Twin Peaks: Has ESG Just Hit A Double Top?

2024 may be remembered as a turning point in the ESG narrative—a year of two significant peaks. The first, and most optimistic, is the potential arrival of “peak emissions.”

Early data suggests global emissions could have plateaued last year, signalling a potential shift toward declining carbon outputs. However, the second peak is more contentious: the notion of “peak DEI” (Diversity, Equity, and Inclusion). This evolving dynamic reflects growing scepticism toward ESG-related initiatives in the workplace, fuelled by political shifts and a backlash against what some see as superficial compliance, rather than meaningful change.

What does this twin peak moment mean for ESG leaders? Let’s unpack these trends, their implications, and the opportunities they present for the future of ESG in the pharmaceutical and biotech sectors.

Peak Emissions: Good News, With Caveats

The concept of “peak emissions” refers to the point at which global energy-related CO2 emissions stop growing and begin a steady decline. Some projections suggest that 2024 could mark this critical milestone. Advances in renewable energy, electrification of transport, and significant investments in decarbonization are making this scenario plausible.

Yet, there’s uncertainty. The global energy transition remains fragile and uneven, with geopolitical tensions, supply chain disruptions, and energy security concerns slowing progress in some regions. And while emissions may peak, the speed of decline will determine whether we can meet crucial climate targets like limiting warming to 1.5°C.

For ESG leaders in pharma and biotech, this is a moment to double down on long-term climate strategies. Achieving net-zero goals requires moving beyond offsets and superficial commitments to transformative change in manufacturing processes, operations and supply chains.

Peak DEI: Two-Steps Forward?

While “peak emissions” offers a glimmer of hope, the social pillar of ESG, particularly Diversity, Equity, and Inclusion (DEI), is facing increased scrutiny and challenge. A growing sense of fatigue and scepticism surrounds DEI initiatives, with critics questioning whether they prioritize workplace culture over core business objectives. In some quarters there is a yearning to return to the simplicity of Milton Friedman’s statement, “The business of business is business.”

Shifting political landscapes are further complicating the issue. In the U.S., a change in administration has energized critics of ESG. This has led some major corporations, including Walmart, Amazon, McDonald’s, and Meta, to scale back or re-evaluate their DEI policies.

This trend is not confined to the United States. Across Europe, the rise of right-wing political parties in countries like Italy, Austria, Germany, and the growing influence of similar movements in the UK, indicates a broader global shift.

However, this pushback doesn’t necessarily spell the end of ESG, or DEI. Instead, it likely signals the end of tokenism, and a natural evolution beyond the well-meaning yet at times flawed approaches to DEI policies, training and awareness campaigns seen in the recent past. This shift could ultimately lead to a maturation and strengthening of the long-term impact and credibility of ESG.

Conclusion: Taking The Long View on ESG

Like a volatile stock chart, the progress of ESG will inevitably experience periods of retrenchment and pullbacks. We may be witnessing such a moment now. However, the overall trajectory of ESG remains positive. We are moving towards a more sustainable and equitable future, with workplaces that are increasingly inclusive and respectful. While there will be setbacks and adjustments along the way, it’s important to remember how far we’ve come in just the last decade.

Now is not the time for entrenched positions or early celebrations from either side of the argument. It’s a time for collaboration, a time to find common ground and determine the most effective path forward. Ultimately, we all share a common goal: a healthy planet and a society where everyone is valued and respected for who they are. The destination is clear; it is merely the precise journey that requires our collective agreement.