At it’s essence, ESG is a wonky acronym for evaluating companies based on environmental, social and governance factors.
But depending on whom you are talking with these days, ESG is either a horrible “woke” concept endangering our society or a helpful tool in assessing how companies take into account societal issues that can impact their and our futures.
“ESG is a pernicious strategy, because it allows the left to accomplish what it could never hope to achieve at the ballot box or through competition in the free market,” wrote Mike Pence in a May 2022 Wall Street Journal piece.
President Biden, on the other hand, issued his first veto recently to counter legislation that he said would make it illegal for pension fund managers “to consider risk factors MAGA House Republicans don't like.”
At heart a business evaluation methodology, ESG has unfortunately become a controversial acronym.
Our country’s political discourse is so driven by extreme views that smart, nuanced discussion of how to take environmental, social and governance factors into account when analyzing companies is being thrown out the window.
And it’s driving thoughtful followers of this issue to distraction.
It’s ironic that ESG, a topic that “was once found mainly in business journals and niche websites is now something your uncle might bring up during a lull in the conversation at Sunday dinner,” declared the leaders of Next Stage, a consulting firm that recently issued “Profit & Purpose,” a report that studies the ESG controversy.
“To be sure, ESG has its challenges,” wrote Just Capital, a leading platform for measuring and improving corporate performance in the stakeholder economy.
“It can be ill-defined, confusing, and lacking in transparency. It needs better, and more reliable and meaningful data. It needs stronger standards and oversight so it becomes more resistant to manipulation and valuable to all market participants. All the more reason for government and industry to work together to get it right rather than use it to advance narrow political agendas.”
ESG has become so “hot,” such a loaded phrase, that many business leaders and communicators don’t want to even utter the acronym for fear of being called out, shared Next Stage CEO Josh Jacobson during a recent webinar. He advised listeners to set aside the term ESG to keep that from getting in the way of continuing to evaluate environmental, social and governance factors relevant to business operations.
Such sentiments are not limited to consultants, analysts and industry watchers. The boldest recent statement on the importance of taking these issues into account came from the CEO of Mars Poul Weihrauch. In a recent interview with The Financial Times, Weihrauch said that criticism of ESG considerations by companies were “nonsense conversations” and that thinking beyond profits was essential for companies to attract high caliber young associates.
With so many environmental and social challenges facing our companies, country and world, let us hope that culture warriors will stop wasting time villifying this form of analysis and move along to the important work of improving our local, national and global situation.
