While the debate about ESG has become increasingly polarised, a new report concludes that most boards, and “notably” those in the US, are “embracing ESG” in their board committee charters.

The news comes as global leaders gather in Dubai for COP28, the UN’s annual gathering to discuss progress towards beating climate change.

The conclusions from The Sustainability Board, a not-for-profit that promotes sustainability issues, also concludes that engagement in sustainability—as measured by competencies or statements—has plateaued.

The annual examination of corporate involvement with ESG has been under way since 2019 and this year encompassed 225 companies around the world, concluding that, on paper at least, “sustainability governance” is increasing.

In a foreword to the latest report, Frederik Otto, executive director of The Sustainability Board, and senior adviser Jeannette Lichner comment on the overall findings:

“This means more boards have adopted sustainability oversight as part of their current committees or dedicated a specialist committee to it.”

However, they have concerns over director engagement which, they say, shows a “need for renewed focus on individual sustainable leadership capacity”.

They write: “The improvement trend of ESG engagement in the last five years is starting to lose momentum. At this critical time of action and implementation, stagnation is the worst enemy.”

The Sustainability Board says sustainability governance on paper is up “globally” from 80% last year to 88%. In the US, says the report, the figure is 95%.

Around 51% of boards in the US have “relevant” ESG committees, while the figure globally is 63%. The “specific stipulation” of ESG in a committee charter has risen from 34% to 41% globally. In the US, the proportion is higher: 47%.

There are no explanations given for why engagement may be falling. But it comes after an intense period of debate in the US over ESG, with vociferous criticism of the term from those on the right of politics. A hefty 39% of the companies covered by the report come from the US.

Global warning

The heat has been felt in many circles. At the beginning of the year, BlackRock, the world’s largest fund manager, said it would no longer use the term because it had been “weaponised” .

Elsewhere, experts have pointed to companies involved in “greenhushing” their ESG credentials—meaning they do the work but refrain from publicity.

In the UK, the debate has taken a different turn, with experts highlighting what they see as the flaws in the concept of ESG as a useful term for analysis or as a guiding principle. London Business School professor Alex Edmans has written: “Let’s scrap the politicised, simplistic and restrictive term of ESG and free companies to create long-term value.”

The cause of sustainability also suffered a blow when the Financial Reporting Council, the UK governance watchdog, said it was deleting provisions in a revised governance code that would have seen boards report on their monitoring of disclosures on sustainability issues.

The UK government has set some of the tone around ESG. In September, prime minister Rishi Sunak rowed back on some climate-focused policies, notably pushing back the deadline for ending the sale of new petrol and diesel cars, as well as the phasing out of gas boilers.

The Sustainability Board’s report suggests companies are in many ways pushing ahead with attention to ESG despite the current political discourse and policymaking. However, the trend in engagement suggests more complex issues are at play.