CEOs are increasingly avoiding using the term ESG amid political backlash

Corporate America has shifted its strategy on environmental, social, and governance (ESG) initiatives.

Following years of investor backlash, political pressure, and legal threats, many CEOs are now avoiding the ESG acronym, reports the Wall Street Journal. Companies including Coca-Cola KO are rebranding publications and committees, removing ESG from titles. Wall Street firms are closing ESG funds due to declining interest.

This shift reflects the complexity of ESG, as noted by Daryl Brewster, former executive of Kraft Foods and Nabisco. He now leads Chief Executives for Corporate Purpose, a nonprofit focusing on social impact. The term ESG became popular after the United Nations used it about two decades ago but has since become divisive and criticized for reasons including being labeled as “woke capitalism.”

Despite reduced interest in ESG among the public, many CEOs continue to follow sustainability commitments made in the past. A Teneo survey found that only 8% of CEOs are scaling down their ESG programs, with the majority maintaining them but changing how they are managed. Advisers recommend CEOs be more precise and set achievable goals, minimizing public pronouncements to avoid regulatory scrutiny or political criticism.

Law firm chair Brad Karp said companies are operationally continuing with ESG programs but not publicly emphasizing them. The politicization of ESG intensified after a dispute between Disney DIS and Florida Gov. Ron DeSantis in 2022, leading to a significant withdrawal from ESG funds and changes in policies by major firms like BlackRock BLK and State Street STT .

There are challenges in quantifying some ESG aspects, especially social goals. However, companies remain committed to the environmental aspect, with many CEOs participating in climate change conferences.

Coca-Cola exemplifies subtle changes, publishing its report as “Business and Sustainability” instead of “Business & ESG.” Texas Attorney General Ken Paxton, an ESG critic, views the decreasing trend as a realization by CEOs of the legal risks and investor losses associated with ESG. Brewster’s nonprofit advises using clear language to describe initiatives, advocating for the term “responsible business” instead of ESG.