Has ESG Outlived Its Usefulness?
Lumping a broad range of issues under the single “ESG" moniker has created a lightning rod for those opposed to any individual social or environmental initiative.
Two months ago, I opened the news app on my phone one evening after dinner, and two of the top five stories in the scroll touched on environmental, social and governance topics (ESG). The first was a report on Sen. Ted Cruz attacking "woke capitalism" and, specifically, going after BlackRock as the poster child for including sustainability considerations as part of its investment strategy. A second story reported that the Sierra Club was pulling its money from BlackRock because the asset manager is not, to the Sierra Club's thinking, placing sufficient priority on climate change in its investment and proxy voting decisions.
Then, on November 28, one of our editorial board members, Deb Bubb, forwarded me an article from The New York Times titled, "Have the Anticapitalists Reached Harvard Business School?" The subheading to that article could have served one of the areas for exploration in this issue: "Social justice joins discounted cash flows on the syllabus as essential knowledge for aspiring corporate leaders."
Just what is the role of an organization when it comes to the broader sustainability of our communities, society and planet? At what point does pursuit of ESG goals undermine the performance of the organization? And what is the business case for setting such goals in a way that actually increases value over time—value for shareholders, employees and the broader ecosystems through which the organization operates and interacts?
In these pages, you will find the voices of a diverse range of CEOs, board members and senior HR leaders. We range from the future of capitalism—based on Alan Murray's conversations with dozens of CEOs and directors—to fundamental questions about the role of the employee-employer relationship to the specifics (and limitations) of executive comp and the way it links to overall performance of the organization.
A recurring theme in this issue is that ESG as a label has outlived its usefulness. By lumping such a broad range of issues under the single "ESG" moniker, mostly what has been accomplished—on the anti-ESG side of the spectrum—is to create a lightning rod for those opposed to any individual initiative.
On the "pro-ESG" side, the genericism of the label has created such a broad-umbrella category that is too often disconnected from organizational strategy and operations as to risk being meaningless in terms of focus, execution and impact.
Another critical touchpoint for these articles comes from our Research + Insights section in the Winter People + Strategy. In the original polling SHRM conducted for this issue, it becomes clear that while there are many issues important to many employees, no single issue rises to the level of a majority vote. At the same time, executives are spending an increasing about of time and prioritization (according to their survey responses) on sustainability-related issues.
To be clear, we are not suggesting that this means executive attention should exactly map to employee sentiment. One of the strengths of creating a sustainable organization will always be leadership's ability to step back and look for core undercurrents that have escaped the attention of the majority but could disrupt the organization's ability to excel and maintain its health over the long term.
Rather, what I think the research indicates is the critical importance that leaders' efforts on sustainability are clearly connected to some fundamental expectations about the workplace for employees—a predictable paycheck; clarity around an employee's role; a sense that this organization is a place I can contribute to with few distractions, and maybe even with pride.
It's a complex swirl of ingredients. For leaders in the 21st century, this new reality will require rethinking how we mix and match those ingredients to not only meet short-term metrics, but to create an organization that sustains and creates added value over time.
Kind regards,
David Reimer, Executive Editor
CEO of the ExCo Group, a senior leadership firm
Advertisement
An organization run by AI is not a futuristic concept. Such technology is already a part of many workplaces and will continue to shape the labor market and HR. Here's how employers and employees can successfully manage generative AI and other AI-powered systems.
Advertisement