ESG strategy in a fragmented world

The 2020's looked set to become the decade of sustainability, with business leaders, investment and government providing impetus. However, that momentum has slowed markedly in recent years, due to a number of factors ranging from political polarisation and global regulatory divergence to public fatigue and apathy. 

We are yet to see how the current turmoil in the Middle East and the seismic disruptions to global oil markets will impact perspectives on ESG in different parts of the world. 

Little wonder, perhaps, that many companies are revisiting and evolving their strategy, focus and goals. Leaders today face three strategic responses to ESG uncertainty: 

• Continue – extend current ESG priorities and targets
• Correct – retain direction but adjust delivery, reporting, and metrics
• Change – redefine ESG priorities in response to external conditions

A wait-and-see approach that relies on historic decisions feels risky. Companies are wise to refresh their ESG strategy to reflect the current stresses around sustainability. 

> RELATED ARTICLE:  Time for an ESG strategy refresh? Four principles for navigating a divergent sustainability landscape

Key Takeaways

• ESG remains a strategic priority despite growing political, regulatory and market fragmentation
• Companies face five tensions that are reshaping sustainability strategy and communication
• The focus is shifting from commitments to measurable business outcomes
• Evidence-based ESG communication can strengthen resilience, trust and competitive advantage

Attitudes to ESG are in a state of flux

Companies must weigh up 5 sources of tension related to ESG.

Tension 1: Slower investment… but strong projections

📉 In 2025 Q1, there were record quarterly outflows for sustainable funds of $8.6bn, while new sustainable funds halved year-on-year.
📈 However, long term investor belief in climate risk, resource scarcity and sustainability driven innovation remains robust.

Tension 2: Conflicting global regulation… but local flexibility

📉 The US has passed anti-ESG bills, retreated from climate commitments and taken steps to reduce climate reporting requirements. Meanwhile, the EU’s Corporate Sustainability Reporting Directive (CSRD) is demanding stricter data from companies than the global baseline.
📈 However, this disparity offers competitive opportunities to multinationals that can design frameworks to carry a consistent global mindset into local jurisdictions.

Tension 3: Lower visibility… but sustained commitment

📉 Many business leaders see safety in silence, choosing to fly beneath the radar on sustainability, rather than invite scrutiny or backlash.
📈 However, the commercial and risk management benefits of ESG are still appreciated by business leaders. 88% of execs have said they view sustainability as a value-creation opportunity and 85% said they had boosted ESG investment.

Tension 4:. Public attitudes shifting… but not collapsing

📉 Consumers are questioning the worth of ESG, especially in the face of a cost-of-living crisis and growing fatigue around green marketing.
📈 However, the vast majority of citizens are still concerned about climate change. They expect transparency from corporations. And demand for sustainable and circular brands remains high. The bedrock of consumer support for ESG appears to be holding strong.

Tension 5: Reputational damage… but opportunities to stand out

📉 The tick-box demands of ESG frameworks has created a so-called ‘compliance paradox’ in which companies are accused of superficial measures rather than substantive impact. Any stigma of greenwashing or virtue signalling can be hard to erase.
📈 However, businesses that base their communication on evidence backed performance can take a leadership stance and attract investment. This messaging could also appeal to young workers, two-thirds of whom place equal importance on their employers’ values, including sustainability and social responsibility, as the money they earn.

So, which way are corporate ESG strategy initiatives headed?

In our recent conversations with clients, and with what we are seeing in the market, we believe sustainability remains a clear priority for businesses and investors. At the same time, there is a need to shape ESG strategies for the uncertainties that seem certain to endure for the rest of the decade.

Business leaders are searching how to adapt the value proposition around ESG in today’s polarised climate without diverging from their purpose and values. Beyond compliance, they need to demonstrate an ESG strategy that will deliver resilience, performance and long-term competitive advantage.

Demonstrating ESG value through evidence

This takes discipline...and courage too.  Accurate, substantial storytelling, based on verifiable data, is needed to convince stakeholders that sustainability initiatives are contributing directly to enterprise value. Tangible proof points and measurable outcomes matter more than commitments.  Companies need to show the evidence in compelling case studies – with the pay-out calculated in business benefits such as operational efficiency, risk mitigation, improved access to finance, stronger recruitment and retention, customer loyalty or growth opportunities.

An overly cautious approach that greenhushes genuine progress could prove to be a missed opportunity with customers, investors and talent. In a fragmented ESG landscape, organisations that communicate with clarity, consistency and credible evidence are likely to be better positioned to strengthen resilience, trust and long-term competitive advantage.