Good morning. Peter Vanham here, on assignment in Brussels, filling in for Alan.
On the ESG front, the U.S. and Europe remain oceans apart. In the U.S., the polarization of ESG is making the acronym a no-no even for its fans, while the EU’s regulatory tsunami on ESG will give U.S. multinationals no choice but to embrace and track ESG principles, regardless of what executives call them. That is the take-away from two ESG conferences I attended this week—one on each side of the Atlantic.
In the U.S., ESG detractors have basically won. As Alan reported earlier, a full half of Fortune 500 CEOs now believe ESG issues are “unduly impacting business decisions.” And that sentiment is trickling down to the chief sustainability officers in charge of ESG. Participants in a Fortune Impact Initiative call on Tuesday, which took place under Chatham House rule, admitted as much. “We don’t talk about ‘ESG’ anymore,” and “the term [ESG] does get in our way” were common refrains.
As an alternative, executives are now talking about the “specific actions” they are taking on ESG’s constituent parts, while avoiding the polarized term itself and dodging so-called “trip wires" like climate and sexuality.
That pragmatic approach doesn’t suit everybody. “No matter what you call it, you’re going to alienate someone,” one participant objected. “There are many people that [criticize ESG] simply because they don’t want to be held accountable,” said another. But amid “extraordinary polarization,” it's clear that corporate America has “moved on” from adopting the ESG moniker.
That conclusion contrasts starkly with what's happening in Europe. Business leaders there have also “moved on,” but in the opposite direction, working to integrate ESG more formally into business practices. This month, the EU is expected to unveil its final set of “European Sustainability Reporting Standards” (ESRS), pushing the ESG debate from the political and societal arenas to the legal and accounting desks of multinationals—and onto the radar of CFOs.
“My colleagues in the U.S. used to think [the EU ESG rules] won’t apply to us,” a Europe-based U.S. manufacturing executive said during a Page Society ESG panel I attended in Brussels this week. But “au contraire, they do apply to us.” The EU’s rules, which become active in 2024 for multinationals, are "a really good argument" for getting his U.S.-based colleagues on board with ESG standards, the executive told me afterwards. “It’s freaking them out.”
More news below.
Peter Vanham
peter.vanham@fortune.com
@petervanham
