January 11, 2024
I woke up Tuesday January 9, 2024, to this Wall Street Journal headline: “The Latest Dirty Word in Corporate America: ESG.”
As the 10-year leader of Dix & Eaton’s sustainability/ESG practice, I went to work anyway. And so did all my colleagues, and our clients and contacts, as we all enter the typical “busy season” for sustainability/ESG reporting.
The premise of the article is that investor, political and legal pressures have scared business leaders, and even ESG professionals, away from using the term “ESG” to describe their environmental, social and governance efforts. And many are also considering saying less about what they’re doing, even if the work internally continues on the same path.
All the rancor has given rise to a debate in the field about whether a rebranding away from ESG to “sustainability,” “business responsibility” or “purpose-driven” is needed: “call it something different and that will ease the pressure” is their hope. It’s not going to work. It’s a distraction. Whatever your preferred term, changing it probably won’t hurt, but don’t expect it to turn around the negativity.
Don’t back down; double down. It’s hard to argue with a company that tells its unique story in an accurate, compelling and authentic way, and you should be able to use whatever term you think is right for you. Disclosing WHAT your priorities are and HOW you are addressing them is important, but it is not enough.
There is a critical third piece of the puzzle that is often missing. It’s the WHY, which is essentially the business case. It is the ESG community’s fault if stakeholders, skeptics and critics don’t understand the WHY.
Those doing the work in sustainability and ESG know the business case:
- Some investors (but certainly not all) desire financially high-performing companies that are also purpose-driven
- ESG programs and commitments can have a fundamental impact on de-risking the business
- Reducing emissions also reduces energy costs
- Waste is waste; waste = avoidable cost
- Diversity, equity and inclusion and strong safety performance feed talent attraction and retention
- Community engagement creates goodwill and lasting partnerships whose value may be overlooked until something bad happens
- Strong corporate governance, ethics and compliance programs positively affect all aspects of the business
We don’t necessarily need to rebrand ESG, scramble to delete every reference to ESG or find ways to minimize what we’re doing. We need to do a much better job proving WHY these efforts are so important. Yes, prove it. It takes data and depth, which are worth your time and effort.
What’s your organization’s WHY? “It’s the right thing to do” is a start, but it’s not enough. Dig deeper. Have you done enough to understand, explain and prove the WHY? Do your stakeholders understand it? Why or why not?
Want help asking and answering the right questions? Contact me.