The forces of darkness are seeking to destroy ESG. Yet companies that embrace ESG and build it into their business culture will get payback, writes David Gilroy.
He bestrides the globe like a colossus. He has massive influence across the world with seemingly little to no accountability. He impacts the lives of many billions of people. We didn’t vote for him; he’s not our leader and yet he is the most consequential politician in our country. Love him or hate him you already know that I am talking about Donald Trump. He made it clear well before he was elected as The President of the United States that he would aggressively pursue policies of “America First” underpinned by business first principles. Any obstacle that hindered America’s interests and business success would be cleared out of the way. One such obstacle loathed by Trump is Environmental Social Governance (ESG). A proposal designed to ensure that businesses become better corporate citizens, respecting and protecting people and environments. ESG marks a transition from purely profit-driven metrics to those that factor in the broader impact of a company’s actions. Since its inception in 2004 ESG has broadened into a full-blown framework determining how responsible businesses should operate. The environment piece takes in carbon emissions, air, water pollution, biodiversity, renewable energy, and waste management. The social element wraps in customer satisfaction, data protection, privacy, gender, diversity, human rights, and labour standards. While the governance part covers tax strategy, executive remuneration, fair and reasonable compensation, donations, political lobbying, corruption, bribery, and board composition. ESG has been increasingly adopted by companies of all sizes as the road map to ethical operations and doing the right thing. Until that is, the election of Donald Trump brought it to a shuddering halt in the U.S. His second presidency has triggered a systematic unwinding of ESG-focused policies across federal agencies, financial institutions, corporate boards, and regulatory regimes. The U.S. has retreated from international climate collaboration, disrupted the renewable energy economy, and effectively de-emphasised environmental and social mandates through executive orders and deregulation. How relevant is ESG? Is it possible or desirable to implement ESG principles? And are ESG and a thriving profitable business mutually exclusive?
Companies like Octopus Energy take a different approach to that of The Donald. Here is an extract from their Future Generations Report 2024. “It shouldn’t matter whether you’re an employee, a customer, or a shareholder of Octopus. Or for that matter, whether you’re engaging with our energy, financial services or education business. Your experience should be the same. We want to make people optimistic about their future and we believe we can achieve this by building a wholly different kind of business. We’re a private company and our biggest investors are our employees. We’re not making decisions to deliver a quick buck for investors. We’re making decisions that we believe in even when nobody is watching. It’s the little things we do every day to make sure that we’re thinking about the impact of our decisions on all our stakeholders”. By any standards Octopus Group is a flourishing company. Founded in 2015, the financial statements for 2024 show that its annual revenue has grown to £12.4bn – underlying EBITDA at £290 million with a strong balance sheet. The business supplies nearly 8 million customers winning numerous customer service accolades and employee testimonials along the way. ESG has been woven into the fabric of the business from the start and as illustrated by Octopus’s success, the case for ESG remains strong.
ESG frameworks aim to expose risks that traditional financial analysis might overlook. Such as environmental liabilities, social controversies, or governance breakdowns. By integrating these, investors may avoid vulnerabilities that could undermine value. For example, Kiplinger highlights that companies with weak employee treatment or poor environmental posture may face increased lawsuits, community backlash, or regulatory penalties impacting financial stability. Academic studies echo this: Eccles et al. (2014) tracked “high sustainability” companies over 18 years and found they significantly outperformed “low sustainability” peers in both financial results and stock appreciation. Additionally, Khan et al. (2016) showed that firms strong on material sustainability issues delivered superior future performance compared to those strong on immaterial factors.
Some research finds that companies with better ESG profiles may benefit from lower borrowing costs and greater investor confidence. A study notes that ESG-focused firms often enjoy reduced cost of capital, while “brown” industries (e.g., fossil fuels) face higher financing hurdles which may encourage resource reallocation toward sustainable sectors. However, the real-world impact of this remains empirically ambiguous, suggesting potential but not conclusive influence. Even if ESG doesn’t always deliver financial outperformance, it may still influence corporate behaviour via investor pressure.
ESG-related reputational risks can trigger measurable market reactions. A study analysing 114 million tweets from 2016–2022 found that sudden spikes in ESG-related discourse correspond with an average -0.29% abnormal return, highlighting how investors respond to perceived ESG controversies. With growing regulation such as the EU’s Sustainable Financial Disclosure Regulation (SFDR), taxonomy frameworks, and the expansion of disclosure mandates, ESG consideration is gaining structural support to drive transparency and comparability. Research-to-practice initiatives, like sustainable supply-chain change and climate risk assessment tools, also reinforce real-world impact. Provided it does not become a box-ticking exercise for its own sake ESG emerges as a force for the good in business. There is a lot of ESG-style activity happening already in our industry: investment in electric vehicles, the installation of solar panels, conversion to LED lighting and work on inclusion and diversity in the workplace. Even for smaller enterprises with limited resources an ESG plan will add value and can be applied at little to no additional cost.
Donald Trump is not the master of all he surveys, and he has it wrong on ESG. Whether it is called ESG or simply acting responsibly, many businesses have proved that operating with ethics can be profitable and sustainable. Customers may not use the term ESG, but they will increasingly expect their service providers to be able to demonstrate socially responsible, ethical, and sustainable practices. Those that do will have the competitive advantage.
David Gilroy, Store Excel
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