Beyond ESG from checklists to capabilities

ESG, the catch-all acronym for corporate efforts to address environmental, social, and governance issues,
is undergoing a rethink, particularly in the United States. Over the past decade, ESG has expanded as a framework to measure a company’s societal impact. Corporate risks linked to society’s biggest issues, such as climate change, inequality, and public health, persuaded investors that addressing these issues was good business. For instance, bolstering a supply chain against the shifting impact of the increasing global temperature protects the bottom line, and healthier employees improve productivity. This shift led to a proliferation of metrics to measure company impact beyond revenues and profits. In the process, ESG moved from the margins into the mainstream, and investors, employees, regulators, and the public increasingly expected companies to take responsibility for reducing and resolving big societal challenges.
The numbers tell the story Among 89 large companies, the median number of ESG-related KPIs that a C-suite monitors is 100, a 30 percent increase compared to 2018. Media mentions of ESG soared from 5,000 in 2014 to over 300,000 in 2024 (Exhibit E1). ESG reporting and compliance have increased transparency on issues like emissions and inclusive economic growth, preventing societal harms and showing that companies can and do make a positive difference.

Yet, the rapid proliferation of ESG checklists has crowded CEO agendas, leading to ESG fatigue. Media mentions have ticked down in 2024 and 2025, and in the United States, shareholder proposals related to ESG declined in 2025 compared to 2024. Companies are increasingly pulled in opposite directions by
differing cultural and regulatory expectations across countries. In the European Union, the regulatory
requirements of the Corporate Sustainability Reporting Directive went into effect in 2025, while the United States is moving toward less reporting.

Events such as the conflicts in Ukraine and the Middle East and an emerging rearrangement of global trade have shifted public attention to energy security and affordability, amplifying these complications.
Fundamentally, a compliance-based approach does little to help companies set strategic priorities and align their unique capabilities with societal needs in a way that’s consistent with their business goals. Thus, we’re at an inflection point: Societal challenges are not going away, and the way companies engage with them must evolve. In this report, we take neither a positive nor a negative view of ESG, instead offering a fact base to support companies and other organizations in evaluating business opportunities that advance societal goals if they have an interest in doing so. Specifically, it examines where corporate capabilities could deliver outsize impact and identifies the market contexts needed to enable a business case across a diverse set of societal issues. A clearer, capabilities-based approach can help business leaders interested in addressing societal issues set strategy and sharpen societal choices about the use of public resources.

source:

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