Donald Trump’s rise to power in the United States has brought about several changes in the government’s 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.
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 has promoted a series of measures that weaken ESG regulations, mainly in the environmental area. Among the main actions, the following stand out:
a)The United States' withdrawal from the Paris Agreement, weakening global climate commitments;
b)Relaxing Environmental Protection Agency (EPA) regulations, reducing restrictions on industrial emissions and natural resource exploitation;
c)The repeal of rules that required transparency from companies regarding socio-environmental impacts.
These actions signal a retreat in the ESG agenda from a government 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 that companies operate sustainably and responsibly. One of the main regulatory frameworks is the Corporate Sustainability Reporting Directive (CSRD), which requires companies to disclose detailed information about their ESG practices.
In addition, there are other important rules:
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 Act – 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 profitability in the long term.
In addition to investors, consumers themselves play a crucial role in keeping ESG relevant during the Trump era. Younger generations are also showing their preference for ESG in the workplace. Millennials and Gen Z choose jobs not just based on the salary, but on the company’s alignment with their values.
The new generations make consumer choices based on values and socio-environmental impacts. According to a study by Bain & Company, a management consulting firm, more than 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 buy from brands that are aligned with sustainable and socially responsible principles. This factor can encourage companies to maintain ESG strategies, regardless of the government's stance.
Since the beginning of the Trump administration, there have been a number of actions aimed at dismantling or reducing the effectiveness of diversity and inclusion programs in the public sector. The Trump administration has taken a critical stance toward several initiatives aimed at promoting racial, ethnic, and gender diversity at the federal level, many of which had been strengthened under previous administrations.
The goal of many of these actions, as advocates argue, was to eliminate what they called “racial bias” or “reverse discrimination.” However, these actions have generated significant controversy, with diversity advocates arguing that the government is rolling back the progress made over the years.
The dismantling of diversity and inclusion programs has faced resistance from within the federal government itself. Several agencies, including the Department of Defense, have continued to conduct diversity training independently, and some public leaders have protested Trump’s orders, arguing 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 challenged several of these actions in court, arguing that they violate constitutional rights and laws that promote equal opportunities. However, with the support of conservative political figures, the changes implemented by Trump have 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 may gain a stronger foothold on the global stage.
