How much should companies cower to the political pushback against all things ESG and, well, “woke”?
I’ve been pondering that question and talking to corporate sustainability professionals and communications experts to understand how companies are traversing this political-cultural moment. Are they pulling back on their sustainability commitments, maintaining their ambition but talking about it less, or damning the torpedoes and going full speed ahead?
The short answer: Companies are staying the course but mostly keeping their heads down.
First, some context. The pushback against companies’ environmental, social and governance strategy is relatively recent and has gained traction quickly, the product of the U.S. far-right wing’s highly effective echo chamber of cable news, podcasts, newsfeeds and social media sites.
ESG, of course, has been around for years and has gained considerable influence in how companies and investors communicate about sustainability and, increasingly, how business customers engage with companies on a range of social and environmental topics. ESG ratings have become mainstream, if flawed, and are now baked into the risk calculations of banks, insurers and other financial institutions. As more companies began to organize around ESG metrics, ESG became a focus of policymakers, too.
Conservatives have gone into beast mode to tar everything ESG with a single brush.
Which is where things have heated up. As governments around the world crafted regulations requiring companies to disclose ESG metrics or that embed ESG criteria into procurement, investing and other activities, the topic became a lightning rod for conservatives.
Add to that the far right’s campaign against “woke,” an ill-defined and all-encompassing term that refers to just about any policy or activity that smacks of progressive thinking — concerns such as diversity, equity and inclusion; LGBTQ+ rights; most social and environmental justice issues; environmental protection and especially climate policy; and pretty much every other issue that falls under the ESG umbrella.
“Woke capitalism” has become the epithet of choice to dismiss such activities variously as inappropriate, elitist or disconnected from the business of productivity and profits. As a result, much of the sustainability agenda is now under attack from a small but noisy contingent and its media and political allies.
The pushback against ESG is, no doubt, a direct reflection of its power to redirect vast sums of money and influence away from fossil fuel companies and other polluters, as well as human rights violators, child-labor exploiters and others deemed at odds with a fair, just and sustainable economy. Lobbyists for the aggrieved incumbents, along with their communications arms and political allies, have gone into beast mode to tar everything ESG with a single brush, typically under the guise of companies inappropriately engaging in politics and policy.
One might assume that, as with other cultural wars, this one is destined to quickly fade into the woodwork, the victim of whatever manufactured outrage next dominates the news cycle. Not likely. ESG impacts trillions of dollars of shareholder equity and working capital, not to mention the reputation and other intangibles of thousands of companies, including their ability to access capital, attract talent and compete for government contracts. And that is a threat to those wishing to squeeze every dollar, euro and yuan out of the status quo.
Factions over facts
So, how are companies responding to a world where factions trump facts and where politics has become more performative than productive?
In short, few companies seem to be paring back their ESG commitments and goals, though some have deferred their target dates, seemingly unrelated to the anti-ESG movement and more connected to energy prices, supply chain disruptions and other geopolitical perturbations. But climate action rolls on, largely unabated, and a handful of self-appointed culture warriors isn’t likely to slow things down.
Indeed, U.S. companies have signaled overwhelmingly that they’re planning to comply with the expected climate-risk disclosure requirements being contemplated by the U.S. Securities and Exchange Commission, regardless of when they become law, according to a recent survey by PwC and Workiva of 300 senior-level corporate executives at U.S.-based public companies with at least $500 million in revenues. Many other large companies have ambitious 2030 or 2050 carbon-reduction goals from which they deviate at their own risk.
Still, companies, many already reticent to talk about their sustainability goals and achievements, seem to be further muzzling themselves when it comes to touting such activities.
“I’ve been involved in sustainability for a very long time,” the sustainability lead for a globally focused, Idaho-based company, told me. (As with others I interviewed, this individual requested anonymity to discuss sensitive issues.) “Pre-2008, it was all about this being the right thing to do. Then the recession hit in 2008, a whole bunch of people got laid off, and the conversation shifted more towards financial materiality but still also the right thing to do. Now, it seems like it’s not cool to talk about being the right thing to do at all. It’s like, if this isn’t strictly from an economic ROI perspective, then we don’t want to talk about it. Saying that it’s the right thing to do comes across as woke.”
Idaho, of course, is a deep-red state that may represent the extreme of anti-ESG jurisdictions. Earlier this month, for example, its House of Representatives passed three anti-ESG bills. One prevents state and local governments from entering into contracts with companies that decline to do business with firms that engage in the manufacture, sale or distribution of firearms or the production of fossil fuels. Another prevents banks and credit unions from the same thing. Still another mandates that state contracts can’t be awarded or denied based on ESG criteria.
“If you’re comparing two contracts at the same price and terms, you can’t decide that ‘I’m going to go with this company because it’s more sustainable or because I like their carbon program or because they’ve got a good diversity platform,’” the Idaho-based executive explained.
As a result, “We’re just not going to talk about ESG as much, but we haven’t slowed down because we still have customers that are pushing us pretty hard.”
This is hardly limited to red states. “We’ve got an unofficial policy to keep quiet on sustainability,” another exec, this one at a Massachusetts retailer, told me. “But we’re keeping the pace going, even accelerating some of our goals, due to customer and investor pressure. We just don’t want to talk about it.”
This retailer hasn’t been targeted by conservative politicians or pundits, so the self-censorship is largely preemptory, said the executive. “We’re trying to balance being a leader with being a target.”
Even companies that aren’t cowed are being careful. “We have a responsibility as a large corporation that is both creating impacts and also enabling solutions to use our voice and address circularity, climate and ethical sourcing,” said the U.S. sustainability lead at a global tech company. “But if we alienate half our customers, then we don’t achieve our potential.”
Navigating the moment
That’s the paradox — and the dilemma: pursuing aggressive goals without making too much noise about it.
So, if talking about ESG is problematic and keeping quiet also creates risks, how should companies navigate the moment?
For starters, by finding other ways to say “ESG.”
“We serve all industries, some of which are on the sharp end of the ESG stick and are dealing with the fact that climate change in particular is a threat to their business,” the tech company executive explained. “For instance, we dial up messaging around efficiency because even if you don’t believe climate change is real, efficiency — a key enabler toward climate resilience — is all about avoiding waste, something we all can agree on.”
People need to look for opportunities to do personal outreach and one-on-one communication.
“What we’ve been trying to do is keep the conversation positive and talk about the benefits,” the Idaho sustainability executive said. The company has partnered with two other large Idaho corporations to do a self-described “road show” to talk with legislators and others about the benefits of addressing environmental and social topics. The exercise has been effective in conversations with “more traditional Republicans,” the exec said. “Every time we’ve done this road show, we’ve gotten really intelligent questions. People are genuinely curious.”
This person counseled: “I think more people need to look for opportunities to do personal outreach and one-on-one communication.”
If you face ESG blowback from your Board or C-Suite, try to differentiate between the “sincere objections” and the “insincere objections.” There are perfectly good reasons to question much of what’s done in the name of ESG. There is too much reporting; too little substance; too much “climate Olympics” of who can launch the biggest, boldest commitment; too much following the crowd to sign up to the latest improbable pledge. In sales jargon, these questions would be called “sincere objections,” authentic statements of unmet needs. Sincere objections need to be heard, acknowledged and addressed.
On the other hand, he said, are “insincere objections,” things that “can’t really be satisfied; it wouldn’t make a difference even if you did address them. Many of the insincere objections to ESG are smoke screens for political performance and orchestrated outrage. Others are attacks on any attempt to challenge or limit business. These insincere objections also give permission to those who never really bought into ESG efforts but couldn’t find a strong argument against them.”
The road from here promises to be perilous. Stakeholders will continue to press companies to be more engaged and more vocal in addressing a broad range of societal ills, even things for which a company has no direct responsibility. And conservative politicians will continue to call out these initiatives, even attempting to thwart them, often wielding such vague and sweeping policies that they are more likely to drive ESG initiatives underground than to stop them outright. (Less than 48 hours after the failure last week of Silicon Valley Bank, Florida Gov. Ron DeSantis blamed the bank’s demise on its focus on diversity issues. Sigh.)
To be sure, as Nadler notes, ESG needs fixing. The ratings, the language, the entire mindset is ripe for rethinking — for example, separating out risk (of interest primarily to investors) from impact (of interest to most stakeholders). But that’s not likely to happen quickly, if at all. In the meantime, a relatively small circle of ideologues is hell-bent on quashing ESG-related activities and calling out and penalizing companies that engage in them.
The bottom line: Don’t talk about ESG. But don’t stop pushing for a more sustainable tomorrow.
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