate goals sooner than later.

ESG is far from dead. The skeptics deserve some credit: their scrutiny exposed weaknesses that forced more meaningful, credible programs to emerge. But the evidence is clear. Today, ESG is no longer about virtue-signaling or check-box programs.

It has become the baseline.

Sustainability is the new compliance — not a moral choice, but a competitive necessity