How has corporate sustainability changed in the past 12 months?

Welcome back to Sustainable Views, the podcast looking at sustainability policy and regulation in depth. I'm Philippa Nuttall, editor of Sustainable Views. Today we're going to be talking about a survey we ran over the summer to figure out what exactly is going on within corporate and financial sustainability teams across the world as they face domestic and geopolitical headwinds. The result is a series of articles looking at how regulation has reshaped sustainability, how external communication is changing, and what exactly is causing these shifts. Joining me today to discuss this subject is Acting Deputy Editor Elizabeth Meagher. Hi, Elizabeth.

Hello.

And data journalist Aniket Narawad. Hi, Aniket.

Hello.

And they've been leading on this project. So to start, Elizabeth, perhaps you could explain to us a little bit what made you want to start this project, and exactly what did you want to try and find out?

Yes, so we are kind of like everyone else have been hearing from sustainability teams for coverage throughout the year that yes, there is a bit of a backlash going on. Yes, people are changing the way they publicly talk about sustainability, but internally nothing has changed. Internal communications haven't changed, practices, targets, everything else has not changed. So that's what we heard and that's what we really wanted to find out.

From the articles I've read, it doesn't seem to be that they were just small tweaks in the way that organizations are speaking and working on sustainability, but it seems to be part of a bit of a broader strategic shift. But perhaps before we discuss that, let's go back a little bit. I mean, a lot of what's happening in companies in terms of sustainability has been because of regulation, in particular in Europe. And Aniket, perhaps you could talk us through a little bit about the changes that you've seen in regulation and what came out of the survey.

Yeah, definitely. What we have seen in the last year is regulation was the main driver behind the growth of sustainability and sustainability teams. If you look into the number of how teams were, sustainability teams were doing the work and the budgets allocated to them, compliance and regulations comes out as a central part of their work. We have also seen this in our survey conducted by us and also a couple of other reports. But with regulation changing in the EU and US, things, things, uh, we have seen signs of things shifting away from this. We have seen, uh, recruiters have told us that we have seen some of the worst, uh, hiring phases in the last few quarters. Uh, now that reporting has become voluntary in the US, experts have raised concerns whether sustainability teams will get necessary investments. With reduced, uh, regulatory pressures, uh, companies are now asking how sustainability can translate to business value for them. One of the experts I was I was speaking to said the discussion is shifting from a matter of urgency to meet regulatory targets to one focused on business impact and margin improvement. In addition to this, we are also seeing something, a new phenomenon, which is the sustainability teams have— and the roles have become much more mature. Today, the roles are much more integrated in the larger business operations. For example, procurement teams are involved in supply chain reporting, or finance and legal teams are play an important role in annual reporting or developing transition plans. The larger communication teams of companies are using sustainability as part of their communication. Roles have grown to become much more intersectional today, which makes it harder to understand which roles are sustainability-only roles and which roles are not sustainability roles. One of the experts which I spoke to described this phenomenon as internal cannibalization of teams. However, he noted that this should not be interpreted as sustainability becoming less important, rather it is becoming more systematically anchored across the company.

Okay, so there's a lot going on there then, plenty to discuss, but it doesn't seem as if it's all bad though. I mean, sometimes we get the idea from the media in particular and the reports that we sort of get in our inboxes that everything is bad and that sustainability really is being dialed back. And perhaps Lizzie, you could talk to us a bit more, I think In the headline of one of your articles was the idea that companies are now sort of dividing into two camps. And can you explain a bit more about what those camps are and how they're operating?

Yeah, so I guess the first one is exactly what Aniket was talking about, these companies that have done a really good job actually of embedding sustainability across different functions already. And so while for them it might even in the data look like their sustainability teams are shrinking, it's actually a kind of positive for sustainability. But we do have to mention the companies that some of them have been grabbing headlines, some of them have done it more quietly, that have just kind of abandoned what they were doing. And those seem to be the companies that kind of viewed sustainability as the latest kind of trend to jump on in the late 2010s, early 2020s. It seems like those ones, we've lost them, which, you know, a lot of people will say is not a terrible thing. It's certainly better for kind of overall greenwashing rates, which do appear to have fallen. So you can interpret that how you like.

And so you say we've lost them. I mean, does that mean that they're not working at all on sustainability anymore, or are they doing it sort of— I mean, you mentioned greenwashing, but there's also this phenomenon that we've often talked about of green hushing, whereby companies are still acting on sustainability, but there's a bit of a pushback because presumably, I mean, you know, if we're going to decarbonize, all companies are going to have to be working on sustainability. So while you say, you know, some might welcome it because actually statistically greenwashing is less impressive, the statistics are less impressive in that, but in the real world, this isn't a good thing for, you know, climate action or protecting nature.

So I think the big distinction there is that this is mostly about communications. And so when I say, you know, we've lost them, I think it's the people that did view it as a positive for communications to be talking about sustainability, maybe they weren't doing much in the first place anyway. So it's not that they have like, you know, fired all their sustainable procurement business partners or whatever it is. They weren't maybe doing that in the first place, but they were talking the talk. And now that it's not kind of trendy to talk about sustainability anymore, we're not seeing everyone just kind of talking about it really publicly. And you know, one thing that is really coming out is that it's possible that President Trump will do more for combating greenwashing. than kind of any other, um, lawmaker. Because it's, you know, you're not just going to say it if you can't back it up anymore. So it's, yeah, it's really largely about communications is where I mean that.

I think that's super interesting. I mean, this earlier this week we were talking about Trump, um, talking about moving reporting or financial reporting from being a, a quarterly thing in the US to becoming a biannual thing like it is in the UK, the EU, and other jurisdictions. So that's two almost good news stories that we've got to have— we've got for Trump this week. We need to be careful potentially. But Aniket, coming to you on the communications front, I mean, is there anything that you wanted to add in terms of what Lizzy said about you heard when you, you spoke to people in terms of, yeah, communicating around sustainability and how that's changed within the companies you spoke to?

What I have seen is that the term ESG almost has disappeared, which was quite popular in 2022, 2023, during that period. Now in 2024, the term almost has disappeared from the annual report, especially in the US. You know, we barely see the ESG anymore in the reports.

That's, yeah, that's really interesting. So it's definitely sort of, yeah, being hidden at least, even if it's not disappearing altogether. And Lizzie, you cover the US for Sustainable Views, and we've already mentioned Trump and a couple of things that are happening in the US. But I mean, it would be wrong to say nothing's happening on this side of the Atlantic. I mean, I'm based in Brussels, and we've seen a big pushback through the omnibus proposals in terms of reducing sustainability reporting disclosure rules as well in the EU. The UK, it's still being discussed. Obviously Trump's there on his state visits, um, at the moment. We don't know exactly what's being discussed, but I imagine, you know, some of these rules could be, could be being discussed, uh, with Keir Starmer in the same way they've been discussed at an EU level. I mean, what differences did it come out when you were speaking to, um, sustainability, uh, people within the EU or, or either UK and the US?

Yeah, so there has been a fairly clear, um, divide. Obviously there has been, you know, a fair bit, as you say, of ESG backlash on this side of the pond. But in the US, it's really clear that it's any, any business that has kind of any clients, any business in the US, particularly government contracts, has to be incredibly careful about how they're communicating about sustainability. And that's the kind of clearest shift. I think that ESG, obviously, also DEI have become basically complete bogeymans in the US. That's slightly less true in Europe. And I think one place that the term ESG does appear to kind of be living on is within the investment firm space, because it was, you know, as lots of people have pointed out, it was always about risk management. It was an investment strategy. It wasn't a way for companies to talk about sustainability. I think sustainability was always a safer term in that sense. But we've also heard from people in Asia that, you know, they're not hugely keen on the term, but it's nowhere near as politicized there as it is here and in the US.

Subscribe to Sustainable Views to access our policy tracker to source insight and data on specific policies, including changes, deadlines, and guidance. The policy tracker allows you to search for information on more than 2,600 sustainability-linked provisions globally. And to click through to our news, views, trend analysis, and deep dives. That gives you the power to see what regulatory changes mean for you and your business. Find out more by emailing sustainable.views@ft.com. That's sustainable.views@ft.com. Sustainable Views as a service from the Financial Times. And was there any sense, either Lizzie or Aniket, when you spoke to people— I mean, if we're not talking about ESG anymore, over the years we've had, you know, various creative and less creative suggestions about what we should be talking about? I mean, is sustainability per se kind of what people are talking about now? Or are there any other sort of interesting ideas out there as to, you know, what we, how we talk about sustainability now? Or should it be this more, as you've just mentioned, these ideas of risk, or I think resilience as well is a term that I often hear when I speak to businesses.

What we have seen instead of the term ESG, we see a lot more people using the word sustainability. We also see impact. That's another word that has popped up now. But sustainability has grown much more in the last 4 years and like, same duration when ESG has dropped.

Yeah, I think what I'm also seeing, as you say, risk, kind of a breaking down. So one person described it to me as a disaggregation of ESG. So if you were talking about the E, you're going to be talking about maybe climate change, maybe nature. If you're talking about S, you're, you know, maybe you're talking a bit less about diversity, but you're talking about fair wages, you're talking about labour conditions, people being a bit more specific, which, you know, is a good thing.

And perhaps you say— so that was my next question— you say it's a good thing. Could you explain a little bit more why, why it's a good thing? I mean, from either your point of view or what people said to you, you know, this disaggregation and sort of seeing them as separate issues rather than being lumped in together?

Yeah, I will say for exactly that reason, really. I think that a thing lots of people have said to me is, you know, ESG was a big issue with it was that it was kind of becoming all things to— trying to be all things to all people. And people were never really clear what you were talking about when you were talking about ESG. You know, some people were talking about turning the lights off at the end of the day, and some people were talking about very different things. So, um, we've heard, you know, people also hiring more subject matter experts. So rather than just having an ESG manager or an ESG team, you'd have a one or two people looking at nature, one or two people looking at something else super specific. And so that definitely appears to be a positive, I think.

Yeah, well, we need to get some positives somewhere, right? So I think anything that you're seeing as a win— and there do seem to be various things in there, it's definitely not a black picture, which is very much what's being painted elsewhere. So I think that's really interesting to hear about, and that's something that we should definitely, you know, discuss more. Aniket, do you want to discuss a bit more what you're going to be looking at in your next article and yeah, what you saw, a couple of the findings?

Yeah, so in the sustainability survey we have done, what we have seen is that a big chunk of work done by sustainability teams is being outsourced now. Companies seem to be a bit more hesitant right now to hire full-time employees and invest in them. So we have seen a lot of the work has been outsourced. So one of the articles I'm working on right now looks into how does this trend and like, you know, tries to understand what kind of work is being outsourced. Is this the only short-term trend or we are fundamentally going to see changes in how sustainability-related work will be carried out in the future? And ultimately, what does this mean for people working in sustainability?

And in terms of outsourcing, are we talking about consultancies or individual freelancers? Is there a pattern as to what this outsourcing looks like?

I mean, they are both happening right now. We have seen a lot of individuals doing freelance work, especially those who are laid off in the last few quarters. And then we also seen growth in the work of consulting firms, such as big consulting firms.

Okay. It'll be interesting to see in terms of costs, you know, if they're outsourcing to consultancies, exactly whether that really is a cost saving. or not, given that, I mean, in the EU at least, one of the, the big pushes in terms of, uh, the omnibus proposal is to reduce the use of consultancies and the amount of, um, you know, analysis that's done by those companies, auditing by those companies to reduce costs. So that would be something we should perhaps have a look at in a second instance. Uh, Lizzie, where's, where's your next article going?

Um, so I'm going to kind of wrap up the full series, um, in my final piece thinking about, you know, lessons learned and what we can take from this period. So a couple of people have kind of described this as, you know, just the way that markets shift, the way that moods shift, and that this is a cycle. And I think that what we want to take out of this whole experience is what we can learn from the companies that have kind of weathered this storm. And so, you know, where we were talking about the companies that have done a good job of embedding it into their corporate strategy, they are much stronger when the mood changes. And so we're going to be kind of compiling a, I don't know, a list of tips and tricks for weathering the next storm.

And I think one of the things you sort of mentioned in one of your articles was the idea that sort of rather than energy going into sustainability at the moment, which was seen potentially a couple of years ago as sort of a trendy subject that companies had to engage with, whether how deep or not that was is a different matter, you were then suggesting that AI has almost replaced that. I mean, is that something that you see continuing? I mean, we've just seen the UK and the US, the UK and the US in the last couple of days, and these massive deals on AI, as if this is kind of, you know, the what's going to underpin the, the economy in the coming years. I mean, did you, do you see that continuing, or do you think the AI bubble will burst? Or is there a way that, you know, once potentially Trump has moved over and the impacts of climate change will be there more than ever for people to see that actually sustainability and AI will in some way potentially work together, or, yeah, what do you see happening there?

Well, I would love to be able to say that I know, um, I know the bubble is going to burst, I know exactly when, so that, uh, we can all time it. But, um, one thing that, um, you know, I've spoken to a lot of kind of financial investor contacts over the past couple of months, and, you know, people do believe that these companies are super overvalued, um, and that this bubble will burst. And one kind of positive spin on that is that that money is then going to be looking for somewhere to go, will it come back to sustainability? And so there is a sense that, you know, it will be kind of ESG funds' time in the sun once again, and hopefully the regulatory changes that have taken place in the years since then will mean that everyone has got much better quality data to work with by that point.

So it really comes back to this question of resilience again and managing risk, which sustainability is obviously a key part of.

Great.

Well, I look forward to reading the next couple of articles. It's great that we've done this, and any readers that want to get in touch, or listeners that want to get in touch with their sustainability stories from their companies, then please do contact us. Thank you for listening today, and to keep up with the latest developments in the world of sustainability, please do sign up for a free trial of Sustainable Views and our daily newsletter at sustainableviews.com. We'll be back with another episode in October.