Per the WSJ, following years of simmering investor backlash, political pressure and legal threats over ESG efforts
Our Take, Doug Sheridan
Per the WSJ, following years of simmering investor backlash, political pressure and legal threats over ESG efforts, a number of business leaders are now making a conscious effort to avoid the once widely used acronym for such initiatives.
Many leaders are more closely examining disclosures, wanting to avoid regulatory scrutiny or political criticism. In lieu of lofty pronouncements, advisers are telling CEOs to be more precise and to set goals that can be achieved. Saying as little as possible is recommended.
“We’ve seen a great deal of reframing and adjusting by CEOs in the ESG arena. Not only of what they say, but also where they say it and how they characterize it,” said Brad Karp, chair of law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP who advises a number of CEOs. “Most companies are moving forward operationally with their ESG programs, but not publicly touting them, or describing them in different ways.”
On earnings calls, mentions of ESG rose steadily until 2021 and have declined since, according to a FactSet analysis. In Q4 2021, 155 companies in the S&P 500 mentioned ESG initiatives... by Q2 2023, that had fallen to 61 mentions.
Adding to the challenges for companies is that some dimensions of ESG, particularly the social goals, can be difficult to quantify. Corporate diversity programs, often part of an ESG agenda, face new scrutiny following a Supreme Court decision on affirmative action and legal challenges from largely conservative groups.
The fiercest critics of ESG say they welcome less discussion of it. But what to call such efforts now remains a debate. One advisor suggests leaders discuss initiatives in clear language, explaining efforts to cut water use, for example, or to use terms such as “our people” or “our natural resources.” More leaders should to adopt the phrase “responsible business." The angle? You can be anti-ESG... but it’s hard to b anti-responsibility.
Our Take: The shift in ESG messaging reflects the reality that “ESG is complicated,” said Daryl Brewster, a former Kraft Foods exec who now heads Chief Executives for Corporate Purpose, a nonprofit of more than 200 companies focused on social impact. Yeah, no kidding. What's more, in most cases it's not what it pretends to be either.