You probably know that ESG, which stands for ‘environmental, social, and governance’, emerged at the turn of the millennium as a framework to assess an organisation’s impact on the world around it.
Businesses, investors, employees and other stakeholders have growing expectations of how green and socially responsible any entity should be. ESG is supposed to measure this, allowing companies to attract discerning customers and employees.
But ESG is now facing a backlash. Critics say it’s confusing and a bureaucratic burden, especially at a time of competing global crises. It has been branded by some as “woke capitalism” and a distraction from business’s main priority: financial returns.
So, who is right? And how can professional communicators walk the tightrope of increasingly polarised public opinion?
Recently, we hosted a debate on this issue at the European Association of Communications Directors’ (EACD) Annual Summit. Entitled, ‘Carrying the Torch: The Role of Business of Defending ESG in the Culture Wars,’ it was aimed at finding common ground in an increasingly polarised political climate in both Europe and the US.
It was a lively discussion generating some forceful opinions. Here are some of my takeaways:
- Authenticity is critical. Companies will want to show they are doing the right thing on ESG, but audiences are increasingly sophisticated and fickle. Organisations need to build a narrative that rings true to their values and brand and is based on real action.
- In a more polarised political environment, communicators need to truly understand their values and how action based on these values will be perceived and received. Backlash from some quarters can be anticipated and prepared for.
- Commitment is critical. If ESG efforts are authentic, consistent with values and backed by meaningful action, companies should stand firm, even in the wake of criticism.
- Collaboration and partnerships can work wonders. Working across sectors and organisations can help tap into diverse resources, expertise, and perspectives. And partnerships can build trust with stakeholders, which is key to establishing ESG credentials.
The ongoing and increasing polarised debate surrounding ESG highlights the significance and complexity of integrating it into strategic and day-to-day business operations and reputation strategies. While some critics argue that ESG imposes a bureaucratic burden that distracts from companies’ fiduciary responsibilities, others recognise its potential for long-term value creation and stakeholder trust.
Finding a delicate balance is key and will enable companies to derive financial value from their ESG activities while staying aligned with their core business goals and values. By doing so, companies can fulfil their ESG obligations, drive positive outcomes for stakeholders and address broader societal and environmental issues.
If you missed our session at the recent EACD Summit, “Carrying the Torch: The Role of Business of Defending ESG in the Culture Wars”, you can read a full recap of the discussion around this timely topic here.