Insight
Grappling with ESG issues is complicated business. Determining what “ESG” means to a company, its relevance to risk and long-term strategy, implications for talent and brand, mounting stakeholder demands—along with belt-tightening in anticipation of an economic slowdown—are all taking the art and science of running a business to new levels.
As we heard many business leaders, policy makers, and global thinkers allude to at The Atlantic Festival 2022, the complex mix of ESG issues presents not only serious business risks, but also urgent opportunities. The challenges of climate change, the transition to a lower-carbon economy, new ways of working, employee activism, food insecurity, more sustainable supply chains, the use of artificial intelligence, closing health equity gaps, and more are driving new demands and spawning industries—and directly impacting corporate growth and competitiveness. The very fabric of business—including the people, data, insights, intellectual property, and brand reputation driving most of the value on corporate balance sheets today—is rapidly changing. In his new book, What We Owe the Future, Oxford professor William MacAskill calls the tremendous disruption and volatility we’re seeing a rare “period of plasticity,” moments in time when change is easier, in which the future is being shaped (for better or for worse). Likewise, every company’s future is being shaped today.1
In her talk on the “S” in ESG at The Atlantic Festival, Zoe Thompson, Social Strategy Leader – KPMG IMPACT, noted that difficult decisions and trade-offs abound. “What’s happening in living rooms, classrooms, and boardrooms” reflects the crosscurrents and competing demands that companies are navigating. Thompson observed, for example, that the chief diversity officer is one of the most in-demand executive roles today (albeit with high turnover given the lack of adequate budgets and top-down support at some organizations).2 At the same time, America has seen a nine-fold increase over two years in the number of banned books.3 A company’s values – particularly around the “S” in ESG – are squarely in the spotlight.
What’s the connection between climate change and viable consumer markets? Between empathy and quarterly earnings? Between human rights and supply chain sustainability? Between standing firm on corporate values and corporate value (both near and long term)? These questions and demands are raising the bar for boards on helping management probe deeply to understand the issues, connect critical dots, think holistically, and position the company for a future that’s opaque and unfolding fast.
John Rodi, Leader – KPMG Board Leadership Center, says “It’s important to avoid getting distracted by the left/right politics and stay focused on what and why ESG matters to the business. Not everything being talked about under the broad ESG label will matter to a company, but ESG conversations should be happening – with urgency – around risk, strategy, and long-term growth opportunities.”
Footnotes
1 William MacAskill, We What Owe The Future, Hachette Book Group, 2022.
2 David Rice, “CDOs on the Run: Why 2021 Has Been a Tough Year in DEI,” DiversityInc Best Practices, September 2022.
3 Caitlin O’Kane, “Over 1,600 Books Were Banned in U.S. School Districts in One Year – and the Number is Increasing,” CBS News, September 20, 2022.
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