The business tightrope: Buckle down or buckle under the pressure
As policies shift and pressure mounts, companies must look to the long term
Is anyone out there still standing?
WHAT I’M WATCHING:
Executive Orders are still coming fast and furious out of the White House, leaving companies scrambling to navigate the complexity. They should be wondering what federal safety nets are gone.
The SEC has significantly weakened investor stewardship rights, and the UK Financial Reporting Council may follow suit. This comes as shareholders are starting to vote on binding majority rights.
Due on February 26th but possibly delayed, the EU Omnibus could have reverberating effects on sustainability professionals globally. In a bombshell finding, Politico revealed that France asked for a two-year delay.
There’s a lot of fear and uncertainty, and rightfully so.
THE NEW FEAR: We’ve gone from “No one wants to be on the front page of the Wall Street Journal” to “No one wants to draw the attention of the President.”
Companies are employing various strategies to mitigate this fear, but the changes reinforce the movement away from ESG. In doing so, companies may be taking their eye off long-term results. Some are staying under the radar by readjusting programs, and a few fully embrace the shift, come what may. Meanwhile, others have built resilient and durable programs focused on their core business and continuing to do the work.
No matter the approach, companies need to buckle up and buckle down.
Buckle up for ongoing uncertainty
Let’s be clear. There is no escape from the President’s attention because if he can capitalize on something, he will.
EXAMPLES OF BUSINESS MOVES ON TARIFF THREATS:
Initially, the playbook seemed to encompass pre-inauguration trips to Mar-a-Lago, donations to the inaugural fund, and social media support for the President from CEOs. These transient efforts represented low reputational risks for companies to undertake.
Buckle up because that isn’t enough. Companies are shifting and reworking strategies. Most of the current focus is on changing language to avoid detection, but the ongoing dance won’t end soon as companies react to the President’s lead.
If you are rebranding or shifting your language without the hard work to integrate material ESG and stakeholder considerations, you might as well be putting a new frame on a broken mirror. It might look different on the outside, but the same flaws appear.
This past week, David Metcalfe, CEO of Verdantix, published a blog post about ESG that favors a shift to ‘sustainability.’
In the US, they need to apply a political filter to their positioning. Firms selling into multiple ‘red’ states or to the federal government should immediately retire the ESG tag from marketing material. The acronym is now officially toxic.
The arguments here apply to the corporate shift away from DEI language.
In ESG Mindset, I wrote this:
Many companies still don’t understand this topic well enough and need help building effective programs to execute on. If ESG ends too early, those companies will never have the opportunity to transition responsibly and integrate ESG into their strategy, ultimately putting them at greater risk over the long term.
I hadn’t considered changing language at the time, but the premise is the same. So, what might come next? US companies should ask themselves what federal protections might be reduced or eliminated and how the broader impact on US allies could impact their value chain.
So, shift if you’d like and don’t integrate ESG, but buckle up to keep hitting that moving target because it is relentless.
Finance is still moving, so buckle down
If the collaboration around ESG were a Venn diagram, you might see finance, policy, and your leadership team driving progress.
Policies in the US are rolling back, and if your leadership team does, your company might miss out on the focus from the financial services sector, so buckle down!
I previously wrote about shifting to business value, so I won’t restate everything, but I will call out some additional evidence from financial services firms. Both of these quotes are from interviews on S&P Global Sustainable1’s relaunched podcast, All Things Sustainable.
“Companies that decarbonized more and quicker have outperformed their peers…I think we do ourselves collectively a disservice by framing transition investing as just something solely that’s sustainability-related…there’s a whole other area of interest in what we think of as environmental themes that is driven by outcomes or wanting to isolate specific opportunities”
—Marina Severinovsky, Head of Sustainability - North America at Schroders
“There’s a moment now for private institutions to step up and be the bellwether… through whatever number of years we need to get through until, I think, the political landscape shifts…until we see that virtue signaling coming through policy. In the meantime, I think, corporations…what has changed? Nothing is changing for us.”
—Brian DiMarino, Managing Director and Deputy Director of Global Sustainability, Strategy and Operations at JPMorganChase
WHY IT MATTERS: The financial markets still support a sustainable transition and seek opportunities, regardless of political winds.
The financial markets are still supporting the sustainable transition and seeking opportunities. Is your company doing the same?
Don’t buckle under the pressure
The increasing political pressure might make every ESG decision feel like dodging traps in an Indiana Jones movie, but one truth remains: resilient companies are not retreating.
Language shifts might help companies avoid part of the spotlight, but trends show they carry reputational risks on the opposite end of the political spectrum. There’s no winning here, but you must watch the bargains you strike.
The choice is yours: buckle under pressure or build a strategy to weather the storm.
