When governments roll back corporate sustainability responsibilities, they often do so in the name of ‘free markets’, corporate freedom, and competitiveness. However, our study of the corporate social responsibility (CSR) system in the Bolsonaro era in Brazil, published in the Journal of Management Studies, indicates that cutbacks in state support for corporate sustainability reduced corporate discretion for certain firms and could weaken their competitiveness. This is because corporate discretion has two components: the liberty to decide on sustainability activities and the capacity to engage in sustainability activities. In our case, we find that multinational corporations in particular continued to face ESG and sustainability expectations in global markets, but the reduction in government support for corporate responsibilities left them with weakened capacity to engage in sustainability—counterintuitively reducing corporate discretion. Our findings highlight the potential risks for companies when faced with ideologically motivated policy changes. Here, the processes by which governments ‘de-orchestrate’ CSR systems provide important clues for how firms may be affected.
National populist governments and the backlash against corporate sustainability
Corporate sustainability appeared to be on a permanent forward march throughout the first two decades of this century, as evidenced by a proliferation of global sustainability standards and certifications, the rise of new science-backed frameworks for managing sustainability, and, perhaps most importantly, advancing country-level and supranational sustainability governance and regulation.
However, this trend has recently been reversed in some places during periods in which national-populist politicians have held power, including in the United States, Poland, Hungary, and Brazil. Many have sought to curb developments portrayed as progressive or ‘woke’. Some of these government responses have, to varying degrees, exhibited authoritarian tendencies, placing the rollback of sustainability within a broader reconfiguration of state–business relations. This has translated into the sometimes aggressive dismantling of regulation and other institutional structures underpinning CSR. While some industry groups have lobbied for such changes, the response from the broader business community has been far from uniform.
De-orchestrating CSR in Bolsonaro’s Brazil
Brazil under Bolsonaro offers an exceptional lens into studying this so-called backlash against CSR and corresponding sustainability engagements. Our research draws on 37 semi-structured interviews with actors involved in Brazil’s CSR system, including corporate managers and executives, governmental agencies, NGOs, consultancies, and asset managers. The interviews were conducted across the Bolsonaro presidency and complemented by later interviews used to confirm and refine our interpretations, alongside field interactions and secondary evidence. Together, this material allowed us to trace both changes in the state’s role in CSR and their consequences for firms.
Voted into power in 2019, Jair Bolsonaro’s government set out to tear down regulations on corporate sustainability, but perhaps more significantly, it began dismantling the wider governance framework around CSR. Prior to Bolsonaro, the Brazilian state had an active hand in shaping corporations’ responsibilities for broader social and environmental benefits. Alongside traditional regulation, institutions including the development bank BNDES, environmental agency IBAMA, and regional public-policy councils provided funding, consultation, oversight and platforms for cross-sectoral collaboration. Through these institutions, the state helped determine the what, where, and how of corporate sustainability.
The Bolsonaro government worked to reverse this system, significantly weakening BNDES, IBAMA and public-policy councils and diminishing their roles in corporate sustainability governance, alongside relaxing sustainability regulation. We call this de-orchestration of CSR because the government went beyond deregulation by dismantling the broader governance structures and state capabilities surrounding CSR.
Consequences of de-orchestrating CSR for corporate discretion
Along with a stated intent to curb cronyism, the rationale for ‘CSR de-orchestration’ in Brazil was to liberate companies from state-imposed responsibilities and let them make their own decisions about such matters. Multinational corporations in particular found themselves in a less favourable position than before. They continued to face ESG expectations in global markets, but had a diminished capacity to meet them. Meanwhile, companies’ civic stakeholders continued to expect companies to consider environmental and social factors as they did prior to de-orchestration, threatening increased transaction costs and weakened public support.
These emerging problems highlight how corporate discretion is not only about the liberty to decide how to conduct corporate sustainability, but also about corporate capacity to engage in such activities. The latter becomes especially important in the contemporary business environment where global financial markets expect greater diligence in acting and reporting on sustainability: the liberty component is institutionally constrained, so capacity becomes paramount.
Why does de-orchestration matter beyond Brazil?
Moving forward, the ambiguous effect of state de-orchestration on corporate discretion should give policymakers and business leaders a moment to reflect on basic assumptions about the role of the state in the economy. For policymakers, the article highlights that the state does not simply constrain corporate behaviour through regulation; it can also provide resources and coordination that enable firms to pursue social and environmental objectives. Investors and civil-society organisations should similarly recognise that political change can alter firms’ capacity to meet sustainability expectations that nevertheless persist.
This makes the business case for radical ‘deregulation’ and ‘rolling back the state’ much weaker. Bolsonaro’s backlash against CSR and ESG illustrates this starkly, with implications extending beyond Brazil as corporate sustainability becomes an increasingly politically contested domain. More generally, this invites a more nuanced understanding of state–business relationships and the meaning of state support for CSR as a possible enabler—not simply a constraint—of corporate discretion.
