Can You Lead Through the ESG Reset?

A few years ago, ESG was the corporate world’s rallying cry. Companies pledged bold goals, investors moved trillions into sustainable assets, and public enthusiasm around corporate responsibility surged. Sustainability reports multiplied, ESG-focused funds broke records, and for a while, it seemed like every major organization was racing toward a greener, fairer future.

Today, the atmosphere feels noticeably different. In boardrooms and investor meetings, you hear the fatigue. Skepticism is rising. Frustration is setting in. Many are asking: has ESG lost its way? Was it ever real in the first place? Or is this just the natural evolution of an idea that now demands something deeper — and harder?

The truth is, ESG isn’t ending. It’s being reshaped. And leadership today means understanding how to navigate this shift, not abandon it.

Understanding the Rise of ESG Fatigue

Several forces have collided to create the fatigue many are now feeling. Political backlash has certainly played a role, especially in the United States, where ESG has become a polarizing issue.

Even Larry Fink, CEO of BlackRock — one of ESG’s most prominent advocates — remarked recently, “I don't use the word ESG anymore. It's been entirely weaponized.”

But politics alone didn’t cause the disillusionment. At its core, ESG fatigue reflects a growing gap between ambitious talk and measurable outcomes. Trust has eroded. According to PwC’s 2024 Global Investor Survey, only 38% of investors believe companies adequately disclose ESG risks, a significant drop from previous years. Meanwhile, a European Commission study found that over half of corporate environmental claims are vague or misleading, underscoring widespread concerns about greenwashing.

Investors are noticing. Sustainable investment funds faced net outflows of over $13 billion in the first half of 2024, continuing a trend that began the year before. Even younger investors, once enthusiastic champions of ESG, are pulling back; Stanford research shows support for ESG investing among Gen Z dropped by nearly 30 percentage points between 2022 and 2024.

Inside companies, the complexity of ESG disclosure requirements has added to the exhaustion. Between frameworks like GRI, SASB, TCFD, ISSB, and regulatory mandates like the EU’s CSRD, many corporate sustainability teams feel trapped in a never-ending cycle of reporting — without the time or resources to drive real change. A 2024 KPMG survey found that 67% of sustainability leaders said they now spend more time preparing disclosures than implementing actual ESG initiatives.

Where ESG Went Wrong

Somewhere along the way, ESG became more about metrics and marketing than about business transformation. It became easier to issue a net-zero pledge than to embed sustainability into supply chains or product design. It became simpler to produce glossy reports than to make hard operational shifts.

As Emmanuel Faber, former CEO of Danone, pointed out, “When ESG becomes more about ticking boxes than driving outcomes, trust starts to erode. True leadership demands walking the talk.”

Stakeholders — employees, investors, customers, and regulators alike — are calling time on ESG theater. They are asking tougher questions, seeking real outcomes, and demanding transparency not only when it’s easy, but especially when it’s not.

This isn’t a rejection of ESG principles. It's a demand for seriousness, substance, and follow-through.

How ESG Is Evolving — And Why That’s a Good Thing

Despite the fatigue, a more grounded and durable version of ESG is taking shape. Companies are beginning to treat ESG performance the same way they treat financial performance: setting clear goals, measuring results rigorously, and accepting that credibility is earned over time, not claimed overnight.

Transparency is becoming the new currency of trust. According to Edelman’s 2024 Trust Barometer, 63% of people said they trust companies more when they openly acknowledge challenges and setbacks, rather than presenting only positive narratives. This marks a shift from glossy ESG storytelling to something more mature — a recognition that real sustainability journeys are complicated, messy, and require honest conversation.

Investors, too, are shifting focus. The number of ESG funds that now integrate real-world outcome metrics, not just ESG scores, has doubled since 2022. Funds and analysts are increasingly looking beyond whether a company discloses to what it delivers: reductions in carbon emissions, improvements in workforce diversity, measurable progress on water usage or land conservation.

Meanwhile, the scope of ESG is expanding. For too long, discussions about corporate responsibility focused narrowly on climate, especially carbon emissions. But the reality is broader. Biodiversity loss, freshwater scarcity, soil degradation — these risks are financially material, too. Over 500 global organizations, representing over $17 trillion in assets, have now committed to begin reporting on nature-related impacts through the Taskforce on Nature-related Financial Disclosures (TNFD).

A nature-positive approach is no longer a fringe topic; it’s fast becoming mainstream. Companies that integrate nature considerations alongside climate are positioning themselves for resilience — not just compliance — in a world where environmental risks are accelerating.

Leading Through the ESG Reset

So how can leaders navigate this more demanding phase of ESG?

First, they must embrace transparency — not selectively, but comprehensively. It’s not enough to celebrate successes. Companies must also be willing to say where they’re struggling, what obstacles they face, and what corrective actions they’re taking. This honesty builds credibility far more than perfect scores or slick campaigns.

Second, the emphasis must shift decisively from disclosure to outcomes. Reporting remains essential, but it must be seen as the beginning of accountability, not the end of responsibility. Progress must be measurable, verifiable, and tied to real operational changes.

Finally, leaders must broaden their ESG strategy to include nature and community impacts alongside carbon. Addressing climate change without considering deforestation, water risks, and biodiversity collapse is no longer seen as sufficient. Investors, regulators, and communities increasingly expect a holistic view of sustainability.

Importantly, leadership in this new phase will not be about big declarations. It will be about persistence — the steady, often difficult work of embedding ESG into core business strategy, making trade-offs visible, and aligning sustainability with innovation and long-term value creation.

A More Sober, More Lasting ESG Is Emerging

What we are witnessing is not the collapse of ESG. It is its maturation.

The easy applause is fading. The harder work is beginning. That’s a positive development for companies that are serious about building resilient, future-ready businesses.

Sustainability was never supposed to be simple. Transformations rarely are. What matters now is not how loudly companies declare their values, but how consistently they align their actions with those values — even when it’s complicated, even when it’s costly.

For leaders willing to make that commitment, ESG remains a powerful framework — not for virtue signaling, but for strengthening long-term performance, securing stakeholder trust, and contributing meaningfully to society and the environment.

The ESG reset isn’t something to fear. It’s a sign that the real work is finally starting.

And that’s work worth doing — carefully, thoughtfully, and with lasting impact.

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