Embracing The Black Parade
To address ESG issues, companies need to invest in people
The other day, a member of my community made a curious comment. Others were discussing the increasing demands of those entering the workforce. A common theme was young people, albeit qualified, asking for higher pay in entry-level positions. If they didn’t get it, they kept searching. As a result, companies were challenged to fill positions. One person concluded that perhaps our youth, influenced by the discourse on climate change and social unrest, were trying to secure their futures now.
The exact comment was like, “We’ve convinced our kids that the world is ending.”
Is this a fair statement? Or is the real issue more complex, perhaps involving student loans and understanding the value of one’s worth? Or maybe even their worth against considerations like purpose and a meaningful life?
Knowing where to start with a rebuttal can be difficult in conversations like these. Frankly, I struggled, and I talk about these topics all the time! Upon reflection, I think companies also struggle with the changing world's complexity. What might look like one thing on the surface might be something else or an interconnected series of issues.
Building defensibility and acting against trends like these can feel impossible for a company.
As it turns out, the anti-ESG crowd may have slowed companies' focus on these complex issues.
According to FactSet, mentions of ESG on earning calls for Q4 2023 were the lowest they’ve been in five years or at the lowest point since before ESG became the corporate topic du jour in 2020. This is a concerning trend, especially considering they aren’t done yet. As of February 2024, there were 61 pending state anti-ESG laws in the US (although they are struggling to pass).
In Florida, Governor DeSantis has done something actually anti-ESG by passing a law that removes considerations of climate change from energy policy. Ultimately, this means that clean energy goals are out the window for energy security, ignoring any transition costs that might arise. Bizarrely, this might also mean avoiding common sense considerations like not building nuclear reactors in the path of a hurricane. Whether the law will impact regulations on employee protections in extreme heat has yet to be seen.
Still, there’s something strange going on in the pullback and the anti-ESG push. Climate change is smacking companies and communities in the face with increasing frequency. 90% of Floridians, for example, believe in climate change. This past weekend, 120 million people in the US (about one-third) were threatened by extreme storm weather, from hail to tornadoes. This came just after tornadoes ripped through Texas, putting 106 of its 254 counties under a disaster declaration.
The past few flights I’ve taken have been delayed due to extreme weather locally, at the destination, or somewhere in between. Yet, nothing seems to top the severe new turbulence brewing in the skies.
Last week, someone died on a Singapore Airlines flight due to extreme turbulence. This past weekend, a Qatar Airlines flight had a similar experience. Climate change is undoubtedly to blame.
Why mention this? Well, it serves as an excellent example of how ESG issues work. ESG issues affect the company. Just as climate change is causing an increase in ‘clear-air turbulence,’ every company has Environmental, Social, or Governance issues that it can’t ignore.
Even if a company:
Doesn’t talk about ESG on its earning calls
Stops publishing a CSR report or pulls back on sustainability language
Refuses to address supplier data requests
Is headquartered in a state that legislates against climate language
Is defiant in the face of growing global regulations (yes, this is a thing)
…even if a company does all these things in the face of increasing climate change attention, it cannot avoid the issues. This doesn’t mean that the world is ending, but it does mean that these global issues will change the company, whether the management team, board, or employees like it or not.
In other words, the rhetoric might not shift the young’s perception. It is reality.
And so, there is an urgency to change and mitigate our lives around climate change. This long-term pressure will continue and needs to be a focus of companies. Reputational risk management through attention to these issues isn’t enough and is only a surface-level fix. The short-term changes our world is going through also need attention. Unfortunately, small, scrappy teams of sustainability professionals often turn into environmental accountants rather than trusted business advisors on these matters.
No matter which way the winds blow, companies must focus on adaptation around their short-term ESG issues in a changing world while keeping an eye on long-term strategy and goals. For airlines, this will require potential changes and even possible portfolio diversification into other means of travel (can we build high-speed rail in the US already?). Other companies should be turning their sustainability professionals loose on these challenges, as these issues are not going away anytime soon.
And it seems like companies just might be sitting on an untapped stakeholder group to help if they’re willing to invest.
Something about this one has me thinking of My Chemical Romance and the lyrics to Welcome to the Black Parade.