DEI may be getting all the attention these days, but another acronym is also facing pushback.
“There have been a lot of very sudden policy swings,” Andrew Jones, principal researcher at the Conference Board’s Governance & Sustainability Center and author of the report, tells Fortune. “Our member companies are grappling with ‘How do we best navigate this environment?’”
But while the majority of companies are tweaking their ESG policies, only 6% report making significant changes. Instead, most are implementing minor (45%) or moderate (29%) adjustments, according to the report. Boards and senior leaders are prioritizing policy defensibility, return on investment (ROI), and alignment with enterprise value, as opposed to broad expansion of initiatives or a values-led framing, says Jones.
“We’ve seen this both in DEI and in ESG—a much closer legal review, much closer kind of compliance mindset,” Jones said.
But while federal regulation of corporate climate action may be waning, certain states are doubling down, leading to a patchwork approach. That might be why the increasing fragmentation of ESG regulation is a top concern for ESG leaders. Approximately half of that cohort is worried about how the widening gap between federal, state, and international policy will complicate compliance and alignment.
“When you talk about states like California and New York, pretty much every company does business there. So [their policies] become de facto federal rules,” Jones says. “Then, at the same time, all these multinational [companies] are subject to new rules coming out of Europe. Right now, the picture is just really uncertain.”
