Environmental, Social and Governance (ESG). These three words have been all the rage, with corporations issuing reports and making changes to their operating model to accommodate its implementation. For some companies it is an empty gesture, designed to tick a box. For others it is giving a label to something they have been doing for a long time. Lastly, there is a group that is organizing and defining the goals of the company when it comes to ESG.
A lot of the focus has been on the environmental component of ESG, with good reason. The climate change crisis is looming large in the minds of people and in corporate executive suites. But the piece that needs more attention and more concrete ethical behaviour is part of the social component. Who a company does business with as customers or as suppliers, or partners matters.
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A recent and obvious example of this would be the travails of Twitter and its advertisers. Elon Musk’s take-over of the micro-blogging site has been controversial to say the least. Advertisers have responded to the negative press by suspending advertising with the platform. For companies who want to show customers their own commitment to ESG and protect their brand, pausing advertising was a prudent move.
Suspension of activities isn’t enough to prove company commitment to ESG
Yet, simple suspension of activities really isn’t enough to prove a company’s commitment to ESG. Suspensions like this need to be longer term, and tied to specific goals for a supplier to meet. It’s not enough for the story to fade from the press. There needs to be a demonstrated change that sticks over time for a company to resume doing business. This philosophy isn’t just about Twitter. Twitter is just the most current public example. Any supplier or even customer who is engaging in activities that are morally, ethically, or legally questionable should be subject to suspension that can only be reversed via provable corrections by the subject company.
To be clear, actions like this are inevitably going to be painful and yes, costly. But a commitment to ESG needs to be strong enough that a company is willing to suffer a financial penalty to do the right thing and hold their suppliers and customers to a standard of behaviour that is at very least roughly compatible with their own even if it hurts the bottom line. Anything less is just ESG-washing for marketing purposes.
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By GlobalData
