Forget The Label – Think About What Matters

In recent years, the concept of Environmental, Social, and Governance (ESG) has gained significant traction across various industries. It encourages businesses to consider their impact on the environment, society, and corporate governance.

However, there has been a growing backlash against ESG initiatives, with some arguing that prioritizing responsible behaviour hinders profitability and places unnecessary burdens on businesses.

Critics claim that the focus on responsible behaviour comes at the expense of financial success. Moreover, some question the legitimacy of ESG metrics, suggesting that they lack standardization and may be subject to manipulation. Opponents increasingly argue that during such economically challenging times, businesses should solely prioritize shareholder value and profit maximization, rather than diverting resources towards societal or environmental concerns. They believe that businesses should be free to simply pursue their own profit objectives, as long as they operate within the confines of the law.

Well, I have spent thirty years in what has been called in its time, corporate community investment (CCI), then CSR (Corporate Social Responsibility), then responsible business. I saw the emergence of Sustainability, helped promote Purpose and have promoted ESG activity. I have advised some of the largest businesses in the world, as well as start-up ethical entrepreneurs, government departments and ultra high net worth individuals, who have made business fortunes and then wish to give them away. So I feel I have sufficient practical, business led experience to offer an opinion, to share my observations based on those decades of input, output and impact on bottom lines and wider business objectives.

To start with, I say forget whatever the current label is – this is all about leadership and responsibility.

I am actually sympathetic to critics of ESG in some respect, because in recent years, we have seen some spectacular errors in the promotion and application of Purpose and ESG, but critics fail to convince such thinking is fundamentally un-business like, for one major reason. They fail to acknowledge the changing landscape in which businesses operate today, in comparison to any point over the last thirty or forty years. We are well into the first quarter of the 21st century, an era defined by heightened societal awareness, evolving consumer preferences, greater demand for corporate transparency and volatility in markets where neglecting the considerations ESG or ethical purpose promotes, can have significant detrimental consequences.

The Importance of Responsible Behaviour centres on some key factors:

It is about Stakeholder Expectations: Customers, employees, investors, and communities simply expect businesses to now act responsibly and contribute positively to society. If you don’t, you won’t recruit talent, you won’t attract sound investment and you will attract negative attention from legislators, thereby restricting your ability and freedom to build profits and value. Frankly if you are leading a business and choose to ignore your stakeholders, you are irresponsible and won’t last long.

It Mitigates Reputational Risk: In an era of social media and instant information sharing, reputational damage can occur rapidly and have long-lasting effects. Behaving irresponsibly, disregarding environmental impact, or neglecting social concerns can lead to public backlash, boycotts, and loss of customer trust. My 2021 book with David Gallagher ‘Truth Be Told’ (Kogan Page) explains this in more detail.

Money follows Responsible Leadership: Although much criticism is coming from within the investor sector itself, many investors, as well as pension funds, are increasingly integrating ESG factors into their decision-making processes. Companies that demonstrate responsible behaviour are more likely to attract investment and secure financing. We know studies have shown that businesses with robust ESG practices tend to outperform their peers in terms of financial performance.

In short therefore, much of this is about balance.

Companies should of course be focused on what their business is. In my definition this should be about providing solutions to human and planetary needs. Many know my phrase ‘Don’t sell something – solve something’, but focused, relevant, ESG management and supporting activity is therefore fully aligned to business success and shouldn’t be a distraction. The issue so often is that those who criticise, mistake some of the social agenda as irrelevant – which to be frank sometimes might be the case, and bluntly, if a strategy seems detached from the business of the business, then it probably does need attention. But an individual aspect of that type, is no argument against running a business responsibly.

In an era characterized by heightened scrutiny and rapidly changing dynamics, the success of businesses is no longer solely measured by their financial performance, even if some would wish it so. Embracing ethical, sustainable principles, under any label, within any framework, not only safeguards the wider society which the business needs to allow it to prosper, it also creates the type of society we should surely all wish to be a part of, where we and those we care about have quality work opportunities, where products and services are safe, where value is created in all senses of the word and where resources are resilient and sustainable. This is good business leadership. This is being responsible, as a person and a leader.

At Anthropy, not only are we striving to encourage such an approach, we are building the largest gathering of responsible leaders concerned about our collective futures.

If you want to be a part of that? – then join us at Anthropy.uk.