Has the axe fallen on environmental, social and governance? Scanning recent headlines, it’s an easy conclusion to make, when screeching declarations in the mainstream media tell us ESG is “dead”.
Political row-backs stateside, regulatory U-turns in the EU, the resurgence of fossil fuels amid faltering progress on sustainability targets have raised significant questions. But the narrative that ESG has lost its relevance is premature and short-sighted.
For beverage brand owners navigating a complex web of operational, reputational and geopolitical risks, ESG is not a distraction. It is a lens for making smarter, more resilient business decisions. Far from a passing trend, ESG remains a vital framework for safeguarding long-term value, responding to investor and consumer expectations and future-proofing supply chains.
The backlash is real, but so is the business case
One thing is certain: the ESG mood music has changed. While the EU has delayed the rollout of the Corporate Sustainability Reporting Directive, the US Securities & Exchange Commission has dropped its defence of climate disclosure rules. At the same time, the second Trump presidency is undermining regulatory progress further in the US.
But ESG goes beyond an exercise in regulatory compliance; it’s a strategic risk tool. Heavily reliant on agriculture and water resources, the drinks industry is uniquely exposed to the effects of climate change. Extreme weather patterns threaten crop yields for barley, grapes and sugarcane. Water scarcity is forcing breweries to rethink operations. And social issues – ranging from responsible consumption to supply chain ethics – remain under intense scrutiny.
There are many high-profile examples to point towards; Heineken implementing water stewardship projects across 41 high-risk sites, while Diageo invests in regenerative agriculture to protect long-term ingredient supply. However, it’s clear these are not just acts of ESG compliance – they are business survival strategies.
Investors expect transparency around ESG strategy
Despite the regulatory headwinds, investor interest in ESG remains robust.
According to recent data from Morgan Stanley, 80% of global asset owners expect to see growth in sustainable investments over the next two years. This reflects continued confidence in ESG as a long-term value driver despite shifting regulatory and political landscapes.
But investors no longer reward vague commitments. They want to see measurable progress on emissions, supply chain traceability and water use. They want credible transition plans, not just carbon pledges without capital allocation.
For companies in the drinks industry, this means ESG disclosure must become more data-driven, transparent, tied to financial performance and focused on what’s material to their business.
Consumers want brands with ESG-driven values
Those hoping to ring the death knell for ESG also overlook the role of consumers in forcing the agenda. At a time when populations around the world are growing increasingly distrusting of their politicians, people still expect brands to step up.
Sustainability is a key driver of purchase decisions, particularly among Gen Z and Millennial consumers. And, as our industry tries desperately to stem the trend among this audience towards drinking less, sustainability is proving to be a prized attribute.
According to a joint McKinsey and Nielsen IQ report, products making ESG claims averaged cumulative sales growth of 28% over the five-year period to 2022, versus 20% for brands not leaning into sustainability credentials. Consumers want to know where their drinks come from, how they’re made and whether the brand aligns with their values.
The rise of no- & low-alcohol, sustainable packaging innovation and ethically-sourced ingredients are not incidental, they are fuelled by demand.
If ESG is “dead,” consumer behaviour tells a very different story.
Not dying, but changing
The reality is that ESG is evolving, accompanied by a shift in language and positioning. Companies now talk about “sustainable business”, “responsible growth” or “climate resilience”, but the guiding principles remain unchanged.
What’s emerging is a more pragmatic, integrated approach to ESG: one that focuses on business-critical outcomes, not just reputational wins.
The smarter companies have quickly grasped that sustainability-led operational shifts in water use, energy reduction and circular packaging help to cut costs, as well as environmental impact. Heineken’s water efficiency efforts, for example, have reduced use by 11% across its operations since 2018.
Not only is this better for the planet, it’s also better for the P&L.
Retreating is not an option
Beyond the headlines, there is no denying that ESG needs a reset. Targets have to be achievable, language must be clearer, and reporting needs to focus on measured actions, not intentions. Despite the challenges, walking away from ESG is a backward step.
Global drinks companies have an enduring responsibility, not just to shareholders, but to their ecosystems of farmers, suppliers, distributors and consumers. At a time of extreme global turbulence, ESG provides the framework to manage these interdependent relationships, mitigate risk and highlight opportunities.
The winners in the changing ESG landscape will be those who stay the course and recognise that it isn’t dead – it’s maturing. And, in an industry where natural resources, brand trust and consumer loyalty are king, it should continue to sit at the heart of your business agenda.
