THE ESG IMPERATIVE — NOT SO FAST!
UncategorizedMonday October 4
Over the past few years, the drumbeat of Environmental, Social, and Governance (ESG) has quietly been making its way into the Corporate Boardrooms around the country. The self-imposed stewardship initiative has its roots largely in green and social initiatives. The discussion has expanded globally but how/when will those discussions derive tangible metrics? Who will set those metrics and ensure they are not politicized or hijacked by the cancel culture? Better yet, who will regulate/audit/investigate compliance? Against what criteria?
Recently I’ve been researching ESG as a business case to be part of the solution, not a rock thrower. A few questions persist: If corporations are implementing and/or being held to an ideal, how will they know they have achieved ESG nirvana? How does that impact their resiliency? Pretty sure there won’t be white or black smoke wafting out of the over water bungalow at the corporate retreat. So how will we know? Do we really want to know?
In my research I came across the below categories of ESG “common considerations” put forth by Brown University (https://investment.brown.edu/esg-standards), emphasis on “considerations.”
Not sure how common they are as that adjective is not qualified in any way. For grins, let’s assume it is so common that parents are talking about ESG on the sidelines of youth sports nationwide. Frankly, if I sat next to parents talking about ESG at my kid’s game I would move my seat and then pull my kid off the team. Weirdos. But I digress. So, how common is it? That’s an honest question…please comment if you have a quantifiable answer.
Looking at the categories above…how many of them are ill-defined and likely to draw an outrageous spectrum of subjectivity? Or, if quantifiable, who decides for example, that Executive Compensation is not appropriate or Corporate Political Contributions are targeted towards the wrong cause, party, or issue? What about Diversity Issues…how will this be defined in order to establish criteria? After all, diversity encompasses many facets of an employee populous and corporate functionality. And, when do one or two or all of them become said diversity “issue?”
What I can confidently say is this: when banks, government agencies, certifications, licenses, proposals/bids, contracts, suppliers, lawyers, accountants, doctors, retailers, employers in general, etc. are held to someone else’s ideal or an unvetted/debated criterion, then the free market will no longer exist. Nor will freedom but that’s not the topic of this article. Or is it?
Please hear me out…I am not suggesting ESG considerations are evil, misguided, or missing the mark. I am only saying that without criterion they are simply not guided. I am direly, and urgently, suggesting that to avoid arbitrary criterion set to these considerations, they must be established via national/international standards and criteria entities such as ASIS and NIST. And once these consensus, collaborative, and contemplative processes formalize criterion, we must then consider the utility of such metrics. Will there be boundaries on who can use the compliance scores? Imagine for example, if a government agency were to use these considerations to determine oversight or audit targets. Seems there were some serious questions about just such a thing earlier in this new millennium. So, will “feel-goodery” dictate considerations or will real data, real standards, real criteria, be established that makes feel-goodery a tangible achievement? One company’s ideal may not be another company’s ideal…and standards and criteria for conflicting ideals are therefore incompatible.
Covenant Park will be hosting a webinar on this subject very soon. We do not purport to have the answers. But we know that any solution without consensus, collaborative, contemplative ESG standards and criteria will be inadequate and potentially devastating economically, and open the door to extensive overreach into any company. We are seeking conversation partners from all vantage points. Please reach out if you are interested in participating in such a discussion. We will announce the date/time/means as soon as the details are pinned down. Stay tuned!
Originally published on LinkedIn.
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