Is good governance out of fashion?

Sammy Morris tracks the US private sector’s retreat from socially focused and environmentally conscious governance and asks: could UK public-purpose organisations follow suit?

The 2010s marked a significant turning point in the corporate world’s approach to societal issues, characterised by the widespread incorporation of values stemming from social movements. Notably, net zero and DEI (diversity, equity, and inclusion) gained traction within boardrooms and corporate strategies.

These values were increasingly seen as essential elements of modern governance, signalling a shift toward a more socially focused and environmentally conscious business ethos. However, the motivations behind this shift were frequently debated.

Sceptics argued that some corporations adopted these values not out of genuine commitment but as a means to bolster their public relations efforts. Despite these doubts, there was undeniable evidence of real effort to embed these values into organisational practices beyond superficial advertising campaigns.

One of the primary drivers of this movement was the growing body of research highlighting the benefits of diverse and inclusive leadership. Studies consistently demonstrated that boards with a mix of experiences, backgrounds, and perspectives were more likely to achieve improved performance and better outcomes.

This correlation between diversity and success offered a compelling case for businesses to embrace DEI initiatives. Similarly, the push for sustainability and net zero commitments was bolstered by mounting evidence of the financial risks posed by climate change and the increasing expectations of stakeholders, including investors, employees, and consumers.

As a result, integrating these principles into corporate strategies was not merely a moral choice but a pragmatic one aimed at ensuring long-term resilience and competitiveness.

Renewed scepticism

However, in recent years, this progressive momentum has encountered significant resistance, particularly from opponents who view these principles as emblematic of an ideological agenda. The concept of ESG (environmental, social, and governance) has found itself in the crosshairs of its critics, especially within the United States.

The political climate shifted dramatically following Donald Trump’s victory in the 2024 presidential election, which emboldened conservative voices sceptical of ESG and DEI principles.

This shift in power has had tangible repercussions. For instance, the six largest banks in the US simultaneously withdrew from the Net-Zero Banking Alliance under pressure from Republican lawmakers, who questioned the alliance's activities and objectives. This coordinated departure indicated a broader retreat from ambitious sustainability commitments in the face of political scrutiny.

The waning influence of these progressive ideals is further illustrated by recent developments at Meta, where Mark Zuckerberg announced the termination of major DEI programmes and a shift away from content moderation efforts on Meta’s platforms.

These decisions reflect a growing tendency among some corporations to prioritise relations with the incoming administration over social responsibility and governance practices. Both moves have prompted concerns that the progress made in embedding sustainability and inclusivity into corporate governance might be unravelling.

Has good governance had its day?

All of this raises a pressing question: is good governance, underpinned by a commitment to sustainability, DEI, and ESG, falling out of fashion? While some analysts might be quick to declare the decline of these values, such a diagnosis seems premature. For now, these trends remain largely concentrated in the United States, influenced by the country’s unique political and cultural dynamics.

Nonetheless, it would be naïve to assume that the rest of the world is immune to the ripple effects of these shifts. The US remains the world’s largest economy and a major trendsetter in global business practices. As its corporate culture evolves under the influence of political forces, the potential for similar changes to take hold in Europe cannot be discounted, with political movements of similar stripes on the rise across the continent.

The implications of these changes are particularly concerning in an era marked by increasing socioeconomic instability across the western world. Rising economic inequality, geopolitical tensions, and environmental crises have created a volatile landscape that challenges the traditional balance between profit maximisation and social responsibility.

If the US business community continues to pivot away from the principles of sustainability and inclusivity, it is plausible that European businesses may follow suit. This shift could manifest in a renewed focus on short-term profitability at the expense of long-term value creation and environmental impact.

Despite these challenges, it is essential to recognise that the ideals of ESG, DEI, and sustainability are deeply rooted in global business practices. Many companies have made substantial investments in these areas, driven not only by external pressures but also by a genuine belief in their importance. These consumers, employees, and investors are likely to continue advocating for corporate responsibility, ensuring that these values remain relevant in the years to come.

Implications for public-purpose organisations

These developments appear to be restricted to the private realm for the time being, with public-purpose organisations showing little deviation from the trodden path of the past decade. But this shouldn’t be seen as a call for complacency—rather the opposite.

While the corporate backlash against ESG and DEI is likely to influence public sector discourse, wholesale abandonment is unlikely due to legal obligations, public expectations, and long-term strategic priorities.

Instead, perhaps we can expect a softening and reframing of ESG and DEI in more neutral, performance-driven language—aligning with governance, risk, and efficiency narratives. Public sector organisations may choose to frame ESG and DEI in terms such as:

1. Risk management (e.g. climate resilience, social cohesion)
2. Operational effectiveness (e.g. workforce retention and productivity)
3. Regulatory compliance (e.g. equality laws, public sector duty)

Instead of outright rejection, organisations may also pivot towards a ‘back-to-basics’ approach—keeping core elements but avoiding the ideological framing.

Promoting the practical benefits of these concepts, rather than the ideologically associated aspects, would perhaps be a wise anticipatory move for advocates of ESG and DEI.

The road ahead

The current backlash against ESG and DEI principles represents a significant challenge to the progress made in corporate governance over the past decade. But while the movement faces headwinds, it is far from being extinguished.

The evolving dynamics of the global economy, combined with the persistent advocacy of stakeholders committed to social and environmental progress, suggest that these principles will continue to shape the corporate world. However, the extent to which they endure and thrive will depend on the ability of businesses to navigate this turbulent landscape and reaffirm their commitment to building a sustainable and inclusive future.