What the ESG backlash of 2025 means for Corporate America in 2026

2025 was a significant inflection point for corporate sustainability in the US, characterized by backlash that has reshaped how companies are approaching environmental, social and governance (ESG) initiatives that they may have previously championed. In the United States, the regulatory landscape has shifted, with many ESG-related requirements being rolled back or loosened after their recent initial introduction. Diversity, equity, and inclusion (DEI) initiatives faced intense scrutiny and legal challenges, prompting widespread program changes across corporate America. Simultaneously, climate pledges came up against political pressure and economic uncertainty, which also led to the investment community adopting a more cautious stance on public ESG commitments.

However, beneath these headlines is a more nuanced reality: many companies are continuing to advance their ESG agenda, particularly those that have leveraged their efforts for strategic business value. In 2026, sustainable corporate action will need to provide clear strategic value and balance the expectations of opposing stakeholder groups.

Regulatory opposition to ESG in the US

Federal climate pullback & state-level initiatives

In 2025, the Trump Administration began a massive rollback in domestic climate regulations as well as the United States’ support of global initiatives such as the Paris Agreement, WHO, COP30, SDGs, ISSB, IMO and more. Environmental regulation within the U.S. has also seen an upheaval with the Environmental Protection Agency implementing 31 deregulation actions [1] to support the Trump Administration’s executive orders. These actions included reconsideration of regulation on power plants, oil and gas industry, GHG reporting programs, and overhauling initiatives from the Biden Administration such as the electric vehicle mandate and the Justice40 climate justice initiative.

The SEC also voted to end its defense of its Climate-Related Disclosure Rules [2], halting an effort to enhance and standardize climate-related disclosures for investors. The rules, adopted in 2024, faced many legal challenges from businesses and state officials, leading to the SEC reconsidering its position under its new Trump-appointed Chair.

These federal changes have subsequently led several states to propose their own climate-related requirements in an effort to maintain a certain level of climate disclosure requirements across the nation.

California led the way in state-level climate transparency in 2023 with the passage of the Climate Corporate Data Accountability Act (SB 253), which established a blueprint for other states to follow. Modeled after this landmark regulation, New York (SB 3456) and New Jersey (SB 4117) introduced climate disclosure regulations requiring companies with annual revenues over $1 billion to disclose Scope 1, 2, and 3 GHG emissions data. Colorado (HB 25-1119) and Illinois (SB 3673) have also introduced similar legislation modeled after the California climate regulation. However, state-level climate disclosure bills across the country have generally progressed slowly, reflecting legislative pushbacks and laggard pacing behind California to mirror the state’s efforts. Meanwhile, California’s regulations have faced legal challenges [3], most notably from the US Chamber of Commerce, which have led to a temporary injunction on reporting and further uncertainty in 2026.

The introduction of these bills across multiple states, even amidst federal rollbacks and challenges, signals a shift in market expectations. It suggests that a demand for climate transparency isn’t a regulatory hurdle, but a requirement from a broad coalition of public and institutional stakeholders. Legal battles may delay or dilute specific mandates, however the movement towards more mandated disclosure is clear. Therefore, companies should proactively integrate these reporting frameworks in 2026 and be prepared to adapt as state-level regulation evolves.

DEI comes under attack

The new administration’s criticism of DEI

In the beginning of 2025, the news cycle was dominated by the Trump Administration’s opposition to diversity, equity and inclusion (DEI) initiatives, reflected through various Executive Orders [4]. Following the lead of the White House, many companies began to pull back their DEI initiatives due to both political and legal pressures

Major companies that have either renamed, reprioritized or completely removed DEI initiatives [5] include Target, IBM, Pepsi and more. Target, which had rolled back DEI targets and programs, and ceased participation in third-party diversity surveys, saw a decrease in foot traffic for about eight weeks. Some saw this as evidence of a DEI-related consumer backlash, although others linked it to wider economic conditions.

As the rollout of DEI changes continued, public discontent motivated companies such as Costco and Coca-Cola to reaffirm their commitments to diversity and inclusion. Furthermore, shareholders at many companies like Apple, Disney, and Costco overwhelmingly rejected anti-DEI proposals, signaling that many investors still view these initiatives as essential to long-term strategic value – or at least, that they do not approve of anti-DEI campaigners’ attempts to dictate management decisions. Beyond surface-level DEI policies, companies should shift towards a holistic and measurable approach in 2026 that is authentic to the brand and integrated into core business strategy. Learn more about what “good DEI” looks like for an organization.

Climate action at a crossroads

Corporations shifting priorities in response to climate criticism

Similarly to DEI, climate action has seen increasing criticism. In particular, Republican attacks on banks, asset managers and proxy advisers in 2025 over their perceived “politically motivated” climate stances. This led to moves such as the collapse of the Net Zero Banking Alliance [6], and a far less vocal investment community in the US – although reports suggest that many are “still doing ESG” behind the scenes, particularly to appease European clients. In turn, this has influenced some companies to scale back, pause or reframe initiatives.

Although headlines suggest that corporate ESG is declining, companies continue to see the value and importance of climate-related initiatives. Only 8% of companies have rolled back on their ESG commitments while another 5% altered their public messaging while keeping their programs intact. It is expected that 32% of companies are expanding their efforts.

Alongside the more publicized commitments to ESG, there has been a rise of greenhushing, quiet climate strategies which are sometimes criticized for lack of accountability. A 2025 EcoVadis study [7] found that 87% of US companies have quietly increased sustainability spending despite regulatory uncertainty. This retreat from vocal ESG messaging doesn’t signal abandonment of climate goals, but rather an evolution in how companies communicate and justify their sustainability work. Furthermore, many companies are adjusting how they communicate ESG efforts by adopting less politically charged terminology. Research from The Conference Board [8] found that while 87% of S&P 500 firms disclosed climate-related targets, only 25% used "ESG" in their report titles (down from 40% in 2024). As Solitaire Townsend, Co-founder of Futerra, writes for Trellis on the necessity of a hybrid strategy [9] for 2026: “Pride where performance is real and measurable. Hide where language has become a distraction from delivery. And extreme caution around slide, reserved only for situations where commitments were hollow to begin with and a credible alternative strategy exists.”

Retreating from transparency risks creating a situation where stakeholders can no longer trust what companies are reporting. In 2026, companies should pivot toward communicating strategies that are rooted in stakeholder materiality and focus on specific climate actions that will drive business value and engagement. Broad claims and lofty ambitions may invite skepticism, therefore disclosures and strategies should be authentic, backed by detailed action plans, and supported by measurable data. Aligning climate initiatives with the organization’s core values demonstrates a long-term commitment to sustainability.

Looking ahead: How to move forward in 2026

Ultimately, meaningful corporate action on ESG issues has always been rooted in strategic value and satisfying the needs of broad stakeholder groups. This foundation will be critical moving forward, regardless of the ever-changing political landscape around ESG. As we move into 2026, key themes to focus on include tension between public positioning and private action, the evolutions of climate disclosure requirements across different jurisdictions, and opportunities arising from climate adaptation and resilience technology.