Are ESG committees still relevant?

Are ESG committees still relevant? The recent backlash has forced many corporate leaders into a rethink, but what’s the right long-term call?

There’s no surprise that the 2020s have been turbulent for Environmental, Social, and Governance (ESG) in the public sphere. It’s especially true since Donald Trump regained the US presidency. Under his leadership, the already increasing hostility against the movement was given unparalleled government support. 

In short, the concept is now firmly caught up in the stubborn political polarisation of US politics, and will likely stay that way for the next three years at least. 

In the fallout, multiple companies have re-evaluated how much time, money and effort they give to ESG, up to and including their investment in ESG committees at the boardroom level. 

Multiple global brand names have either disbanded such committees, changed their names or integrated them into others, like remuneration and nominations committees. Commentators have repeatedly argued that such moves represent a downgrade of priorities or an attempt at “hushing” (keeping quiet to avoid angering any of multiple polarised groups of stakeholders). 

Examples within the last two years include coffee chain Starbucks, American Airlines, UK tech chain Curry’s and the Cigna group. All have pursued one of the above tactics. 

This raises crucial questions for corporate leaders everywhere: amid the noise and the retreat of some, is the dedicated ESG committee still a relevant, even necessary, component of modern corporate governance?

At this point, it’s worth looking at the concept of an ESG committee and reminding ourselves what it’s there to do.

At the board level, a dedicated ESG committee typically serves as the eyes and ears of the full board on all matters related to ESG metrics. Its primary functions include:

• It ensures the company’s ESG strategy is aligned with and – crucially – is integrated into the overall long-term business strategy.
• It identifies and oversees the company’s handling of material ESG risks (e.g., climate change impact, supply chain labour issues, data privacy failures).
• It oversees the company’s efforts to comply with ESG reporting requirements. Depending on the country/region in question, these requirements could be quite lengthy and still growing. 
• It considers and reflects on all input from stakeholders regarding the company’s ESG strategy. 

When it comes to the decision around whether your company needs a committee like the one above, the simple answer is two-fold.

• It’s about what’s best for your company
• It’s not about following a trend

The second point is precisely why making decisions based on public backlash alone may not be the right course of action. Folding ESG away outright or even tucking it under other business goals can come with risk if you haven’t evaluated your stakeholder and compliance expectations properly. 

These days, the location of your company (or at least its headquarters) can be a driving factor in how much energy you decide to give ESG. 

In the US, for example, the Trump administration has

• Openly criticised and targeted ESG investing
• Openly criticised goals related to ESG metrics, including combating climate change and diversity, equity and inclusion
• Openly signalled its willingness to lean on big businesses over issues like tariffs, products and strategic goals. 

An environment like this may be less attractive to companies considering whether to set up or retain an ESG committee or broadcast its existence in public communications. That said, if your company’s investors continue to demand or show appreciation for ESG-related value, then having some kind of committee to oversee this may be a good option. 

In the EU, UK and in several countries of the Middle East, on the other hand:

• Regulations around ESG reporting are increasing
• The general mood of both political and consumer stakeholders is one that values long-term sustainability

In other words, these areas lean far heavily on compliance, and so many bigger companies will need to ensure that they have the skillsets and resources to fulfil these obligations that will only get tougher over time. In cases like this, having an ESG committee will demonstrate to stakeholders that the company has an established and functioning chain of command in place to reach a very tangible goal.

So, are ESG committees still relevant? The ultimate answer is that it depends on your company and its stakeholders. The practical answer is that it may matter far more than the public backlash suggests. 

ESG assets continue to be worth between $30-40 trillion worldwide, and multiple outlets have voiced their sustained expectation that this figure will grow. If a company is caught in the backlash, it still has the option to simply avoid publicity around the term “ESG” rather than the entire concept outright. The same goes for committees. 

Ultimately, if your company has any strategic need for ESG metrics, compliance or similar requirements, having some kind of dedicated committee is a good idea because it allows you to give structure and oversight to an important goal.