Last week, I had the pleasure of speaking at the Reuters Responsible Business conference in New York. I participated in a compelling fireside chat with Helle Bank Jorgenson, CEO at Competent Boards, about how leaders can navigate the politicization of ESG and achieve both profitability and sustainability.
Outlined below, are concrete ways companies and CEOs can remain successful in this challenging environment.
Clarify Your Values
People spend a disproportionate amount of time debating the concept and the definitions of ESG. Most of that time they talk past each other rather than focusing on how to address what’s happening on the ground.
My recent conversations with CEOs are not about ‘woke’ capitalism or contentious political rhetoric. Rather, they’re about the democratization of economic, human, and social capital, which has ushered in the stakeholder economy. Customers, employees, and investors are demanding that corporate and government dollars work harder and go further to alleviate pain and meet historically unmet needs.
This shift cannot be ignored. By 2030, the Silent Generation and Baby Boomers will transfer between $30 to $68 trillion to Millennials and Gen Z. These emergent generations are guided by an alignment of values more than any time in our nation's past. To meet their expectations, leaders must have a clear view on the principles that guide who they vote for, where they choose to work, and how they spend their time and money.
So, that’s where conversations about ESG strategies should start: By clarifying the values that shape where companies invest and how they innovate. Not because it’s ‘woke’ – but because innovating is what companies do to stay profitable and satisfy their stakeholders.
Avoid Transacting Through Politics
The political tension is palpable for corporate executives. But business leaders are well served to see this tension for what it is: dissonance. CEOs can’t transact their way through political cycles because today’s politics are very different from what tomorrow’s will be.
So how do companies stay focused on their core values and avoid being swayed by external pressures? It all comes back to values. Our economic system is built on trust. On the back of every dollar bill, it says “In God We Trust.” There’s an assumption we hold that institutions that deploy capital – your bank, the government – will do it the right way. There’s an alignment of values that we all agree on, and when those values are misaligned, companies fail, and trust is lost.
For example, the recent banking crisis shed light on what can happen when values are misaligned. Some have argued that banks have failed because they are too focused on issues like DEI or because of lenient regulation. But the real reasons are much simpler. Banks fail because of poor governance, bad business models, and operating without values alignment.
Have a Course to Stay the Course
There’s an old saying that if you don’t know where you’re going, any road will get you there. You must have a course to stay the course.
Every successful strategy I’ve seen has three elements. First, it prioritizes stakeholders. Second, it puts values at the center. And finally, it is tied to clear metrics.
When I look across key stakeholder groups – employees, consumers, investors, and regulators – it’s increasingly clear that sustainability is profitability to them. Each group has their own perspective on how a company should be defining and delivering financial and societal value. They’re allowed. It’s on leaders to know those perspectives inside out. Then address them head-on.
A lot of the work Ichor does is focused on helping CEOs and General Counsels understand where there’s consensus and divergence among their stakeholders – especially on the ground in local communities, where they rarely have insight. The companies that take the time to really know their stakeholders are thriving.
They use hyperlocal insights – sometimes down to a zip code – to align their values and capital flows with stakeholder demands. This enables them to anticipate risk, measure the true impact of their ESG investments, and achieve better outcomes.
Set Clear Metrics and Stay Accountable
There’s a common misperception that measurement is hard. But all you really need is a simple and adjustable way to measure values against your stakeholders. This will ensure success. By setting clear metrics – with an ability to adapt and refine – companies can ensure their ESG strategy is aligned with stakeholder needs.
Accountability is the hard part. It comes down to asking and answering the tough questions. Today, there’s no limit to who can do the asking.
Candidly, this is why I get frustrated when I see news organizations over-simplifying issues and stoking political rhetoric without asking businesses the tough questions. According to Diversity Resources, after the death of George Floyd, U.S. companies pledged $50 billion toward racial equity, but only $250 million has been spent as of October 2022. Media have a responsibility to ask the tough questions and hold businesses accountable for the disparity we’re seeing between corporate words and actions.
Platitudes aren’t enough. Commitments need to be long-term, programmatic, substantive, and align with values. We can do more to reshape the narrative about what success looks like.
Stakeholders, Values, and Metrics
We know that businesses today are operating in a uniquely challenging environment. But success in this environment comes down to these three things. Prioritize stakeholders. Put values at the center. Tie it to clear metrics.