ESG work is a hero's role

Climate-related work might lead to better-managed companies

It has been a week. I’m behind on writing due to a cold. A bizarre lawsuit against ESG in retirement funds clearly shows signs of political overtones rather than reality, and we’re still shattering heat records globally.

And yet, we carry on. Yes, we are brave souls working at companies and in government trying to drive impact, as only we can do so through our unique skills and our organization’s reach.

In the past, I’ve written about how the disclosures have pivoted productive sustainability teams into carbon accountants. The resulting Great Disclosening has led many to flee from corporate positions into more strategic consulting gigs that yield satisfaction and impact while scratching that sense of purpose.

But what if collecting and preparing that data for reporting wasn’t solely an exercise in disclosures but a necessary first step to analysis that leads to transition, providing an impact as only the company can?

Well, this is the dream for sure, but for many, by the time last year’s sustainability report is published, it is time to start on the next one, leaving no time to make the case for change. The perception of the recurring low value for these roles rather than as a change agent is a real struggle.

In ESG Mindset, I discuss the challenges of data and low-value disclosure exercises. I also write about upskilling and mainstreaming the idea and, of course, the data around the concept of Digital Transformation, which includes getting people to see the high value in the data when used internally.

As the company moves towards new digital systems, the data quality improves. As data quality improves, executives can make more informed decisions based on that data, leading to improved Governance.

ESG, DEI, and sustainability data can provide an additional analytical lens on the company, improving Governance and delivering value.

But I also wrote that capitalizing on this date means leveraging human capital, the people who understand your business best, to help surface improvements and innovations. Talent sits in the middle of all of this value.

And I didn’t specifically address talent in the book.

Enter a new report from the Wall Street Journal titled What Do Many Better-Managed Companies Have? Lots of Climate-Related Jobs.

Before you get too excited and ask for a raise, it is essential to remember that correlation doesn’t equal causation. If you aren’t familiar with that expression, it means that just because two (or several) variables seem related doesn’t mean they are. Still, the authors, Rick Wartzman and Kelly Tang, make a persuasive case that companies with more climate-related talent may be better managed.

Effectively, they set out “to determine whether there was a connection between the number of climate-related jobs that a company has, relative to the size of its overall workforce, and how well-managed it is by our reckoning.” In my opinion, this appears to be a way to examine a company’s attention to ESG issues and where they fund those related roles, resulting in quality Governance.

They started with the best-managed companies, as defined by the Drucker Institute, named after Peter F. Drucker, who is credited with creating modern business management theory. Their report uses the Drucker Institute’s 34 key metrics and data sources to determine America’s best-managed companies, matched against climate job data from Revelio Labs.

The Drucker Institute’s methodology measures against five principles: Customer Satisfaction, Employee Engagement and Development, Innovation, Social Responsibility, and Financial Strength. You can read more about the methodology for rating companies against these factors online, and I encourage you to do so as it is pretty informative. Fun Easter Egg: My friend and fellow author, Alice Korngold, developed the methodology for Social Responsibility.

Even though this report appears in the Wall Street Journal, it isn’t trying to tie ESG to alpha or market outperformance. For example, recent data from MSCI showed that companies who scored higher on material Social issues outperformed their peers over an 11 year period.

Instead, the report is more aligned with ESG as quality Governance could indicate long-term resilience by measuring management effectiveness against climate jobs by the total employee population.

So, what did they find?

Insight #1: Companies with a higher share of climate jobs outscored those in the bottom quartile across each category, sometimes by a lot. The top quartile wasn’t always the best, but the top three were above the bottom quartile every time, including on Financial Strength, which appears to be where all the quartiles were the closest.

Insight #2: According to another study by Revilio Labs, job postings for climate-related work tripled since 2018. Those industries most heavily affected by climate change are seeing the highest increases. My assumption would be that climate change is a more material issue for those industries (which is ESG).

Insight #3: While it is unclear why this correlation exists, it might be some mix between looking to the future (long-term/ESG) or that tackling sustainability topics can help drive results.

This last insight is where purpose-filled employees, who go beyond the typical intensity of Gen-Z cited in this article and elsewhere, can activate, drive change, and improve and innovate around the business. This insight also reveals what I love most about these topics. ESG, DEI, and sustainability force a company to reckon with unfamiliar concepts that are wildly complex and have no clear answers.

Wouldn’t a company that tackles the thorniest material issues in the context of its business be more likely to deliver long-term results? Barring a crisis or failure on the Governance pillar, I think so!

So, if you are pursuing an ESG, DEI, or sustainability role at a company, take heart. Your skills are desperately needed to help your company uncover value!