Has the Anti-ESG Backlash Reached Its Peak?

A Look at ESG, DEI, and California’s Latest Climate Laws

The world of Environmental, Social, and Governance (ESG) policies is at a crossroads, with growing signs that the backlash against ESG initiatives may be slowing. As lawsuits against anti-ESG policies emerge and companies continue to implement their ESG programs (albeit more quietly), many wonder whether the movement to roll back ESG policies has peaked.

A significant area under scrutiny is Diversity, Equity, and Inclusion (DEI). Some companies are scaling back their DEI commitments, bowing to public pressure. However, it raises an important question: Is this a temporary response to external forces, or will DEI policies reemerge as companies refocus on ESG principles?

California’s Legislative Updates on Climate Disclosure Laws

Amidst this backdrop, California’s legislature has been busy amending climate disclosure laws that impact businesses operating within the state. California is known for its forward-thinking environmental regulations, and this time is no different. The state’s new legislation, which awaits Governor Gavin Newsom’s signature or veto, extends the timeline for implementing climate disclosure rules by six months, while maintaining firm deadlines for company reporting.

The amendments to SB 253 and SB 261—which focus on emissions and climate risk disclosures—are crucial steps in California’s climate agenda. The delayed timeline for rule implementation still requires businesses to meet tight reporting deadlines starting in 2026. These changes offer companies flexibility by allowing them to consolidate reporting at the parent company level, which makes compliance more manageable.

However, one proposed amendment, which would have pushed back the deadline for reporting voluntary carbon credits under AB 1305, was unsuccessful. This means companies must meet the July 2025 deadline, a timeline that is quickly approaching.

Political Pressures and Climate Policies

On the national front, US presidential candidate Kamala Harris faces pressure from both political sides to clarify her stance on climate policies. As climate change becomes a focal issue in US politics, candidates like Harris must balance appealing to climate activists without alienating moderate voters. Her climate agenda remains under scrutiny as she navigates this challenging political landscape.

The Future of ESG and DEI

Despite the current political and legal challenges, the long-term future of ESG and DEI initiatives remains bright. Many companies are quietly continuing their work in these areas, recognizing that sustainable business practices are not just beneficial for the environment but also for long-term profitability and reputation. The Science Based Targets initiative (SBTi) recently released the first-ever framework for decarbonizing buildings, adding another layer of complexity and importance to corporate ESG strategies. However, the initiative is also facing controversy over potential conflicts of interest between its funders and its mission.

California’s Path Forward in Climate Legislation

California, known for its aggressive stance on climate change, continues to push forward. The California Air Resources Board (CARB) faces a January 2025 deadline to issue rules under SB 253 and SB 261, but with the passing of SB 219R, they have been granted an additional six months to finalize these rules. However, the reporting deadlines for businesses remain unchanged, starting in 2026.

One major point of debate is the cost of compliance with these climate laws. SB 219 eliminates the fees that companies were previously expected to pay, but this raises questions about how the state will cover these costs, especially given its current budget deficit. Budget negotiations are set to conclude by the end of August, which may provide more clarity on how California will fund these ambitious climate policies.

Meanwhile, AB 1305, which covers voluntary carbon credits, has also seen its deadline extended, now pushing the reporting requirement to July 2025. The bill has made its way through legislative committees with little opposition and is expected to pass smoothly, reinforcing California’s leadership role in shaping national climate policy.

Effective Climate Policies: Which Ones Actually Work?

AI plays a crucial role in climate action by analyzing massive datasets, including weather models and the effects of climate policies. Recent research examined 1,500 climate policies worldwide, revealing that only 63 successfully achieved significant emissions reductions (defined as a decrease of 0.6 to 1.8 billion tonnes of CO2e).

The study highlighted that the most effective climate policies often incorporate market-based tools, such as tax incentives and carbon taxes. A prime example is the UK’s coal phase-out policy, which succeeded primarily due to the implementation of a minimum carbon pricing mechanism.

Understanding which climate policies truly deliver results is essential for future environmental strategies.

Navigating the Future of ESG and Climate Compliance

The anti-ESG backlash may have reached its peak, but the road ahead for ESG, DEI, and climate policies remains complex. As California leads the charge on climate disclosure laws and businesses continue their commitment to sustainability, it’s clear that ESG will remain an integral part of corporate strategies moving forward. However, challenges around cost, implementation, and political pressure will need to be addressed as companies and policymakers navigate this evolving landscape.

With the legislative process in motion and businesses adapting to new regulations, companies must stay informed about these changes to remain compliant and ahead of the curve in the race towards sustainability.

About the Center for Sustainability and Excellence (CSE)

The Center for Sustainability and Excellence (CSE) has been at the forefront of industry trends for nearly 20 years, providing top-quality certified training in Sustainability (ESG) for C-suite executives and Corporate Responsibility managers worldwide.

CSE will host a major Sustainability (ESG) Summit on September 30 at the One World Trade Center in New York. This event will gather visionary leaders, sustainability pioneers, and key policymakers to exchange insights and strategies centered around ESG principles. Don’t miss this opportunity—register now!

Become a certified Sustainability ESG Practitioner and turn your company’s commitments into action. Join the Certified Sustainability (ESG) Practitioner Program, Leadership or Advanced Edition, in 2024.

Upcoming trainings:

• Leadership Edition 2024, Sept. 26-27 & Oct.1^st: few spots available
• Advanced Edition 2024, Nov. 14- 15 & 18: claim your spot on time

For group registrations reach us at [email protected]