Takeaways

• Governance has overtaken environmental concerns as the leading ESG reputational risk for companies in 2026.
• Rising regulatory scrutiny, ethics concerns, and corporate governance failures are driving the shift.
• Experts say businesses must strengthen transparency, compliance, and oversight to protect public trust.

Governance has emerged as the biggest reputational risk in ESG for 2026, overtaking environmental concerns for the first time in recent years, according to consultancy firm GlobeScan.

The shift reflects growing anxiety among businesses, investors, and consumers over corporate ethics, accountability, and leadership practices. GlobeScan said the trend signals that companies are facing increasing pressure to improve transparency, compliance, and internal oversight as stakeholder expectations continue to rise.

The consultancy noted that environmental risks, while still important, may now be viewed as relatively more stable or manageable in the short term. Social issues also remained lower on the list of reputational concerns.

Read More: Sustainalytics ESG Risk Rating: A Guide for Responsible Investing

The rise of governance-related risks comes as companies around the world face tighter regulations and closer scrutiny from shareholders, activists, and the public. GlobeScan said recent corporate governance controversies have further intensified concerns among business leaders.

“Governance now sits at the center of reputation management,” the firm said, adding that organizations may need to strengthen crisis response systems, ethical standards, and oversight procedures to prevent reputational damage.

The growing focus on governance risk, corporate governance, and ESG reputational risk has been highlighted by several high-profile incidents in recent months.

Last week, energy company BP announced the removal of Chair and Director Albert Manifold after the board raised what it described as “serious concerns” linked to governance standards, oversight, and conduct.

Although the company did not disclose the full details behind the decision, Manifold had faced criticism over his handling of a shareholder resolution proposed by climate activist investor organization Follow This.

Investor activism has also intensified in the retail sector. A group of shareholders recently urged investors to vote against the reelection of current leadership at Target during its upcoming annual meeting.

The coalition, including Trillium Asset Management, SOC Investment Group, and Mercy Investment Services, argued that a series of operational and strategic decisions had hurt the retailer’s reputation and financial performance.

The investors criticized the company’s move to scale back diversity, equity, and inclusion initiatives, reduce Pride-themed merchandise, and provide what they described as an insufficient response to immigration enforcement actions at some store locations. According to the group, these decisions triggered customer backlash and reputational harm.

Experts say the latest findings underline how closely reputation is now tied to leadership behavior and decision-making. Companies are increasingly expected to demonstrate strong ethical standards, transparent governance structures, and accountability at every level.

Also Read: What Are LSEG ESG Scores? Guide to Methodology & Ratings

As ESG risk management evolves, businesses are being advised to invest more heavily in compliance systems, board oversight, and internal ethics programs. Analysts believe companies that fail to address governance weaknesses could face significant damage to both investor confidence and consumer trust.

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Source: ESGDIVE