Four years ago in Foreign Affairs, I argued that the demand that corporations adopt voluntary standards for environmental, social, and governance was the wrong way to correct societal ills such as pollution, emissions, and economic inequality. Now, the era of addressing ESG concerns appears to be over. In the wake of U.S. President Donald Trump’s reelection (and federal crackdown on ESG and related initiatives), many corporations unceremoniously dropped their ESG reporting. Dozens of major firms—including Starbucks, Mastercard, and Procter & Gamble—weakened or reversed policies that linked their top executives’ pay to the companies’ performance on ESG measures. Shareholders of publicly listed companies turned against such policies, introducing 40 percent fewer ESG-related resolutions between mid-2024 and mid-2025 than in the prior yearlong period. And after top U.S. banks fled the Net-Zero Banking Alliance, which bound banks to zeroing their emissions by 2050, the UN-backed program simply collapsed. Leading tech firms such as Apple and Microsoft have also visibly retreated from public climate advocacy.

This retrenchment has been widely mourned in the press: a Forbes op-ed, for instance, lamented that the retreat “undermines the shared norms that drive collective progress,” adding that “When leaders go quiet, others question whether progress is stalling altogether.” But the vanishing of ESG initiatives presents an opportunity. Such efforts were never going to work. Requiring companies to pretend that their motive was seeking the common good, rather than making money, only generated a flimsy charade in which firms strove to appear compliant with particular metrics of public welfare: in a famous example, to address the accumulation of plastic waste, Starbucks unveiled with fanfare a strawless cup lid—which turned out to contain more plastic than its prior model.

By making companies responsible for adopting business practices that could address climate change, poverty, and inequality, major market economies avoided undertaking the kinds of government interventions that could really solve these problems. The ESG trend perpetuated, or even amplified, the fiction that corporations are the most effective driver of societal change.

Trump, of course, does not appear to believe that ills such as climate change or wealth inequality ought to be tackled at all. He is using executive power aggressively to undo any U.S. regulations that restrain corporate behavior. But some leaders of major market economies are taking the chance offered by the retreat from ESG initiatives to regulate the private sector more directly. The EU, for instance, has recently implemented a directive requiring firms to ensure that their supply chains comply with European environmental and human rights standards, and India is codifying what had been voluntary ESG reporting into government regulations. Such policies, however, are patchy. Unless political leaders face up to their obligation to regulate the corporate world far more extensively and more directly, they will only find themselves more and more distrusted.

The economist Milton Friedman’s famous 1970 claim that businesses had no social responsibility beyond seeking profit helped entrench grotesque income inequality in the United States and other leading democracies. Fifty years later, it was clear that this worldview was not working: as I wrote in 2022, financial institutions were “impoverishing their clients through products where profits for some require losses for others. Food and drug manufacturers are damaging their customers’ health through opioid and obesity epidemics. Tech firms are polluting rather than enlightening the sphere of public debate. The capitalist system as it exists today is not delivering for society, even before taking environmental damage into account.”

The growing recognition of these problems made it seem as though the private sector was abandoning Friedman’s doctrine. Activist shareholders had begun to press corporations and financial institutions to broaden their sense of purpose. In place of Friedman’s unvarnished greed-is-good message, companies made the even more grandiose case that their enterprises could directly save the world. They rushed to adopt (often voluntary) standards for reporting their environmental, social, and governmental impacts, disclosing metrics such as their carbon footprint or the diversity of their boards—generating a market for a new kind of “social responsibility” consultants pitching their auditing services.

The ESG trend, however, mostly enabled business as usual with few real constraints. In 2021, an undercover reporter filmed ExxonMobil executives admitting that they endorsed a carbon tax only because they felt sure that Republican legislators would never actually pass such a levy. “It gives us a talking point,” a chief ExxonMobil lobbyist bragged, to improve the company’s reputation with no substantial consequences. Business leaders should behave ethically, of course, but private entities cannot be responsible for collective social outcomes, which are the responsibility of governments.

The abandonment of ESG has been driven, in part, by Trump’s pressure. CEOs likely concluded that their shareholders were best served by toeing the Trump line, no matter how much they personally supported social responsibility initiatives. But the sheer speed with which so many corporations have discarded ESG reporting suggests that such measures simply often amounted to greenwashing—deceptive claims exaggerating companies’ sustainability—which is a useful revelation of companies’ true motives. ESG was “a marketing thing,” Sir Douglas Flint, a former HSBC chair, admitted openly in July. The businesses that told “everyone, ‘we’re saving the world; we’re saving the planet’” were making “ridiculously extravagant claims.”

The problems that gave rise to the push for ESG initiatives, however, have not gone away. And they will not go away until governments abandon their 50-year reflexive deference to big business by enacting tough competition policies to make markets work for consumers again, firmly enforcing regulations to clean up pollution and emissions, and imposing corporate governance frameworks that end the obscene injustice of executives who earn hundreds of times their country’s median salary. Insofar as the adoption of ESG measures postponed a reckoning with the failures of laissez-faire policies championed by U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher, its swift disappearance may be a blessing, clarifying what the private sector wants and what it cannot do. Half-hearted correctives such as those pursued by the Biden administration or, more recently, British Prime Minister Keir Starmer’s government do not address the fundamental dysfunctions of market economies as far as many of their voters are concerned.

Democratic publics resent their distorted economies and the elites responsible for creating them. A 2025 Ipsos poll found that a majority of people in 29 out of 31 countries surveyed agreed that “the economy is rigged to advantage the rich and powerful”; this sentiment was especially strong in major democracies such as Germany, the United Kingdom, and the United States. In the United States, politicians are now identifying such resentments as concerns about affordability. The high cost of living in many parts of the country is a real problem. But the crisis is much bigger. Unregulated capitalism is placing more and more burdens on people’s lives: the time wasted trying to resolve problems in a labyrinth of unresponsive call centers, the battle to get insurance claims paid, the deterioration of streets and other components of public infrastructure, the degradation of secure employment into a “gig” economy of precarious jobs without benefits, and the increasingly frightening prospect that artificial intelligence will destroy middle-class livelihoods wholesale even as AI companies’ share prices soar.

Geopolitical tensions are prompting greater policy interventionism, at least in technology and defense. Beyond this, some Europeans, in particular, are beginning to realize that a major change is needed. European policymakers are moving to intervene more actively to rein in corporate behavior, especially in the social media sector. Although last year’s report on sluggish EU growth and innovation by Mario Draghi, the former Italian prime minister, has led to initiatives to cut red tape, these moves do not signal a firmer embrace of the laissez-faire ideal. 

In private meetings I have attended, European officials are even more vocal about the need to establish a new economic model that reflects their citizens’ values. Similarly, Japanese officials privately echo Canadian Prime Minister Mark Carney’s belief that the state should take a more active role in forging scientific and economic alliances among countries outside the U.S. sphere of influence. In some countries, public appetite for green policies appears to be rising; the surprising Green Party victory in a recent British by-election along with the steep decline in right-wing parties’ vote share, may be a straw in the wind.

Yet leaders worldwide remain too hesitant to make a real rupture with the idea that the private sector ought to lead social change. Even when policymakers institute new laws to govern the economy, they are often indirect. In many countries, for example, politicians are now moving to ban or restrict teens’ social media access in response to public alarm about cyberbullying and the hijacking of young people’s attention. But many of these laws put the burden on families to enforce intrusive rules to avoid regulating companies’ algorithms and behavior. New appetite-suppressing drugs that successfully inhibit weight gain have been celebrated, but the reason they are in such demand is because no government has seriously considered challenging its food sector’s well-documented contributions to obesity.

Even if Trump’s successor resumes praising voluntary ESG standards and reinstates key environmental regulations, it will be harder than ever for the public to believe that companies can really be motivated by the desire to make the world cleaner and fairer. Moderation in politics is undergirded by broadly shared economic growth. For years now, public antisystem sentiment has led to electoral wins for “outsider” or extremist parties. The source of such sentiments is not difficult to understand: contemporary capitalism is not working for most people. To avoid a deepening spiral into political extremism and dysfunction, governments everywhere will need to ditch the Friedman doctrine for good. The realization that corporate ESG was a fiction creates a true opportunity for the actions that will change the world for the better.

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