For nearly two decades Bea Boccalandro has served as a “purpose and ESG advisor” to major brands. She did a brilliant job of capturing how to ignite a sense purpose for employees on an individual or organizational level in her 2021 book Do Good At Work: How Simple Acts of Social Purpose Drive Success And Wellbeing.
Recently Boccalandro has focused on helping business leaders understand the phenomenon of ESG (environmental, social and governance), which she considers foundational to a productive corporate purpose. While some commentators from both the right and left criticize ESG thinking as wrong-headed, Boccalandro argues it is destined to prevail.
David Hessekiel: There are so many definitions of ESG floating around. When you talk about it what do you mean?
Bea Boccalandro: So true! ESG seems to be defined every which way. I think the issue is that, as a concept not yet 20 years old, it’s still evolving.
As you know, ESG originally referred only to applying company environmental, social and governance factors in investment decision making. But as the term proliferated beyond capital markets into the vernacular, so did its meaning. When executives ask me to be their “ESG advisor,” they’re not asking me to help them analyze their performance on a set of environmental, social and governance factors, although that’s sometimes part of it. They expect me to help identify what societal causes the business should concern itself with and how to involve employees in such causes, for example.
So, my definition of ESG reflects its spread throughout greater society: ESG is the application, measurement, disclosure and consideration of a company’s impact on societal issues, including its efforts to positively impact them. This encompasses investors using ESG in their decision making, executives in their strategy, employees in their job choices and consumers in their purchasing decisions, for example.
Author, teacher and consultant Bea Boccalandro advises business on creating more impactful corporate ... [+]
David Hessekiel: What is the relationship between ESG and corporate purpose?
Bea Boccalandro: Purpose can be considered the ESG area the company supports so well and naturally that it’s a compelling reason for the organization to exist. What do I mean by that? Well, at its most elemental level, ESG is about not making any of society’s problems – e.g., climate change, crime and injustice – any worse. Corporate purpose, on the other hand, is about identifying one societal challenge (at least) that is especially close to the business and making it better. Purpose springs from the foundation of strong ESG. An example of both done well is Eventbrite, the technology platform company dedicated to “bringing the world together through live experiences.” Its ESG includes environmental sustainability, event safety and team member treatment and its purpose is reducing social isolation – an issue very close to its everyday business. The company, therefore, has a Social Connection initiative that funds research on social isolation, guidance for platform users on making their events effective at countering loneliness and isolation, etc.
David Hessekiel: Attempts to cancel ESG have sprouted in government halls, board rooms and across society. Is the concept threatened?
Bea Boccalandro: Anti-ESG proponents won’t succeed any more than the Catholic Church succeeded in stopping the printing press in the fifteenth century. Some innovations – the printing press and ESG included – are fated to march into history because they are such a compelling life upgrade that citizens are no longer willing to go back to a world that lacks them.
Dozens of studies show that the do-good actions ESG makes possible for us as employees and consumers imbue us with a sense of purpose. Actions as modest as serving on the team that designs the label for dolphin-safe tuna or buying the tuna that dons the ESG label boost our sense of purpose. The resulting greater sense of purpose, in turn, improves our happiness and health. It even reduces our risk of cardiovascular disease, susceptibility to mental health issues and mortality in any given year. Not surprisingly, the percentage of shoppers who consider a product’s environmental impact doubled over the last decade, from under 25% to over 50%. Similarly, over the past few years, ESG has steadily climbed the list of reasons people quit their jobs all the way to the number one spot, per some surveys.
To many citizens, especially those in younger generations, ESG feels a little like a lifetime pass to the spa. It boosts happiness and wellbeing. Now that they’ve experienced this life upgrade, they’re not going to give it up.
Bea Boccalandro penned the 2021 book "Do Good At Work"
David Hessekiel: In addition to enriching people’s lives, why do you think the business marketplace will also drive ESG forward?
Bea Boccalandro: ESG’s popularity, to both employees and consumers, has economic consequences. Sales of ESG products are growing faster than those of traditional products. There’s also ample evidence that, compared to conventional companies, ESG companies have numerous human resource advantages, including more job applicants, lower payroll costs, higher employee productivity and lower turnover. University of Chicago economist John List and colleagues found that ESG’s recruitment and productivity benefits alone generated a hefty enough financial return at a data-entry company to comfortably warrant a $1 million ESG investment for every 500 employees.
Given all this, one would expect ESG to drive higher stock and accounting returns. And it does. This is precisely why ESG has evolved in 20 years from a curiosity pursued by a fringe few to a practice applied by the vast majority of S&P 500 companies and institutional investors. I know that some claim ESG doesn’t improve company performance. It’s true that it doesn’t always, but rigorous reviews of the full set of evidence, where external factors are controlled for, find it does in the vast majority of cases.
In summary, markets accommodate what the public demands and many people now expect to the opportunity to align their economic choices with their values. ESG is, therefore, here to stay.
David Hessekiel: So, you believe that ESG will prevail because of market forces. But are the critics right? Should we be concerned about its flaws?
Bea Boccalandro: We can learn from the Catholic Church. In the end, it realized the folly of opposing a historic wave, stopped objecting to the printing press and chose to make the best of it. The resulting wildly successful Gutenberg Bible served the Church well and eased the world’s transition to the era of mass communication.
Critics are right that ESG is still half-baked. It’s beset with the problems typical of any early-market innovation. It lacks formal standards, regulation, enforcement, etc. In this wild wild west phase, companies can get away with whitewashing, investors and consumers cannot easily interpret data because it’s so inconsistent, etc. But, remember the findings I mentioned earlier? They show that even in its infant state, ESG adds value to investors, employees and consumers.
Imagine how useful ESG will be when it’s mature! We just need to help it get there. This is, of course, already underway. Government, third party organizations and even consumers are increasingly developing regulations, cracking down on bad ESG behavior, formalizing measures, etc. So, no, I’m not concerned about ESG’s weaknesses. They’re expected and can be overcome, or at least managed. I am concerned, however, that by trying to extinguish rather than optimize ESG, critics are making our transition to an economy that benefits from well-functioning ESG unnecessarily painful. But, make no mistake, our future is fated to be steeped in ESG.
