Business Insider ran a story last week titled ",” asserting that companies have backtracked on ESG as part of a “great un-wokening.” The journalist, Emily Stewart, acknowledges that companies backing down on sustainability and diversity efforts “could prove short-sighted.” But she concludes that “maybe corporate America was never truly committed to the idea in the first place.”
The article reflects a broader narrative in the public discourse that contends that companies and CEOs became too activist on societal issues. But C-Suite leaders beware. The need for business to act – to go beyond words – has intensified, not receded. Those tempted to think the work is over are mistaken. Ƶ Trust Barometer data consistently shows demand for action.
Business is by far the most trusted institution. The 2024 Ƶ Trust Barometer shows the leadership vacuum created by a lack of trust in government and puts responsibility firmly on business to solve important problems. Globally, business is seen as 52 points more competent and 32 points more ethical than government.
Corporate activism really gained pace in the mid-2010s, related to support for the Paris Agreement on climate and corporate opposition to the bill in North Carolina in 2016. In 2019, the Business Roundtable a redefined Statement on the Purpose of a Corporation signed by 181 CEOs emphasizing how business must serve all stakeholders, customers, employees, suppliers, communities and shareholders. In parallel, sustainable investing continued to grow, leading companies to try to qualify for new funds. The murder of George Floyd in 2020 prompted many companies to confront racial injustice and establish or overhaul Diversity, Equity, and Inclusion (DEI) programs to achieve a more diverse workforce that better reflects the world.
Leadership character is in question and will be scrutinized intensely in the year ahead. Some would have it that business can and should revert to unfettered shareholder maximization and forget that leaders ever realized there’s more to leadership than turning a profit. They are kidding themselves. The operating reality for CEOs has changed profoundly and it’s not going back.
Demographic, geopolitical, and environmental shocks are our norm. People will argue about how to go about the work most effectively, but we must have more diverse workforces and inclusive workplaces to compete. We must have more resilient supply chains to grow. We must tackle labor issues and we must do our part as environmental stewards.
None of this is radical. It is about doing business, better. It is about strengthening capitalism. For anyone in the C-Suite or counseling business leaders, a few points to consider:
- Communicators and executives need to avoid the language trap. The misuse and weaponization of the word “woke” and the deliberate conflation of the terms Woke, ESG (Environmental, Social, and Governance), and DEI dilute the substance of each. Smart leaders will focus on action and follow through. Keep it simple. Center on the clear objective of building a healthy, value-generating, inclusive and sustainable business. And always explain why what you sell matters.
- Don’t allow others to conflate principles you know to be valuable to the health of your company. Corporate purpose is not ESG. Corporate purpose is one of the most important ingredients for long-term growth. If you don’t know what you are growing for, trouble lies ahead. Related but not identical, some consumer brands have skillfully embraced purpose to appeal to specific customers. For the right brands, this can still be hugely effective. But it must always be authentic.
- Despite the contention in the U.S., ESG is primarily intended to provide a level playing field of information to capital markets on how non-financial metrics are connected to risk and opportunity. It is a way to send better quality information to analysts and investors about the long-term risks for a business. People should have the choice to invest in whatever company they want to. Quality information is central to that process. Acronyms like these are technical and not effective in talking with employees and customers. Keep language simple and easy to understand and relate to.
- On DEI, I want to be very clear that Bill Ackman is plain wrong in that DEI is inherently a racist and illegal movement. John Hope Bryant was at the Milken Conference when he said that DEI “is about expanding the table and adding a chair.” Research shows that diversity helps drive innovation and business success. While some steps have been taken on DEI, the work must continue. The representation of Black directors of Fortune 500 companies has expanded to 17 percent. But only 1.6 percent of Fortune 500 CEOs are Black. The number of Latino directors is far lower at 7 percent and Asian Americans at 9 percent. Additionally, many corporate DEI commitments made in 2020 remain unmet.
- If you want to employ the best people, Impact matters. The 2023 Ƶ Trust Barometer Special Report: Trust at Work shows that Societal impact (71 percent) is nearly as important as career advancement (83 percent) and personal empowerment (80 percent) in the selection of an employer. And 61 percent of job seekers globally expect the CEO to speak out on issues they care about. There is a difference in the U.S., however, with a 10-point drop to 51 percent in 2023. Most Republicans and Independents do not want CEOs to speak out on political issues.
- Sustainability must be about follow through. Trust at Work revealed that employees are 14.5 times more likely to work for a company that publicly supports and demonstrates a commitment to human rights. They are also 8 times more likely to work for a company that acts on climate change. However, a later Trust study showed that two-thirds say businesses are not doing well in keeping their climate promises. When companies focus on delivering Net Zero emissions, controlling plastics pollution, enabling regenerative agriculture, or addressing other critical issues, they assure their future success.
, I made a plea to the communicators in the audience. Stand up for purpose-driven, sustainable, inclusive business. Don’t retreat because it is politically expedient. Advise your clients and stay the course. But get more sophisticated with your “how” because better business takes real work.
Richard Ƶ is CEO.
