Q&A with Kōan's Editorial Director: How is U.S. pushback on ESG impacting EU sustainability efforts?

As ESG faces political resistance in the US, EU companies are caught between clashing expectations on both sides of the Atlantic. In this quick Q&A with Simon Clow, our Editorial Director, shares insights on how businesses are adapting—and what it means for the future of corporate sustainability.

Q1: What challenges do EU companies face if they run Diversity, Equity & Inclusion (DEI) programs while working with or in the U.S.? (given that some of these programs are being restricted or banned).

It really depends on the company. If you’ve got U.S. operations, you have to decide how to handle DEI on that side of the business. We’ve already seen some clients back away from DEI programs, partly because of pressure from the U.S. government—especially if they’re working with federal contracts. In some cases, there’s even been outreach from U.S. officials warning EU companies they could be excluded from tenders if they keep running these programs.

A lot of companies are now backing away from the language of DEI—not necessarily scrapping the work, but trying to avoid drawing attention. We saw that with Barclays recently—they dropped their U.S. DEI programs entirely. And that raises difficult questions. Does it look like you're compromising your values? Or are you just protecting your interests in a huge market like the U.S.?

Another issue is the risk of unequal treatment—you’ve got DEI initiatives in Europe or Asia, but nothing in the U.S., and that can affect everything from internal mobility to employee morale. It creates tension: how do you explain that to your workforce, especially if you’ve made a strong case for DEI being core to your values and strategy?

It’s a tough position—on one hand, you've made a public commitment to inclusion; on the other, you're trying to stay aligned with shifting political expectations in a key market. And you don’t know how long those expectations will stay the same.

Q2: How do you think EU companies are dealing with the growing gap between strong ESG rules in Europe and pushback against ESG in the U.S.?

You’ve got a clear divergence—Europe tightening ESG rules, even if some of them are being softened or delayed, and the U.S. rolling a lot of it back. What’s changed recently is that ESG has become part of the trade debate in the U.S. The argument is that Europe’s standards—ESG, product safety, DEI—are being used as non-tariff barriers, which the U.S. sees as unfair. That’s part of the justification for the suggested tariffs.

At the same time, there’s this idea that deregulating ESG in the U.S. will make it cheaper to operate there and bring business back—but that ignores the fact that long-term value often comes from responsible companies: those with engaged workforces and solid social and environmental practices. Plus, shifting production isn’t quick. It took decades to deindustrialise; it would take just as long to rebuild.

Q3: Will U.S. resistance to ESG change how EU companies report or talk about their sustainability efforts globally?

I think it will—definitely. You’ll start to see EU companies, especially those with U.S. operations, pull back a bit from how openly they talk about things like diversity. And that kind of caution could start to spread more generally, even in companies without a big U.S. presence.

What’s more interesting is how this shift gives more weight to the internal sceptics—the people in companies who’ve never really believed in ESG or thought climate issues were important. Now they’ve got a new argument: “Look, our U.S. competitors aren’t doing this—why should we?”

So suddenly the people who’ve been pushing ESG inside these companies—sustainability teams, supportive execs, and so on—might lose some ground. You’ll see old debates resurface that we thought were already settled. It changes the tone of the conversation.

Q4: What can EU governments or institutions do to help companies that are stuck between different ESG rules in the U.S. and Europe?

Honestly, I don’t think governments will do much in the short term—they’re still trying to resolve the ongoing tariffs dispute with the U.S. And who knows what the U.S. will ask for in trade talks? ESG rules could easily end up on the table.

What the EU Commission has already done, though, is soften some of the ESG rules, like the ESRS and CSRD. That’s partly because of pressure from inside the EU—companies and governments like Germany saying the reporting burden is too heavy. Even companies that support ESG argue it puts them at a disadvantage if they’re competing with U.S. or Asian firms that don’t have to do any of this. And it looks like that message landed—Brussels has made some adjustments.

That said, I don’t think we’ll see a full reversal. There’s still a lot of political and public support for ESG in Europe—climate action, electric vehicles, all of that. There’s no “Trump equivalent” in the EU at the moment with the same kind of power to roll things back. So while the pressure might lead to lighter reporting or slower deadlines, ESG isn’t going away.

We’re already seeing it—for example, in the UK, the Prime Minister responded to the new U.S. tariffs on cars by saying they’d protect the car industry. One of the ways they’re doing that? Pushing back the deadline on electric vehicles. So instead of switching completely to EV's by a certain date, hybrids are now allowed too. That takes some pressure off carmakers and slows down the investment they need to make. It also slows down the rollout of charging infrastructure across Europe. So yes—governments might ease the burden, but the direction of travel isn’t changing completely.