Are businesses backtracking on ESG commitments?

Picture of Sophie Harbert

Sophie Harbert

Stories of large organisations backtracking on ESG commitments have recently made headlines, along with news of significant changes of approach to sustainability standards. Forbes has called this ‘The Rise and Fall of ESG’, pointing to various factors including simmering global conflicts and a vocal US backlash. In the midst of a climate crisis, these are trends worth exploring more deeply.

In 2023 Amazon, Shell, BP and other multinationals, along with a number of major investment companies, began backing out of their previously stated climate commitments. This pattern has unfortunately continued as businesses of all sizes encounter difficulties reducing greenhouse gas emissions. Some point to absent or inconsistent government policy around target-setting as the reason companies are able to walk back from climate pledges. It may, however, be more a case of organisations taking stock of the scale of some of the challenges ahead.

SBTi: a controversial update

Earlier this month, the Board of the Trustees of the Science Based Targets Initiative (SBTi) — the body responsible for setting a standard for companies’ net zero targets — stated that it intends to consider new guidance that would allow organisations to use ‘environmental attribute certificates’ (i.e. carbon credits) to account for the delivery of their climate goals, specifically those relating to Scope 3 (indirect) emissions. This move has been highly controversial in the sustainability world. The SBTi Board even received criticism and a protest letter from their own staff members stating the Board ‘undermined the governance process’ in disclosing the revised stance. Relying on carbon credits is a divisive approach as it reduces the pressure on businesses to actively reduce emissions. Carbon offset projects can also be unmonitored and difficult to trace. Many, including the WWF, feel the SBTi stands to lose credibility by relaxing the guidelines after years of stringent target setting. Others feel it is the only way net zero targets will be achieved.

Unilever resets

Food giant Unilever has traditionally been considered a leader in ESG, publicly proclaiming their desire to do ‘more good for our planet and our society — not just less harm’. Their recent U-turn on key sustainability commitments came as a surprise. Instead of halving virgin plastic use by 2025, they now commit to cutting plastic by just a third by 2026 and indicate their initial target achievement will be unlikely before 2034. Whilst any reduction in plastic use from a major consumer goods producer is a cause for celebration, Unilever have been criticised by Greenpeace for not doing more from their position as the ‘biggest corporate seller of plastic sachets in the world’ at some 53 billion sachets per year. Unilever has also moved away from their pledge to pay direct suppliers a living wage by 2030, replacing it with a ‘fair pay promise’, and also dropping commitments to increase spending with diverse suppliers and raise the proportion of employees with disabilities to 5%. Unilever’s CEO defended the changes, stating they were made in order to ‘set sustainability ambitions which are credible, which they can deliver against, and which have a real positive impact.’

The case for ambitious goals

Given these recent examples, is it still a good idea to set ambitious sustainability targets and make them public? We certainly think so. Many governance and economy experts insist that, rather than abandon ESG at this crucial time, corporate executives need to double down and focus on action over vague future promises. We agree. Don’t be put off planning ambitious goals. Think about what is realistic and achievable within a set time frame and use public commitments as an incentive to act. If you need help, get in touch!

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