Another Inconvenient Truth

Why business leaders should speak up on ESG.

If there’s one consistent topic we focus on here at The Instigator, it’s the very big bet that society is making on the corporate sector’s voluntary efforts to address the climate crisis. 

So imagine my surprise when I came across a Wall Street Journal article this past week reporting that companies are downplaying these and other ESG programs in response to the culture wars. The article observes that there is much less discussion about such efforts – including net-zero commitments and initiatives to meet them – in corporate earnings calls.

The article goes on to explain that, among other factors, leaders fear angering investors who prefer companies focus on the bottom line rather than societal good.

But as we always say, this is a false choice.

First, as we always note, business should only do things that make business sense. This includes ESG activities. Such initiatives are the only ones that can truly scale. When it comes to addressing the rising risks of environmental devastation, the first challenge for business leaders is to determine how their companies can make a positive difference in ways that also work for stakeholders. 

And second they need to explain to stakeholders how exactly they will do this.

We’re not saying any of this is easy. It's the opposite of easy. But it's obviously very important. And the business opportunities are huge. So it's crucial that we all get much smarter about when and how ESG initiatives can do positive things for society and for the bottom line. We also need to know when they won't work so we can determine how we will address such challenges.

The Wall Street Journal article quotes a professor who says it is easier for companies to stay the ESG course by saying very little about it. Or, as another article put it, The first rule of ESG: Don’t talk about ESG.

But, as we’ve argued before, we think this advice is misguided. We need more discussion and transparency, not less. 

A good and current example of this is all of the recent discussion about oil and gas company commitments to decarbonize. This past week, Shell has been in the spotlight as the company's new CEO put forth his plans to back off some of their earlier climate commitments. No matter where you stand on this matter – and we know this topic generates especially strong opinions – you’ll likely agree that it's good that the topic is getting careful focus. 

On a societal level, if individual companies engage in these efforts behind closed doors, they miss the opportunity to help frame the climate conversation as a legitimate business issue and advance the norms of corporate engagement that have helped us make some progress thus far. We’re still behind the eight-ball. We can’t afford any regression.

So we will keep banging the drum here about corporate-environmental synergies to counter this worrisome trend. I hope you will join us. You can start by sharing this newsletter. 

Onward,