HEADLINE: “Why ESG and DEI could be the next big business risk” By Patrick Langrell
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Why ESG and DEI could be the next big business risk
The instinctive reaction to the ESG and DEI ‘vibe-shift’ in the US was to persist, defend the status quo, and write off what was happening over there as an isolated and temporary phenomenon.
Patrick LangrellSocial commentator
Jun 17, 2025 – 5.00am
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Australian corporates face a harsh new reality given what’s transpiring in the US.
Lofty pronouncements about “diversity” and “social licence” are now at serious risk of falling flat and sounding tin-eared. More and more, they sound like “corpsplaining” – a corporate attempt to explain or justify social engagement in an overconfident or oversimplified manner, in the mistaken assumption that companies know more about the social good than the average citizen.
How did things get so bad? In short, US business leaders downplayed legitimate concerns over their engagement in contested issues, including many under the ESG and DEI umbrellas. This generated discontent and led to co-ordinated pushback over time. Trump capitalised on this discontent throughout his campaign, and has fully weaponised it in his second term.
Combined with titanic economic and geopolitical challenges – plus daily bolts out of the blue, presidential feuds and vendettas, ideological witch-hunts and chaotic policy contortions – US business leaders now navigate an uncertain and volatile environment.
Sensing the change in the wind, US companies have tacked accordingly. ESG and DEI have gone underground or undergone a makeover. Maintaining core business is top of mind, and that’s hard enough.
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Australian business leaders watching these events unfold are choosing one of three options: persist, pause or pivot.
The instinctive reaction to the “vibe shift” in the US was to persist, defend the status quo, and write off what’s happening over there – and to a lesser extent here – as an isolated and (fingers crossed) temporary phenomenon.
This approach has the benefit of accurately reflecting key socio-cultural differences between us, shores up the elite governing consensus and claim to the moral high ground, and leaves existing efforts largely in place. This is indirectly buffered by the re-election of a sympatico Labor government and a weak and wobbly opposition.
“The baby doesn’t need to be thrown out with the bathwater, but some elements of ESG and DEI do need to be re-evaluated to bring more people along without the same adverse effects.”
Downsides of persistence include minimising the growing concerns and unintentionally sustaining the backlash against “out of touch elites”. It might also be perceived as a rearguard action based on a misplaced sense of Australian impermeability to tectonic cultural shifts already underway.
The second and more cautious response has been to pause and adopt a wait-and-see approach. Governments come and go, implications for Australian companies aren’t clear, peril awaits anyone hitching their wagon too closely to the US roller coaster, and executive overreach will return the pendulum anyway.
The advantage of this approach is that it quietly maintains popular ESG and DEI commitments, albeit with less fanfare – more virtue, less signal. It may involve tweaking a few risk assessments and webpages, but companies can continue with BAU, wink and nod to various constituencies, and not attract unwanted attention. Since the excesses of the left paved the way for excesses of the right, we’ll reach an inflection point soon and so no need to change course now. Besides, if “Trump always chickens out” (TACO) elsewhere, he might also here.
But this is predicated on a hope and a wish that it’s smooth sailing here on out. US business leaders certainly don’t have this luxury anymore – that ship has sailed – and most are engaged in extensive political risk analysis, emergency scenario planning and preparedness, while beefing up their geopolitical muscle.
Australian businesses relying too heavily on a wait-and-see approach are vulnerable to whatever social controversy comes their way – responding reactively and in an ad-hoc fashion, rather than proactively thinking things through.
A third approach is to pivot and signal a clear evolution. This involves admitting that a company or sector may have overlooked some things, and acknowledging there are people of goodwill on both sides of contentious debates. It also means openness to greater restraint going forward, together with a rethink of how corporate engagement can better respect the breadth of views.
The baby doesn’t need to be thrown out with the bathwater, but some elements of ESG and DEI do need to be re-evaluated, perhaps reassembled, to bring more people along without the same adverse effects.
The pros here are clear. It’s more inclusive and respectful of a genuinely diverse range of viewpoints. It’s a less self-righteous and more humble approach to matters on which good people do hold differing views.
The cons are also clear. Debates nowadays are often cast as zero-sum games, leaving bridge-building approaches unsatisfying to extremes at either end. Revising or unwinding previous commitments can look weak or disingenuous. The task of developing a new social consensus on any contested issue is also long and arduous, beyond the remit of any one company.
These approaches are painted in broad brushstrokes. In reality, they often blend together and perhaps a prudent approach endorses such a blend. However, there is some evidence that support for the third approach is gathering speed – whether it be Jamie Dimon’s clarion call against elite virtue signalling, or a fresh Aussie willingness to open up discussion over DEI, diversity, corporate governance, gender equality, Australia Day and Welcome to Country.
Culture wars need not become civil wars, and Australian business leaders needn’t repeat the mistakes of their US counterparts. The change in the wind should move things into a better place – if we can pivot and tack smartly.
BOTTOMLINE: A third approach is to pivot and signal a clear evolution. This involves admitting that a company or sector may have overlooked some things, and acknowledging there are people of goodwill on both sides of contentious debates. It also means openness to greater restraint going forward, together with a rethink of how corporate engagement can better respect the breadth of views.