We Must Remove the Barriers to ESG, Particularly Political

By George P. Nassos

Environmental, Social and Governance (ESG) is the current representation of corporations achieving environmental sustainability. Originally developed in 1987 by the Brundtland Commission, it was called sustainable development, meaning development that meets the needs of the present without compromising the ability of future generations to meet their own needs. A few years later, it was referred to as the triple bottom line consisting of environmental integrity, social equity, and economic viability. If a corporation’s governance is structured to meet the environmental and social needs, economic profitability will also be achieved. This was demonstrated excessively until many companies started marketing themselves as ESG even though they didn’t implement the strategy. This led to many cases of greenwashing.

While ESG has been proven to be a great corporate strategy, it has come across many barriers preventing it from achieving its full benefit. For example, many companies focus on short term financial goals which makes it difficult to achieve ESG since the latter is really a long-term project. Companies also must make large financial commitments to achieve their ESG goals and reluctancy to fund the projects makes it almost impossible to achieve a positive outcome.

It is critical that a company has a commitment from its corporate officers as well as the board of directors. Without buy-in from these key stakeholders, ESG initiatives may lack the necessary resources and strategic focus. It is these stakeholders that pass their effort down to the middle management and all the other employees to implement the ESG strategies.

A company may also have a problem with discontent from its investors. Some of these people may not be aware of the role of ESG and its benefits. Consequently, the investors may create resistance to implementing the ESG initiatives.

Another major problem that companies have in implementing ESG is identifying proper management. Many companies want to meet the needs of their stakeholders by establishing a position of Chief Sustainability Officer, or equivalent, and then identifying the proper person to fill the position. Quite often, a company will promote someone into that position whether they are qualified to lead it. Even if the company fills the position with a qualified person, it may still have difficulty in implementing the necessary ESG strategies if many of the key employees don’t understand sustainability or ESG. A company needs to train most of its employees about ESG so they can all work together to move it forward.

The question of implementing ESG in a corporation is now becoming a political issue. One presidential candidate has stated that corporations are wrong to use their power to force a radical agenda on society. Included in his so-called radical agenda is ESG. He has stated that large corporations push ESG and abuse their unchecked power to push the far-Left agenda that is destined to fail at the ballot box. He went on to say, “I am standing in their way”. By his calling ESG a far-Left agenda clearly indicates that he does not know what ESG is and, further, does not know its benefits. He is objecting to companies prioritizing ESG over maximizing returns for their investors. He apparently doesn’t realize that a company focusing on ESG will not only achieve the goals of ESG, but it will also maximize the profits. This has been demonstrated conclusively by investment funds consisting of companies operating with ESG strategies.

Achieving ESG as much as possible has more than enough barriers. We don’t need another one presented by politicians. They should focus on what they know best rather than bringing an important topic like ESG into political campaigns.