{"id":626250,"date":"2023-04-06T14:50:35","date_gmt":"2023-04-06T19:50:35","guid":{"rendered":"https:\/\/news.sellorbuyhomefast.com\/index.php\/2023\/04\/06\/why-business-leaders-must-resist-the-anti-esg-movement\/"},"modified":"2023-04-06T14:50:35","modified_gmt":"2023-04-06T19:50:35","slug":"why-business-leaders-must-resist-the-anti-esg-movement","status":"publish","type":"post","link":"https:\/\/newsycanuse.com\/index.php\/2023\/04\/06\/why-business-leaders-must-resist-the-anti-esg-movement\/","title":{"rendered":"Why Business Leaders Must Resist the Anti-ESG Movement"},"content":{"rendered":"

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U.S. business leaders are increasingly being exposed to the culture wars, with company decisions around issues like DEI, LGBTQ+ rights, abortion and even ESG investing being attacked by right-leaning politicians and pundits. Instead of retreating to the sidelines, this article argues that leaders can\u2019t avoid these topics and that they have a business and moral obligation to address them head-on with courage.<\/p>\n

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The culture wars in the U.S. continue to rage, and they\u2019ve come for business. Companies are being dragged into issues that stir emotions, such as abortion, gay and trans rights, racial and gender equity, and climate change. In particular, business is facing questions about its stance on societal issues mainly from the right side of the political aisle. So with 70% of America\u2019s top execs calling themselves Republicans<\/a>, business leaders now find themselves in an odd position: accused by high-profile members and pundits from their own party of being part of a \u201cwoke\u201d or \u201canti-ESG\u201d progressive agenda.<\/p>\n

For many companies, it may seem smart to stay out of anyone\u2019s crosshairs. But try as they might, there\u2019s no avoiding taking positions on the big issues of the day \u2014 major stakeholders, particularly young customers and employees, expect it.<\/p>\n

Preparing for and figuring out a response to accusations of \u201cwoke-ness\u201d is now a top leadership priority, so let\u2019s unpack what\u2019s going on. We\u2019ll start with the most prominent examples facing organizations today. Then, I\u2019ll outline what leaders should consider going forward in light of today\u2019s political attacks.<\/p>\n

What Is the \u201cAnti-ESG\u201d Movement About?<\/h2>\n

First, some terminology and background on how a variety of issues have been lumped together by the right. \u201cESG\u201d (environmental, social, governance) is primarily the language the financial world uses to represent attempts to measure the risk (and opportunity) to a company or investment stemming from environmental and social issues. The \u201cG\u201d part refers to how well a company manages the governance of these issues.<\/p>\n

\u201cSustainability\u201d is a much broader idea which looks at a company\u2019s role in society and how it impacts, and is impacted by, the full gamut of environmental and social issues. The label \u201canti-ESG\u201d makes it sound like going after investors (more on that in a bit) is the end goal. But it\u2019s just part of a larger \u201canti-woke\u201d and anti-sustainability effort, which was summed up nicely in an article by an executive at fund giant Morningstar<\/a>: \u201cAnti-ESG [is] a proxy for opposition to the spread of \u2018liberal values\u2019 in civil society.\u201d<\/p>\n

How is this broad opposition to environmental and social sustainability playing out for business? Here are a few examples:<\/p>\n

LGBTQ+ rights<\/h3>\n

The most prominent example of government coming after business over social issues is arguably the GOP governor and legislature of Florida versus the Walt Disney Company (the state\u2019s biggest employer). Last year, the then-CEO of the happiest places on earth spoke out against Florida\u2019s so-called \u201cdon\u2019t say gay\u201d bill<\/a> that would, in Disney\u2019s words \u201cunfairly target gay, lesbian, non-binary and transgender kids and families.\u201d The public statement only came after intense pressure and outrage from his employees.<\/p>\n

Supporting LGBTQ+ rights is not remotely new to business, especially in hospitality, where the industry has long seen the benefit of marketing to, and hiring from, the gay community. But the normally anti-big-government legislators and governor behind the bill came down on Disney<\/a>, taking away\u00a0some longstanding economic advantages and the company\u2019s ability to govern itself in central Florida.<\/p>\n

The battle rages on. Disney has had some success in legal wrangling<\/a> to weaken the government\u2019s new influence over its operations, and CEO Bob Iger told shareholders this week<\/a> that Florida\u2019s retaliatory actions were not just \u201canti-business\u2026but anti-Florida.\u201d<\/p>\n

Abortion<\/h3>\n

In the wake of the Dobbs<\/em> U.S. Supreme Court decision overturning the right to abortion, companies have faced new, tough choices. A number have offered to pay for transportation to other states for reproductive care<\/a> for employees in states where abortion is outlawed. Companies with more direct connections to health care, particularly the big pharmacy and drug chains, have faced pressure<\/a> about whether they will sell legal abortion pills.<\/p>\n

Diversity, equity, and inclusion (DEI)<\/h3>\n

In recent years, there\u2019s been a dramatic increase in chief diversity officer roles<\/a>, and company performance on diversity metrics became a much more common part of executive compensation<\/a>. And in the aftermath of George Floyd\u2019s murder in 2020, corporate America publicly committed at least $50 billion to confront systemic racism<\/a> (with debatable success and follow-through).<\/p>\n

Companies are generally proud of their DEI work, and have continued making commitments, like a new initiative from Ariel Investments, \u201cProject Black<\/a>,\u201d which brings together Walmart, JPMorgan Chase, Lowe\u2019s, and other major brands to build a more diverse supply chain.<\/p>\n

But the anti-ESG crowd regularly attacks DEI, even in nonsensical ways. Immediately after the fall of Silicon Valley Bank, Florida\u2019s governor<\/a> and far right pundits blamed the collapse on \u201cwokeness\u201d and diversity<\/a>. A shocking op-ed in the Wall Street Journal<\/em><\/a>,<\/em> commenting on the bank\u2019s modest improvements in representation on the board, declared, \u201cI\u2019m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.\u201d These statements are not only baseless \u2014 there\u2019s zero evidence of diversity playing any role at all in the collapse \u2014 they\u2019re stupid and racist.<\/p>\n

ESG investing<\/h3>\n

The idea of screening investments on environmental and social issues goes back decades. But in recent years, a critical mass of investors clearly decided that global mega-challenges like climate change create economic and business risk that they should understand and include in decision-making. They screened companies on ESG-related risk, created massive new funds and attracted hundreds of billions of capital \u2014 resulting in more than $100 trillion in ESG funds<\/a> in 2022.<\/p>\n

While the definitions underpinning ESG funds are hard to pin down, and the field is still nascent, ESG has held strong even with all the uncertainty of the pandemic and the tech stock rollercoaster. (ESG funds are, broadly, heavy invested in tech and light on oil and gas.) Even while $300 billion-plus was withdrawn from all funds<\/a> in the U.S., ESG funds basically held flat. (Not losing funds in a broad market withdrawal is a win.)<\/p>\n

The short story on why <\/em>investors have moved forward in the face of any uncertainty and vagueness is that a) the environmental and social forces driving risk to business, like climate change, are real and here, and b) customers are demanding ESG and impact investing options.<\/p>\n

But some government leaders aren\u2019t having it. Couching their actions as part of an \u201canti-woke movement,\u201d a few states pulled funds<\/a> from high-profile ESG advocates such as the world\u2019s largest asset owner, BlackRock. It\u2019s part of this larger war on \u201cliberal values\u201d that Morningstar talked about, but it\u2019s also the easiest lever to pull \u2014 removing funds from your pension investments is quicker than passing anti-LGBTQ laws.<\/p>\n

What Business Leaders Should Consider Going Forward<\/h2>\n

Clearly, there\u2019s a lot going on. Navigating a company\u2019s role in society is one of the great management challenges of our time. Business leaders should pay close attention and take away three lessons.<\/p>\n

Don\u2019t let loud voices keep you from doing what your business is meant to do.<\/h3>\n

Even as critics of ESG investing get louder, some investors in conservative regions are pushing back. Pension fund executives in Kentucky and North Dakota say they won\u2019t pull money<\/a> from ESG-friendly financial services firms. And in Indiana and Nebraska, banking associations are lobbying against GOP-written legislation<\/a> that would force them to pull money from any financial institutions using ESG criteria.<\/p>\n

The banks pushing back on anti-ESG laws are not seeking medals for philanthropy; they\u2019re doing it because it\u2019s good business. Environmental and social issues do have sizeable material impacts on companies, which means investors are legally required to consider them. The pension managers in Kentucky said that not investing with BlackRock would \u201cviolate [their] fiduciary duty<\/a>.\u201d The numbers are compelling to support this: A Wharton School of Business study estimated that a Texas anti-ESG law had cost the state $532 million in higher interest payments<\/a> on municipal bonds. If states embrace these laws, and potentially cost taxpayers hundreds of millions of dollars, it won\u2019t sit well with pensioners.<\/p>\n

Investors also have to keep offering ESG products and services because their customers demand it. For example, a few years ago, I spoke at a conference a big bank held for their private wealth clients. I remember the meeting\u2019s host, the bank\u2019s global head of wealth management, telling his uber-wealthy clients, \u201cWe surveyed our global customers, and the number one thing you\u2019ve asked for is impact investing and ESG.\u201d That\u2019s an amazing shift in recent years from a normal focus on maximizing returns, philanthropy, and family endowment planning.<\/p>\n

It\u2019s not just finance that needs to ignore anti-ESG pressure in favor of customer needs. Consumer products and food companies benefit from marketing to and creating products for diverse customers segments that want sustainable options. And going back to those pharmacy giants again \u2014 giving in to state legislatures on reproductive health care means giving up a large market for people wanting access to these products.<\/p>\n

The bottom line is that politicians angling for more air time and a presidential nomination will not have the best interests of the economy or your business at heart. You have no responsibility to humor them if they are threatening your profits, business model, or customers.<\/p>\n

You may hate to wade into policy issues, but you can\u2019t avoid it.<\/h3>\n

Companies can\u2019t sit on the sidelines anymore because, well, there are no sidelines. In a transparent world, your silence will speak volumes. Roughly 70 to 90% of respondents in the 2023 Edelman Trust Barometer<\/a> said they \u201cexpect CEOs to take a public stand on issues\u201d such as climate change, discrimination, and the wealth gap.<\/p>\n

Of course, these are choppy waters to navigate. But for your stakeholders, your consistency becomes very valuable. You can\u2019t say you stand for equity and then stay silent when the government moves to curtail the rights of many of your employees or customers. Likewise, you shouldn\u2019t have aggressive carbon-reduction goals, but then lobby against any government action to reduce emissions (or let your trade association do it). You\u2019ll need to develop more of a strategy around what some call corporate political responsibility<\/a>.<\/p>\n

So, there\u2019s an important corollary lesson on politics: Business needs to reevaluate who its allies are. Your connection to a party and its philosophies is no longer just about tax rates or special industry incentives or laws. As the culture wars have heated up, it\u2019s been good for politicians with populist leanings to attack business \u2014 from all sides. So, assess what will really help your company and sector move down a more just and net positive path, to meet your big carbon-reduction goals, and to protect your vulnerable employees and customers. Work with those in government who will, in good faith, help make that happen.<\/p>\n

Do the right thing.<\/h3>\n

Don\u2019t give in to political leaders who want to slow progress toward a fair and thriving world, or to bigots who want to systematically take away people\u2019s fundamental rights. I know it\u2019s scary. Many of your stakeholders \u2014 customers and employees alike \u2014 agree vehemently with the anger and attacks. But guess what? A most-likely larger group, especially younger customers and employees, wants you to stand up for marginalized groups and be consistent about your values \u2013 even if it\u2019s uncomfortable. The new CEO of Mars, Poul Weihrauch, made the business and moral case clear in a recent interview with the Financial Times<\/em><\/a>: \u201cCompanies that back off their social and environmental commitments in the face of \u2018nonsense\u2019 political attacks risk alienating a generation of talent.\u201d<\/p>\n

But even if you don\u2019t know exactly which group is bigger, why not just do what\u2019s right? And let me be clear: On many of these issues, there is a right and wrong. Companies should continue to fight to protect the rights of people to love who they want, to give women and people of color equal rights, and to ensure the ability of our shared climate to support our very existence.<\/p>\n

To be clear, we can and should debate the how<\/em>; for example, what\u2019s the right policy mix or approach from business to tackle climate change? But morally, fiscally, and scientifically, it\u2019s right to act. Full stop. In the past in this country, forward-thinking businesses have come out, well ahead of government, in favor of desegregation (for example, Coke and Pepsi competed to market to and hire Black Americans<\/a> in the 1940s), for domestic partnership before legal gay marriage<\/a>, and more. These were actions to access new markets and new groups of employees, sure, but were also clearly morally right.<\/p>\n

The Courage to Lead<\/h2>\n

When facing the forces of illogic and intolerance, stand up and show your employees and other stakeholders that it\u2019s unacceptable for your business, for your values, and for society. Develop your courage muscle.<\/p>\n

Like with all controversies \u2014 especially the fabricated ones \u2014 some organizations stand strong, while others run for the hills. In the battle over the abortion pill, pharmacy giant Walgreens has made its response clear as mud, appearing to say it would not sell the pill<\/a>, then backpedaling<\/a> (kind of). This is a legal product that the American College of Obstetricians and Gynecologists has deemed safe and effective. In the short run, Walgreens may win some points with GOP politicians and one pool of customers, and possibly avoid threatened lawsuits. But what does the action say to the 63% of women (And 58% of men) who say abortion should be legal<\/a> (and could also<\/em> sue for access)?<\/p>\n

The anti-ESG investor battle is also creating dividing lines. As Bloomberg put it recently, Morgan Stanley is choosing to \u201cdouble down on ESG\u201d<\/a> and launched more <\/em>funds in February. At the same time, fund giant Vanguard pulled itself out of a global agreement to move its portfolios to net zero carbon by 2050. The Vanguard CEO recently told<\/a> the Financial Times<\/em>, \u201cwe cannot state that [ESG] investing is better performance wise than broad index-based investing.\u201d That\u2019s some weak tea. Especially since guaranteeing that ESG will outperform, especially in a short time frame, is an odd requirement \u2014 no investment thesis can guarantee it will outperform, and no other category of investments, like tech or health care, is really asked to. ESG investing is about risk management and satisfying customers, not guaranteeing results.<\/p>\n

Some companies seem to be moving toward a muddled middle-ground of what\u2019s been called \u201cgreenhushing<\/a>,\u201d or going ahead with your environmental and social efforts, but trying to stay quiet like a teenager sneaking in after curfew. A quarter of companies in a new survey said they would not publicize their climate goals<\/a>, for example.<\/p>\n

The old truism \u201cpick your battles wisely\u201d is always good advice, but some battles and some \u00a0rights are<\/em> worth fighting for. If you take a stand publicly, you tell your stakeholders what you value. You can help move public opinion or bring out the supporters and quiet the critics. By staying silent, companies miss the opportunity to gather allies and build collective courage.<\/p>\n

And wouldn\u2019t you rather work for, or lead, a brave company?<\/p>\n<\/p><\/div>\n

Read More<\/a>
\n Andrew Winston<\/p>\n","protected":false},"excerpt":{"rendered":"

U.S. business leaders are increasingly being exposed to the culture wars, with company decisions around issues like DEI, LGBTQ+ rights, abortion and even ESG investing being attacked by right-leaning politicians and pundits. Instead of retreating to the sidelines, this article argues that leaders can\u2019t avoid these topics and that they have a business and moral<\/p>\n","protected":false},"author":1,"featured_media":626251,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[378,160],"tags":[],"class_list":{"0":"post-626250","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"category-leaders"},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts\/626250","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/comments?post=626250"}],"version-history":[{"count":0,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts\/626250\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/media\/626251"}],"wp:attachment":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/media?parent=626250"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/categories?post=626250"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/tags?post=626250"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}