For today’s corporate leaders, environmental, social and governance (ESG) criteria are non-negotiable when navigating 21st-century risk and protecting business value.
In fact, ESG has already been front and centre on the corporate agenda this year, from BlackRock CEO Larry Fink’s annual letter to recommendations from Ontario’s Capital Markets Modernization Taskforce and in discussions on “stakeholder capitalism” at the World Economic Forum in Davos.
What’s evident is that companies won’t improve their ESG profiles without clear reporting standards, and that we need to see progress on transparency and data collection. But we can’t let the conversation around ESG continue without taking a step back and acknowledging the need for a broader discussion about the fundamental shift in attitude we have to see from corporate leaders.
Failure to act on ESG is a failure to drive performance in the modern economy we’re all a part of. The idea behind ESG, put simply, is to require corporate leaders to adopt the more expansive view that corporate growth strategies should also drive social progress and prioritize communities above all else.
Why? Because companies that prioritize their communities will ultimately be more sustainable, more resilient and better set up for long-term growth. When social responsibility goes hand in hand with a company’s mission and is an integral part of its strategic planning, it can drive performance for employees and clients.
It’s been encouraging to see Canadian businesses — large and small — step up to support their communities during the pandemic. The last year has shown us how interdependent we are and how we’ve needed to act collaboratively to address a global issue.
The ability for companies and governments to work together on pandemic relief will only drive clients, investors and employees to now put more pressure on corporate leaders to act on other global issues, like climate risk and income inequality. The expectations placed on companies are higher than ever — which is a good thing. In fact, as leaders, we can use this momentum to make a fundamental shift in the way we view and operate our businesses.
What’s more, environmental and social goals are intertwined. By managing climate risk, companies are also fighting social inequality because disadvantaged groups are disproportionately affected by climate change.
If we want to ensure prosperity, we need to shift the way we view capitalism. Practically and operationally, that means taking a hard look at where we allocate capital, who we hire to run our companies and how we conduct contract procurement.
Smaller businesses may find it more difficult to make the shift in the short term. It’s important to recognize that it won’t happen overnight.
This is a call to Canada’s corporate leaders — we have the opportunity to pursue a path of sustainable growth that will serve as an example for others to follow.
It’s time we turn one day into Day 1.
Guy Cormier is the president and CEO of Desjardins Group.
Comments
This is largely nonsense. You can't get corporations to adopt views which will result in smaller short-term profits. For that matter, contrary to what the article says, it's far harder to get large corporations to think that way than small businesses--small business owners have generally sunk all their capital, and then some, into the business itself, and conceive of it as a lifelong livelihood. It's the big businesses that think in terms of finance, investment, quarters and so forth.
It is just possible some change might be possible if there were drastic, widespread changes in accounting standards, to do things like discount the future less. But for the most part, it's a mirage. You can't get people to prioritize things other than money (eg by not offloading costs onto the rest of us with externalities) when ultimately, staying in business and growing compared to the competition is entirely caused by money. Systemic change needs to actually change that if it is to make any difference.
Adding ESG to modern capitalism is like putting lipstick on a pig. The fundamental problem with capitalism is that it is driven by growth, in particular the need to grow capital assets by extracting excess profit . This is epitomized by the obscene valuations in the stock market of non profitable companies, driven by venture capital and related financial businesses.
Capitalism needs a moral and ethical rebuild to bring it into balance with ecological realities, not a cosmetic make-over.
Yes Capitalism is in severe need of a "do-over".
The problem with implementing and enforcing ESG operations and policies is that Capitalism has managed to almost totally divorce itself from anything that could be characterized as "community". Capitalism has become so constricted in its mental capacity that it recognizes only two entities - investors and customers. Both of which exist only in relation to their potential for being fleeced. Capitalism is the wellhead for psychopathic corporatism.
In the current climate Capitalism is virtually indistinguishable from the criminal fraternity, engaging without a second thought in bribery, corruption, money laundering, fraud and too numerous white collar crimes to enumerate. Capitalism has no ethical, moral, or legal core values. Hapless investors and customers are participating in giant gambling casinos and con games and "The House" always wins.
"Capitalism is the wellhead for psychopathic corporatism." Perfect! Can I steal that?