America’s ESG Hiring Boom Is Starting to Cool

ESG job departures outpaced arrivals for half the months of last year, marking the reversal of a multiyear trend. Companies had 3,071 ESG departures compared with 2,897 arrivals in December 2023, according to employment data provider Live Data Technologies, which reviewed more than 360,000 current and former ESG professionals at U.S. companies.

Meta Platforms, Amazon and Google had the largest ESG job outflows among U.S. companies in 2023, according to the data. Tech, financial-services and consulting companies were particularly active with ESG departures, representative of broader cutbacks in those sectors including layoffs in some cases. Meta declined to comment and Amazon and Google didn’t respond to requests for comment.

Companies are facing ​​investor pushback and political pressure targeted at ESG efforts, with shareholders cashing out billions in favor of higher returns elsewhere. Most businesses continue to follow sustainability commitments but are changing how they handle their ESG programs, in some cases adjusting diversity initiatives by scrapping legally risky and possibly discriminatory practices.

“2023 saw a real cooling in chatter around ESG and in some quarters, quite a pronounced attack on what ESG was about," said Joe Dubbin, managing director at Cripps Leadership Advisors, an executive search firm. “It has certainly filtered through into the hiring requirements that we’ve been tasked to go do."

That some companies already have teams and don’t need to build them out is certainly a factor in the slowdown in ESG hiring, Dubbin said. Regulations and investor sentiment will help determine the future level of continuing demand for these positions, he said.

Corporate boards have been placing less pressure on executives to focus on managing ESG risk compared with that of supply chain, cybersecurity, generative artificial intelligence and geopolitical uncertainty, said Alexander Bant, chief of CFO research at consulting firm Gartner. That reduced pressure has in part led to CFOs asking “substantially" fewer questions to advisers about ESG, for example, on how to talk to their investors about their related strategy, he said.

Companies are reconsidering the priority given to ESG programs and their pursuit of top ESG scores in response to pressure from investors seeking faster returns on investments, Dubbin said. “In delivering meaningful environmental and carbon-reduction programs, the financial returns are a long way away," he said, adding energy transitions are necessary. “It’s not gone away. It’s just having a repricing and that’s driving hiring trends."

Some CFOs are devoting more resources to the areas of the business generating those higher short-term returns, resulting in a smaller ESG team or people incorporating ESG into their roles in lieu of positions wholly devoted to it. For example, as a temporary fix, some companies might task the head of operations and other senior leaders to manage several performance measures for sustainability as part of their remit instead of outright hiring people to do so, said Catherine Harris, head of the Americas sustainable business practice at Acre Resources, a sustainability-focused recruitment firm.

“More businesses are recognizing they need to build a sustainability team, but resources are not as bountiful as they might like," Harris said.

New and potential corporate sustainability disclosures and regulations in California, Europe and elsewhere are starting to pile up for a mix of public and private companies, creating new burdens for their compliance and finance teams.

Hiring for ESG positions has generally climbed since 2018, though that momentum slowed in 2020 because of the pandemic. ESG job arrivals and net inflows were both at their highest in late 2021, the data show. Sixty-three percent of ESG professionals who changed jobs in 2023 left the function, Live Data said.

For the full year of 2023, arrivals were still ahead of departures, at 40,884, versus 39,452, but the gap has significantly narrowed compared with previous years, Live Data said, based on a review of professional profiles, company websites and other public employment data. Net inflows totaled 1,432, compared with an average of roughly 15,000 over the prior five-year period.

Arrivals represent a person joining a company or switching positions at the same company to an ESG role, while departures reflect a person ceasing to hold an ESG job, whether they’ve left a company or not.

A drop in new ESG hires hasn’t necessarily weakened companies’ investments in those areas. Ninety-two percent of chief executives stand by their ESG programs, while the remaining 8% have ramped them down, according to a Teneo survey from December.

The nature of ESG positions, at least on the surface, is changing. ESG job titles sometimes include words such as sustainability, impact, responsibility, climate and diversity. There are fewer sustainability reporting positions focused on companies’ reporting of ratings and rankings and more positions within or working directly with the finance team, for example the role of “ESG controller," said Ellen Weinreb, managing director at Weinreb Group, a sustainability and ESG recruitment firm.

“The decrease is the backlash and the increase is the regulatory, so it nets out," Weinreb said, referring to ESG job inflows and outflows.

Ongoing resistance to the ESG label might influence how companies decide which roles they want to avoid, said Mike Wallace, chief decarbonization officer at Persefoni, a carbon accounting and management software provider. Roles have evolved from a director-level position into a job in the C-Suite and shifted from marketing to finance, he said.

“You’re going to have to figure out what’s the language you’re going to use to stay in compliance, but also continue to do business with your biggest customers asking you for sustainability, carbon data or ESG data," Wallace said, referring to CFOs and other executives.

Write to Mark Maurer at mark.maurer@wsj.com