The rise of Donald Trump to power in the United States has brought about various changes in governmental approach to environmental, social, and governance (ESG) issues. Since the beginning of his administration, there has been a clear weakening of environmental regulations, a less stringent stance on social issues, and an emphasis on market deregulation.
Nevertheless, even in the face of this adverse political landscape, 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 has promoted a series of measures that weaken ESG regulations, primarily in the environmental sphere. Among the key actions, the following stand out:
a) The United States’ withdrawal from the Paris Agreement, weakening global climate commitments;
b) Relaxation of Environmental Protection Agency (EPA) standards, reducing restrictions on industrial emissions and natural resource exploitation;
c) Repeal of rules requiring transparency from companies regarding socio-environmental impacts.
These actions indicate a setback in the ESG agenda from a governmental standpoint. However, paradoxically, this movement could generate a stronger response from the private sector and international markets, which are likely to reinforce their own ESG guidelines.
The European Union (EU) has been one of the most active regions in creating rules to ensure that 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 standards:
a) EU Taxonomy – Defines criteria for classifying sustainable economic activities;
b) Sustainable Finance Disclosure Regulation (SFDR) – Requires investors and financial institutions to disclose the ESG impact of their investments;
c) Corporate Sustainability Due Diligence Law – Requires companies operating in the EU to conduct audits to ensure that their supply chain complies with environmental and human rights standards.
Despite the regulatory rollback promoted by the federal government, companies and investors have realized that ignoring ESG could pose financial and reputational risks. Large investment funds have begun to demand greater ESG transparency, considering that environmental, social, and governance factors directly impact long-term profitability.
In addition to investors, consumers themselves play a crucial role in maintaining the relevance of ESG during the Trump era. The new generations also show their preference for ESG in the workplace. Millennials and Generation Z choose jobs not only for the salary but for the alignment of the company with their values.
The 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 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 government stance.
Since the beginning of the Trump administration, there have been a series of actions aimed at dismantling or reducing the effectiveness of diversity and inclusion programs in the public sector. The Trump administration took a critical stance towards 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 was, as advocated by their supporters, to eliminate what they referred to as ‘racial preference’ or ‘reverse discrimination.’ However, these actions generate significant controversy, with diversity advocates arguing that the government is rolling back progress made over the years.
The dismantling of diversity and inclusion programs faces resistance within the federal government itself. Several agencies, such as the Department of Defense, continued to conduct diversity training independently, and some public officials protested against Trump’s orders, advocating for the importance of a diverse and inclusive workforce for the government and federal agencies.
In addition, some civil society organizations and human rights defenders have legally challenged several of these actions, arguing that they violated constitutional rights and laws promoting equal opportunities. However, with the support of conservative political figures, the changes implemented by Trump had a significant impact on reducing resources and adopting 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 while government 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 can strengthen themselves in the global landscape.
