Navigating ESG Backlash: Legal & Communications Strategies for a Polarized Landscape

Avoid traps by staying true to your values, ensuring that each ESG initiative is grounded in a sound rationale, and clearly communicating the benefits you hope to achieve

“If you try to please all, you please none.” – Aesop

Reevemark recently hosted a panel on the shifting legal and communications issues around ESG at the ALM General Counsel Conference East in New York. Below are some key takeaways from the discussion.

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As ESG issues become battlegrounds in broader cultural debates, businesses must adopt proactive legal, communication, and stakeholder engagement strategies to manage these challenges effectively.

1. Understanding the Current ESG Climate

The ESG landscape is evolving, with companies facing heightened scrutiny from shareholders, customers, and activists. While some initiatives receive criticism for being insufficiently progressive, others are perceived as overly “woke.” Compare, for example, Engine No. 1’s 2021 proxy contest vs. ExxonMobil in which the hedge fund succeeded in pushing the company towards a more sustainable and climate-conscious strategy with Robby Starbuck’s 2024 campaigns against DEI initiatives at Tractor Supply and Lowe’s. Each case illustrates the point that organizations need to strike a balance that aligns with their values while addressing stakeholder concerns.

2. Anticipating Regulatory Shifts

Some believe that President Trump’s re-election could signal a shift away from stakeholder capitalism and back toward shareholder primacy, and that such a change in governance and policy could affect the viability of ESG initiatives.

Companies can prepare by:

• Staying informed about legislative trends.
• Engaging with regulators to advocate for balanced policies.
• Building adaptable strategies to respond to changing political and social climates.

3. Engaging Diverse Perspectives

Successful ESG strategies require a deep understanding of varied stakeholder perspectives, from cultural differences to geographic nuances. Actively seeking feedback ensures that policies resonate broadly and avoid alienating key audiences, but ultimately the company must be prepared to defend its decisions on any potentially divisive topic. Often, the best strategy is to make sure company policy directly aligns with your corporate values and advances a purpose that is core to the company’s mission.

4. Communicating Effectively

In an era where terms like ESG and DEI can be polarizing, communication is critical. Companies are finding success by rebranding these initiatives as part of their core sustainability narrative and emphasizing the resulting benefits in areas that are less prone to criticism such as customer satisfaction, employee well-being, and community impact. At the same time, avoiding perceptions of “greenwashing” or “virtue signaling” is essential to maintaining trust.

5. Equipping Legal Teams

Legal departments play a pivotal role in ESG strategy, balancing legal obligations with social considerations. Tools like risk assessments and engagement with ESG rating agencies can help mitigate challenges while aligning with broader corporate goals.

6. Planning for Crisis

As the New York Times reported in October, crisis management plans tailored to ESG backlash are no longer optional. Key components include:

• Conducting regular risk assessments to identify vulnerabilities.
• Assembling cross-functional crisis teams.
• Outlining clear protocols and processes for decision making in the event of a crisis.
• Maintaining open and transparent communication with all stakeholders.

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As the ESG landscape continues to shift, companies must remain agile, prepared, and authentic in their strategies. Open dialogue, clear communication, and proactive legal planning are essential for success in this complex environment.