The politicization of environmental, social and governance work is showing up in places from mainstream media headlines to the floor of the House of Representatives, leaving communicators scrambling to figure out how to navigate conversations with stakeholders about what it all means.
Efforts to restrict investments in ESG investing has been coined as “the anti-ESG movement,” but it is, in fact, a small pool of vocal pundits and politicians leading the charge.
As if this wasn’t challenging enough for corporate communications professionals to keep up with, the collapse of Silicon Valley Bank is being leveraged as a misguided proofpoint of unfolding culture wars. In this rapidly evolving and hyper-politicized moment, communicators need to shut out the noise and keep it simple. We’ll outline the context of the realities of the landscape, the data to back it up and offer some specific recommendations where to go from here.
The term ESG, initially a corporate governance and investment term to help companies assess social, environmental and governance risk, has been confused, conflated and intentionally obfuscated to mean so many things, so it’s no surprise many from the boardroom to the kitchen table are scratching their heads. Yet if you strip away the politics, agendas and whack-a-mole definitions, what you find is near-uniform agreement in its essence: companies should consider environmental, social and governance issues in business decision-making because they’re critical to protecting and strengthening the bottom line.
Alan Murray said in a recent CEO Daily newsletter that he “can’t find a big company that is backing off its ESG plans.” That is because addressing ESG areas is a core business strategy. McKinsey puts a finer point on it: true ESG is consistent with a company’s well-considered strategy and advances its business model. Inaction on ESG issues like climate change could cost companies a combined loss of $1 trillion, and stakeholders continue to demand this progress. A PwC report found that “83% of consumers think companies should be actively shaping ESG best practices and 86% of employees prefer to support or work for companies that care about the same issues they do”. Even investors, the group Congress is looking to limit, want ESG progress. In fact, another recent PwC study found that nearly half of investors would divest from companies that aren’t taking sufficient action on ESG issues. This has nothing to do with being “woke” or not, as some suggest, trillions of dollars are at risk through inaction or up for grabs in a competitive marketplace.
Regardless of your side of the aisle, there is general agreement on this point. A recent survey by Penn State’s Center for the Business of Sustainability and communications firm ROKK Solutions found 63% of voters, including 70% of Republicans, oppose government restrictions on ESG investments.
That’s not to mention that such restrictions could cost taxpayers; an analysis finds taxpayers in six states could have been responsible for up to $700 million in excess interest payments if restrictions had been in place. In one specific example, the Indiana Public Retirement System estimated that “limiting the portfolio managers could slash investment returns from 6.25% a year to 5.05%, costing state pension funds $6.7 billion over the next 10 years.”
These factors are also causing the anti-ESG “movement” to lose some steam in very tangible ways. Proposed legislation to restrict free-market investing has been defeated in Indiana, Kentucky, Wyoming and North Dakota. Institutional Investor reports, “State pension funds or other powerful players in at least five Republican-controlled states say…these new culture-war policies are interfering with the market and could cost pensioners and taxpayers billions of dollars.”
But as politicized rhetoric rages on, what’s a corporate communications professional or brand leader to do? Here are some best practices to keep in mind as stakeholders ask questions and the headlines play out:
Do avoid debating the merits of ESG investing
Investors are smart and know best where and how to invest their money. They do not want regulation to restrict their options, and the free market will, likely and hopefully, continue to hold ground like it has in most ESG battleground states.
Don’t fall into the ‘green hush trap’
Brands can and should talk about the work they’re doing on impactful issues, but keep it simple. Talk about how your company is playing its part in ensuring we have clean air to breathe or what you are doing to protect the communities where you operate. These are issues we can all universally get behind.
Do be specific and exacting in your communications
It’s time to move beyond goals and aspirations to talk about projects and impact in a tangible and detailed way that ties back to business progress. Ensure these messages are tailored to individual stakeholder audiences and, when possible, talk about what has been changed in the short term as opposed to your plans far into the future.
Don’t talk politics
Instead, focus on and reinforce the very real reasons why your business is pursuing ESG action and how these issues are material to your business. This is about enhancing the bottom line while benefiting stakeholders by protecting people and the planet.
Refining corporate communications for the ESG narrative is critical. While there is uncertainty and even misunderstanding about the term ESG, there is absolute certainty about growing stakeholder demands and the fact companies must continue protecting, rather than harming, people and the planet. It’s important to avoid distractions and stay laser-focused on the critical role companies play in building a sustainable future.
Whitney Dailey is EVP of purpose at Allison+Partners and has helped to guide communications strategies for brands including PepsiCo, Athleta and others.