Taking organizational accountability beyond the gesture and reframing ESG priorities
ESG is a trap.
Let’s not be too coy about that. The Herculean effort of shifting five centuries of commerce, industry and enterprise towards an operational paradigm that prioritizes the environment, society and accountable governance was never going to be easy. But taking the momentousness of that effort — the sheer scale of the endeavor — and shoehorning it into a three-letter initialism should be a flashing red light of caution.
No doubt, it is helpful to have a catchall for the tangled bird’s nest of issues that we’re attempting to contend with as leaders. In our efforts to organize around positive change, there is a utility in being able to refer to a single term, instead of having to twist our tongues through an infinite list that includes Net Zero emission goals, gender and diversity inclusion policies, social license outreach, and supply chain carbon impact and capture.
ESG may be an easier reference but its use also threatens to obfuscate the diverse intent of these initiatives, relegate them to a line item and render them meaningless. If climate change and the environment, equity and equality, and responsible and responsive governance are to be achieved, we have to embrace them at the operational core.
Our good intentions are there but there’s a risk of approaching ESG as a singular problem that can be solved by throwing enough funding at it, checking off the right box on the annual report. Like so many other well-meaning but poorly realized initiatives, there’s a danger of turning something of great potential benefit into a financially wasteful fiasco.
WHY BOTHER WITH ESG?
Business has been running smoothly for a good long while. So why not business as usual? Why complicate things? Why upturn the apple cart?
The easy answer is … don’t.
That is, unless you think we could — should — be doing things better.
As leaders, if we can’t see the value in humanizing how business operates — by seizing the opportunity to claw back a little determination from the tyrannies of YOY profit and growth metrics — nothing we do on the ESG front will mean a thing. Change comes from within. That’s true of organizations and it’s true of those who lead them.
If we don’t internalize the shift to ESG priorities, we can’t press forward with them in earnest. And if we can’t make that transition ourselves, how can we shift an entire culture in that direction?
Now, we can say the needful words.
We need to stop global warming and climate change. We need to create equitable opportunities for people, from the landing dock to the C-suite. We need to be transparent and helpful participants in the communities we operate in. We need to build a healthier world. We need to be good for people.
These are good things to work towards. No sane individual would argue otherwise. So, it’s easy to throw some well-meaning sentiment behind those ideals, even if people are largely powerless to breathe life into them.
Leaders need to be on a different level with these motivations. What we do can actually make a difference. Those commitments have to mean something for us so that they can mean something for other people. If they do, our people will follow us. And the culture — the world — can truly begin its transformation.
That’s why we bother.
WHERE WE BEGIN
Despite all the companies offering to provide insights and ratings, measuring ESG factors is still very much a nascent science. Figuring out where to start with our efforts isn’t as easy as cross-referencing a few data points.
Data can help us pinpoint areas of ESG risk. It can even help us monitor our success in managing those risks. But it can’t tell us how to manage them. For that, we have to be willing to gut-check our organizations and take our cues from what we find there. We also need to not shrink away from the work that needs to be done, even if it challenges our status quo.
First and foremost, we begin to tackle ESG by steering our organizations with intentionality rather than compliance. We choose the proactive over the reactive, taking action on these weaknesses as we ferret them out. I’m not sure a lot more needs to be said about this now. Executive leaders know the value of getting there first. Waiting for regulations to set the rules only constrains our ability to find the solutions that work best for our stakeholders and shareholders.
The next step — and this is a more controversial take — we reframe ESG.
PUTTING THE “G” BEFORE THE “E”
An increasingly insistent note in the discussion surrounding ESG is that the ordering of the letters puts our priorities in the wrong place. ESG might roll off the tongue more easily than GSE but it’s hard to argue that we can reverse climate change without first changing the way we govern our organizations, ourselves and the way we connect with the world.
The G in ESG is the least discussed and least developed facet of our new holy trinity. This needs to change. With the imminent and exigent global climate crises, it’s easy to see why E gets the emphasis. But ESG is meant to be a set of operational standards for corporations, not a ranking of threat levels. Nothing becomes part of the operational DNA of corporations without it first being baked into the governance structure. So it goes to reason that any progressive policies — whether it’s investing in education and training pathways for underserved communities, embracing a sustainable hybrid workplace, or reducing our environmental impact to zero — must flow first from well-defined governance.
Codifying our efforts in governance gives our organizations a coherent purpose to rally around. The nature of that purpose — the balance of energy expended on the various parts of the ESG triad — will be unique to the organization. And the inherent transparency of expressing our values and goals through governance helps make them relatable to both stakeholders and shareholders.
The good we intend from our ESG work can only bear fruit if we start by planting the seeds in fertile ground, then give them the light, water and nutrients they need to thrive. Our commitment as leaders is that fertile ground. Governance is how we set them up to flourish.
BRACING FOR THE ESG CHALLENGE is the first in a series of articles exploring the complexities of ESG efforts and how effective executive leaders can approach them. In future articles, we’ll dive into the pitfalls of gaming ESG scores and greenwashing, how ESG increases value, and much more. Subscribe here to follow the series in 2022.
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Valentina Fomenko, “5 Big Mistakes Companies Make When Tackling ESG,” Entrepreneur, 2021,
Stuart R. Levine, “Don’t Get Left Behind on ESG,” Forbes, 2021,
Michael O’Leary and Warren Valdmanis, “An ESG Reckoning Is Coming,” Harvard Business Review, 2021,
Gib Hedstrom, “Beware the 80/20 Governance Trap: Where External ESG Ratings Fall Short – and Why,” The Conference Board, 2019,
Simon MacMahon, “The Challenge of Rating ESG Performance,” Harvard Business Review, 2020,
Wal van Lierop, “Most ESG Investing Makes a Charade of Fighting Climate Change,” Forbes, 2020,