The “social” in ESG

Business leaders are leaning into ESG strategies even though 86% of consumers say they don’t know what it means.

Why it matters: There’s no unified way to explain and measure ESG — environmental, social and governance — so it’s up to communicators to bridge the knowledge gap.

Between the lines: The “S” in ESG covers issues like labor, pay transparency, representation and workplace health and safety.

• A new Protiviti-Oxford University studyfound that 60% of C-suite executives under the age of 50 believe ESG will become extremely important to their business strategy over the next decade — and leaders across all age brackets are prioritizing the social piece.

The big picture: Since the term ESG was first coined in 2005, there has been a shift from “the idea of ‘doing no harm’ to ‘this company makes the world a better place,’” says Aniela Unguresan, economist and co-founder of the EDGE certification board, which measures corporate representation, pay equity and policies.

• According to Unguresan, the “S” is a key part of the shift as more business leaders think about diversity, pay equity and protecting their workforce.
• “For PepsiCo, the ‘S’ is about our company’s soul. It is about what we aim to give our associates, communities and consumers,” says Krista Pilot, senior vice president, global external communications. “People are the foundation of the world’s food system and PepsiCo’s business. The ‘S’ is about our commitment to them.”
• “Investors, employees and consumers are increasingly interested in how companies show up in the world,” says Abbey Carlton, head of social impact at Indeed. “Our mission naturally lends itself to doing a lot of work around the ‘S’ pillar, but I don’t think any company can afford to ignore this conversation.”

State of play: The “S” work is no longer siloed within social impact or DEI teams — these initiatives are being woven into mission statements and business goals.

For example …

• Accenture has a goal to achieve a 50-50 gender split by 2025.
• Pfizerhas incorporated “equity” as a core company value.
• By 2031, Indeedhopes to remove barriers for job seekers and cut the time it takes to find a job by 50%.
• Activation Blizzard launched the Level Up U boot campto train professionals from underrepresented backgrounds to become full-time engineers.

Zoom in: To be effective, ESG communications must be rooted in action and strike a balance between data and storytelling.

• “Communicators can cultivate a common vision and explain quantitative goals and strategies: This is where we are, this is where we want to go, and this is how we will get there,” Unguresan says.
• And these goals “should be complemented by impactful narratives — which is the heart and soul of what makes this work so important and why we’re doing it in the first place,” says Carlton. “Messaging in this way will help all stakeholders better understand why this work matters.”

 
– ESG skeptics

Critics believe businesses should prioritize profits and view ESG as a costly distraction that won’t yield long-term results.

Why it matters: Even if a company is moving full steam ahead on ESG, understanding the contrarian point of view is important and will improve messaging.

State of play: Anti-ESG activist investor Vivek Ramaswamy recently sent letters to Apple and Disney, asking them to end specific social initiatives — like racial equity audits of hiring and compensation practices — because they create “severe economic, legal, and reputational risks.”

What they’re saying: ESG is risky because it “blurs ethics and sound business practices, with the promotion of particular political causes,” says Samuel Gregg, distinguished fellow in political economy and senior research faculty at the American Institute for Economic Research.

• ESG “seems to turn business into an NGO that just happens to pursue profit as one of many different goals. And when there’s a confusion of goals, organizations start to find themselves behaving and acting in dysfunctional ways,” Gregg told Axios.
• “Publicly traded corporations have a fiduciary responsibility to generate a profit — and [if] ESG distracts you from that, you’re violating your fiduciary obligations to your shareholders.”

Zoom out: No amount of communication can correct a flawed strategy, says Gregg.

Yes, but: The business community should encourage more open discussions about the pros and cons of ESG — and communicators can help.

• “Good communications could foster a serious debate and encourage business leaders to listen to the critiques. That will be a more constructive exercise than whatever they’re doing now,” Gregg says.
• Ramaswamy agreed, telling CNBC, “… I think we need more open debate representing a more diverse set of perspectives than we’ve heard in the boardrooms of these companies over the last several years.”

axios.com