Think ESG Is Fading? Think Again. Your Employees Didn’t Get the Memo.

Across boardrooms and headlines, the ESG narrative has taken a turn. In the U.S., political backlash has framed ESG as “woke capitalism,” while global investors reevaluate priorities amid inflation, supply shocks, and regulatory uncertainty. Yet through the haze of backlash, a powerful force continues to push forward – your employees. The Gen Z and Millennial generations aren’t just entering the workforce; they’re shaping its future.

From inside the organization, they are embedding purpose, climate, equity, and ethics into daily decision-making. NextGens are not lobbying from the sidelines. They’re inside your company, expecting leaders to deliver on the values printed in sustainability reports and on careers pages. And increasingly, they walk away when companies fall short.

This isn’t hypothetical. Employees are already taking action and companies are responding. From workers striking over climate inaction to unions demanding stronger ESG policies, we are seeing a rise in purpose-driven workforce activism. This is not a fringe movement; it is a mainstream issue that’s on the rise.

The ESG “backlash” narrative is overblown.

It’s true that ESG has faced a barrage of criticism. U.S. politicians have accused ESG advocates of pushing a “woke” agenda. Some major firms have downscaled ESG efforts:

• BP recently announced that its head of sustainability, Giulia Chierchia, will leave the company as it pulls back on some low-carbon investments.
• HSBC Asset Management is restructuring and has parted ways with its global head of sustainability.

But interpreting these moves as the end of ESG misses the point. ESG isn’t fading; it’s evolving. The short-term politicization of ESG is distracting from the structural, generational shifts driving its long-term relevance.

The Next Generation is the market.

This NextGen cohort isn’t just tomorrow’s workforce; it makes up today’s influencers, customers, and investors. They don’t want platitudes; they want proof. Their values shape where they work, what they buy, and who they back. For companies, failing to align with this generation doesn’t just mean losing talent, it means losing relevance. The smartest businesses know this isn’t idealism; it’s strategy. It’s how you futureproof.

Gen Zs and Millennials now make up nearly half the global population. By 2034, 80% of the workforce in advanced economies will comprise Millennials, Gen Zs, and the first Gen Alphas. This matters. Deloitte’s 2024 Gen Z and Millennial Survey found that 46% of Gen Zs and 42% of Millennials have changed or plan to change jobs due to environmental concerns. Not only do these generations want their employers to act on climate and social issues, they’re willing to walk away if they don’t.

These are not idle threats. They are actions that affect recruitment, retention, and productivity. In a labor market where talent is a competitive advantage, companies cannot afford to alienate this workforce.

From bottom-up pressure to institutional change.

Younger employees are speaking up and shaping strategy. They are joining corporate boards, policy councils, and innovation teams, turning grassroots pressure into real governance influence. What starts as internal momentum is now driving product redesigns, investor engagement, and even policy shifts. Major consultancies are advising clients that if you’re not integrating employee-driven ESG insights into boardroom reporting, you’re already behind.

The myth that sustainability is a top-down mandate from regulators or investors misses the bigger picture: change is coming from within. Employees are forming sustainability committees, launching green resource groups, and organizing climate hackathons.

According to Ignite HCM, HR departments are responding by:

• Creating sustainability ambassador programs
• Integrating ESG into performance reviews
• Subsidizing green commuting and low-carbon lifestyle choices

This is grassroots corporate activism in action, and it is delivering! When employees champion sustainability from within, companies are more likely to adopt lasting ESG commitments and drive meaningful transformation.

ESG isn’t about opinion. It’s about market need.

While some headlines suggest public support for ESG is slipping, the underlying environmental and economic challenges remain as urgent as ever:

• By 2025, two-thirds of the world’s population could face water shortages.
• By 2050, global food demand will increase by 70%, requiring massive shifts in sustainable agriculture.
• Material scarcity for rare earth minerals is already affecting supply chains in everything from EVs to smartphones.

These are facts, not opinions. Companies that focus on ESG are not doing it merely to indulge in political correctness, they are managing long-term risk and identifying future markets.

Solutions to these challenges are already reshaping entire sectors with scalable, technology-driven innovation:

• Xylem is deploying smart water technologies in 150+ countries, helping save billions of gallons of water and cut energy use. In 2023, it enabled the reuse of 1.6 billion m³ of water and avoided 1.9 million metric tons of CO₂.
• Nestlé has committed $1.3 billion to regenerative agriculture by 2030, with over 20% of core crops grown sustainably by 2023. It’s also investing in circular packaging and refill trials, led by its internal “Sustainability Champions.”
• Schneider Electric has helped clients avoid 440 million tons of CO₂ since 2018 through its EcoStruxure platform. Over 90% of its own electricity is renewable, and employee-led “Green Teams” drive ESG action company-wide.

These aren’t PR stunts. These are financially backed, market-driven innovations designed for resilience and growth. They are also tightly aligned with the expectations of younger, eco-conscious consumers and employees who evaluate companies not only on products and paychecks, but on purpose.

ESG delivers results.

Contrary to the backlash, ESG investments are delivering tangible returns, and the numbers tell a compelling story. According to Morningstar’s 2024 Sustainable Investing Landscape, ESG-focused funds outperformed their conventional peers in key sectors such as technology, healthcare, and consumer staples over a five-year period. In Europe, where ESG integration is often more advanced, sustainable funds captured nearly 65% of all fund inflows in 2023. Globally, ESG assets are projected to surpass $50 trillion by 2025, representing more than one-third of total assets under management.

Moreover, ESG-aligned companies are not just benefitting financially—they are structurally stronger. Studies by McKinsey and Harvard Business School have shown that such companies tend to outperform on key business indicators, including innovation, brand equity, and supply chain resilience. They also report lower volatility during market downturns, suggesting that ESG acts as a buffer against systemic risk. Importantly, these firms also:

• Experience up to 30% lower employee turnover
• Report higher customer retention and satisfaction
• Attract more mission-aligned, long-term investors, including institutional capital focused on sustainable outcomes

This helps explain why asset managers like BlackRock, despite vocal political opposition, continue to back ESG-linked funds and climate transition strategies. As CEO Larry Fink has emphasized, ESG is not a political agenda; it is a form of forward-looking risk and opportunity management. In a world increasingly shaped by climate shocks, social unrest, and regulatory shifts, ESG provides a strategic lens through which companies can build resilience, unlock innovation, and drive value creation for stakeholders.

ESG as employer branding.

Younger generations care deeply about what their employers stand for and it’s driving their career decisions. According to IBM’s Institute for Business Value, 71% of employees and job seekers say that environmentally sustainable companies are more attractive employers, and that figure rises to an impressive 84% among Gen Z. These preferences are rooted in action, not sentiment. Gen Zs and Millennials are researching corporate ESG performance before applying for jobs, while leveraging sites like Glassdoor and ESG ratings platforms to evaluate employer values.

These trends are having measurable impact. Companies with strong ESG reputations experience a 50% lower employee turnover ratio and significantly higher engagement scores. This is echoed in LinkedIn’s Global Green Skills Report, which noted a 40% increase in job postings mentioning sustainability and climate-related skills between 2021 and 2023, reflecting both demand and competitive advantage for ESG-conscious firms. Demand for green talent is also surging much faster than its availability, with global need for green talent increasing by 11.6% from 2023 to 2024 and supply only rising by 5.6%.

The stakes are high. In a tight labor market, top-tier candidates are actively screening potential employers for climate action, DEI metrics, and transparent governance practices. Job seekers are increasingly asking questions about carbon reduction goals, ethical sourcing, and inclusive workplace policies during interviews. Conversely, companies that fail to articulate a coherent sustainability strategy face risks ranging from diminished brand loyalty to weaker employee morale. As Gen Z is projected to comprise over one-third of the global workforce by 2030, these dynamics will only intensify. Companies that ignore these signals risk being sidelined by the very people who will define their future.

Gen Z: The accountability generation.

If Millennials helped normalize sustainability in business, Gen Zs are taking it a step further. They are the most connected, data-literate, and activist generation in history. They are not content with vision statements. They want evidence. They read ESG reports, benchmark performance, and expect to participate in decision-making. They bring energy, urgency, and activism into the workplace. Organizations that embrace this energy unlock innovation. Those that suppress it risk disengagement and reputational harm. Gen Z doesn’t just want to work for good companies, they want to co-create them.

They demand transparency, climate disclosures, and diversity metrics. They use platforms like TikTok, LinkedIn, and Reddit not just to consume, but to mobilize. Boycotts, viral campaigns, and whistleblowing are just a few ways Gen Z exerts pressure.

They’re not just asking questions; they’re holding employers accountable.

ESG isn’t fading, it’s evolving.

ESG isn’t disappearing, it’s evolving; and your employees are its most credible drivers. In a world of short-term headlines and political volatility, employees offer clarity and long-term commitment. By aligning business strategy with employee purpose, companies can transform internal momentum into competitive advantage.

It’s time to stop viewing ESG as a reputational liability and start seeing it for what it really is: a strategic asset shaped by the values of your most important stakeholders – your people. This is the next frontier of sustainable business. It’s not from the top down, it’s from the inside out. Because when the people on the inside believe, the company leads. Period.

Executives who think the ESG movement is losing steam are mistaking headlines for headwinds. While a vocal minority resists ESG on ideological grounds, the economic and demographic realities say otherwise.

Millennials and Gen Zs will soon dominate the labor market and consumer landscape. They aren’t just ESG-friendly, they are ESG-driven. Companies that align with their values will lead the next generation of business. Those that don’t will struggle to stay relevant, as these next generations don’t just talk the talk, they walk.

Marga Hoek Founder-CEO Business for Good, Global Thought Leader Sustainable Business, Capital and Technology, Award-Winning Author

Theresa McCarty Lead Research and Analysis Business for Good, New York