Business and Markets

What I Learned at ESG Camp

July 28, 2023  • Judy Samuelson

I’m heading off on vacation – and no I am not going to ESG camp; I’ve just been. The Aspen ESG Summit in Colorado offered three days of immersion into an array of topics on the front burner for business managers and executives with ESG titles and responsibilities. At the Summit, they mixed it up with long term investors and a host of actors both critiquing and advising business, but with shared goals to align business decisions with the long-term health of society.

The organizing principle for the Summit explores business as the agent of change in a complicated world of influences and influentials — newly imagined incentives and practices along with embedded protocols that need to change. Directors from public companies were invited, along with internal ESG experts working to align investment decisions with better outcomes in the less-than-transparent but increasingly important world of private capital.

This is a meeting where “divest vs. invest” in fossil fuels is still an important topic. Someone will end up owning the asset — and what will govern how they act?  When the focus is on the system, not the consumer impulse or the actions of an individual company, new questions emerge.

In a session dedicated to the Green Premium, participants engaged with colleagues and competitors from the same sector to understand how markets and consumers will respond to higher prices for investments in decarbonization, or employee well-being. (One might ask why we give consumers a choice, rather than pass on the real costs of doing business responsibly, but that’s not a realistic path in many markets – if you aim to stay in business.) It’s a real tension and the best choices lead to new ways of thinking, questions about product and service and job design, and innovations more likely to capture the upside when it comes to the massive investment underway in decarbonizing industry. Long-term thinking is critical.

Another session was dedicated to lobbying and trade groups.  What are they doing in your name?

Here’s what I am thinking about ten days later. Three things.

The pace of change that is evident in some global brands is —dare I say it—inspiring. Companies like PepsiCo and Walmart, who have been in the public eye and the target of NGO campaigns for decades, are not just companies – they are systems unto their own – with hundreds of thousands, even millions of employees, spanning the world. That’s massive scale even without considering their extended supply chains and the impacts of their business protocols across agriculture, fisheries, natural resources, and commodity markets.

Such corporations bring new meaning to the idea, “too big to fail.” It is encouraging to understand the degree to which the priorities of the sustainability department are now experienced across management of capital expenditures, M&A, packaging, transport, sourcing, and yes, strategy.

Second, for a number of reasons, the acronym, ESG, is dead, or at least dying.  It’s a great term for insiders who use it as a touchstone for a host of connections and consequences of business decisions, inside the company and well beyond, that would otherwise require a full paragraph to describe. But ESG has come to mean too many things that are outside of the scope of business managers and are better decided by citizens through their elected officials. And like another un-useful term, “stakeholder”, ESG fails to spotlight for an individual enterprise what piece of the ESG stew really matters – exactly where the decisions of an individual company are material in systems at risk. That is the work that all boards and executives need to engage in now. (They can do it, and the best ones will do it, without uttering the term ESG.)

A focus on materiality and fiduciary duty doesn’t mean business executives won’t continue to be called on to stand up for democratic principles, including open and fair elections, or to assure employees whose rights are on the line that they have their collective back, or to double down to ensure an inclusive workplace that takes in diverse points of view to get to better decisions.  In other words, employees are not mere ‘stakeholders’ – they are the company and the key to producing a quality product—in the most expansive definition of that term. Doing right by employees requires being attuned to both tangible and intangible values and measures of success. The General Counsel (GC) in a company I would want to work for is playing offense in this moment. This GC can articulate why the business considers diversity—as a colleague at a financial services company calls it — as their North Star.

The last thing I walk away with, and will still be thinking about on vacation, is that although globally significant enterprises are hyper attuned to how they show up and what they need to do differently to preserve the license to operate, the ocean is still warming.

We don’t address climate change or species decline or inequality one company at a time. The need for collective action is paramount. On climate change, that means pricing carbon to engage markets, but also the need for permitting reform here in the US — where the opportunity to leverage the massive investment in green infrastructure is at risk if we can’t pick up the pace of change. The business community needs to speak up.

So back to the provocative question of one of our breakouts — What are trade associations and your lobbyists doing in your name?

Lorraine Smith, one of my favorite provocateurs, is trying to unpack this question in her piece this week. Take a look.  And check out the work of one of our participants, InfluenceMap, which attempts to make the system of influence peddling more fully transparent in its massive and specific data base. Or consider the Principles of Corporate Political Responsibility of the Erb Institute at the University of Michigan, which bring us back to choices at the level of the corporation.

We need collective action and co-creation to progress. There are dozens of examples of NGO-industry partnerships working at scale, like those of another Summit participant, the Sustainable Fisheries Partnership. But not only is more possible, we have only begun. Is your trade group helping, or working at cross purposes?

A new resource we released during the Summit picks up this question in one of seven key considerations for Boards. We call it the Agenda for the Prepared Board. You can find it here.

The good news is that across both labor markets and in sustainable design of corporations, we have begun to understand what good practice could look like. hashtagEvolutionofESG. For early adopters the focus is no longer risk management; companies on the forefront are focused on long term value creation. The work starts with clarity of purpose, and what matters most to the success of the business now and in the future.

Who’s in?