The rise of Donald Trump to power in the United States brought several changes to the governmental approach regarding environmental, social, and governance (ESG) issues. Since the beginning of his administration, there has been a clear weakening of environmental regulations, a less rigorous stance on social issues, and an emphasis on market deregulation.
However, even in the face of this adverse political scenario, the concept of ESG has maintained its relevance and may continue to grow, driven by the financial market, institutional investors, and consumers.
The Trump administration promoted a series of measures that weaken ESG regulations, primarily in the environmental sphere. Among the key actions are:
a) The United States’ withdrawal from the Paris Agreement, weakening global climate commitments;
b) The relaxation of Environmental Protection Agency (EPA) rules, reducing restrictions on industrial emissions and natural resource exploration;
c) The revocation of rules requiring companies to disclose socio-environmental impacts.
These actions signal a retreat in the ESG agenda from a governmental perspective. However, paradoxically, this movement may generate a stronger response from the private sector and international markets, which tend to reinforce their own ESG guidelines.
The European Union (EU) has been one of the most active regions in creating rules to ensure companies operate sustainably and responsibly. One of the key regulatory milestones is the Corporate Sustainability Reporting Directive (CSRD), which requires companies to disclose detailed information about their ESG practices.
Additionally, there are other important regulations:
a) EU Taxonomy – Defines criteria for classifying sustainable economic activities;
b) Sustainable Finance Disclosure Regulation (SFDR) – Requires investors and financial institutions to report the ESG impact of their investments;
c) Corporate Sustainability Due Diligence Law – Requires companies operating in the EU to conduct audits to ensure their supply chain complies with environmental and human rights standards.
Despite the regulatory dismantling promoted by the federal government, companies and investors realized that ignoring ESG could generate financial and reputational risks. Large investment funds began to demand greater ESG transparency, considering that environmental, social, and governance factors directly impact long-term profitability.
Besides investors, consumers themselves play a crucial role in maintaining the relevance of ESG during the Trump era. New generations also demonstrate their preference for ESG in the workplace. Millennials and Generation Z choose jobs not only for salary but for the company’s alignment with their values.
New generations make consumption choices based on values and socio-environmental impacts. According to a study by Bain & Company, a management consulting firm, over 70% of millennials are willing to pay more for sustainable products. Generation Z follows the same trend, being even more demanding of brands that demonstrate a real commitment to ESG. In other words, they prefer to consume from brands aligned with sustainable and socially responsible principles. This factor may encourage companies to maintain ESG strategies, regardless of the government’s stance.
Since the beginning of the Trump administration, there has been a series of actions aimed at dismantling or reducing the effectiveness of diversity and inclusion programs in the public sector. The Trump administration adopted a critical stance toward various initiatives promoting racial, ethnic, and gender diversity at the federal level, many of which had been strengthened in previous administrations.
The goal of many of these actions, as defended by their supporters, was to eliminate what they called ‘racial preference’ or ‘reverse discrimination.’ However, these actions generated significant controversy, with diversity advocates arguing that the government was rolling back progress made over the years.
The dismantling of diversity and inclusion programs faced resistance within the federal government itself. Various agencies, such as the Department of Defense, continued to conduct diversity training independently, and some public leaders protested against Trump’s orders, defending the importance of a diverse and inclusive workforce for the government and federal agencies.
Additionally, some civil society organizations and human rights advocates challenged several of these actions in court, arguing that they violated constitutional rights and laws promoting equal opportunity. However, with the support of conservative political figures, the changes implemented by Trump had a significant impact on reducing resources and the adoption of more inclusive policies in the public sector.
Even with a government seeking to weaken ESG programs, the concept remains relevant, driven by investors, consumers, and international regulations.
The Trump era demonstrates that although governmental decisions may affect the speed of ESG adoption, the global market and society continue to demand transparency, sustainability, and social responsibility. Companies that ignore this trend may face reputational and financial risks, while those that maintain an ESG commitment may strengthen their position in the global scenario.
