For too long ESG has existed in a policy bubble – a bubble that has now burst, following successive greenwashing scandals and criticisms of the way Environmental, Social and Governance standards are measured. Scepticism amongst business leaders runs high, while public trust in companies to deliver on their ESG pronouncements is falling.
The unfortunate consequence is that companies may decide to sit on their hands rather than fly their ESG colours and risk a PR backlash. This would be disastrous, not only in terms of hampering progress towards net zero and the UN’s SDGs, but also because it would be bad for business long term.
SEC Newgate’s Global ESG Monitor 2021 revealed that consumers expect companies to take the lead on environmental and social issues, want greater transparency, and will reward companies that do pass muster (and shun companies that don’t). This is even more true of Gen-Z.
The key question therefore is how should corporates rebuild trust? Not just amongst consumers but in the business sphere where there are signs of “purpose fatigue”. One of the main criticisms of ESG (aside from the obvious: the fact that certain corporations have used the opportunity to present faux eco-creds), is the lack of standardisation in monitoring and certification.
What is (still) lacking is a unified standard and regulatory framework for ESG tailored to each sector, whether that comes from government or the private sector. B-Corp is an excellent example of a credible certification scheme that’s gaining ground with businesses and consumers, and one way for companies to get on track. Another obstacle to progress is the perception that ESG is a box-ticking exercise for shareholders, not for people, which is rooted in its beginnings as a taxonomy for socially responsible investing.
In the absence of clear guidelines (there is still no overarching global ESG approach), it’s up to companies to take the initiative. But in these turbulent times, it’s even more vital that the strategy and messaging is right. What’s resoundingly clear from our global research is the public want actions over words: environmental protection and pro-social projects that have a measurable impact; transparent, responsible investing and product innovation that demonstrate real commitment. In other words, good works and ethical behaviour that earn a company the right to have a voice.
Business leaders should take time considering what their platform looks like. It must be sector-relevant and authentic, chiming with core values and with customers. For example, should an FMCG company be planting trees or supporting initiatives to reduce plastic waste?
Purpose-driven projects and communications must be meaningful, connecting with what people are concerned about. In the grip of the cost-of-living crisis, corporates might look at ways of reducing the burden on consumers and giving back to communities. Good examples might be a supermarket embarking on a mission to reduce food poverty, or food waste; a factory boss giving workers a bonus to deal with the cost of living squeeze; a bank investing in ‘green capital’ through rewilding.
With ESG under scrutiny at a time growing global instability, it’s actually the perfect time for innovative companies to lead by example. Patagonia’s announcement in September that all future profits would go into a trust to mitigate climate change was a radical example of “going purpose”, but one that earned it respect the world-over.
Finally, there’s good housekeeping: remaining accountable through regular and consistent reporting, offering maximum transparency about supply chains, investments and governance issues, doing due diligence on suppliers; and engaging with all stakeholders and relevant communities. Equally important is ensuring staff are trained and have the right digital tools to support conformance. Sensible measures that will prepare brands for the day when they find themselves (perhaps unwillingly) under the hot lens of public scrutiny.