It's no accident that the S is in the middle

A recap of two conference panels focused on Social Justice and DEI efforts

People always ask me how I got into ESG. My background is technology-heavy, and there are only hints of interest during my college years. At the time, I was asked to mentor first-generation college students from urban areas (mostly Reading and Philadelphia) into a successful college journey. That story rarely comes up and seems like a lifetime ago.

How I got into this space evolved over just the past few years. As I tell the story, inevitably, I say something like this:

And so 2020 hit, bringing ESG into focus for many companies, and I found myself well-positioned from my time in Capital Markets.

There is a lot of ‘what happened in 2020’ skipped over in that sentence, so let’s look closer. The E was light that year (although, personally, our house had minor flooding damage from Hurricane Isaias), but the S weighed heavily on our collective minds. You could almost draw a line between COVID to the horrific murder of George Floyd. On the surface, these things look unrelated, but our shared experience of vulnerability from the first was piled on with sadness, anger, and confusion around the second. Well, for me, anyway.

Despite the S playing such a massive role in ESG’s attention post-2020, I don’t often write about it unless it intersects with the E and G. I find it a difficult topic to tackle from my perspective, and every time I start, I get in my head about it. Two weeks ago, I attended two events and decided to take the inspiration and insight from what I heard from others and share it with some thoughts.

NOTE: I’m paraphrasing from my copious notes!

The Events

On Wednesday, I attended Bloomberg’s Sustainable Business Summit. I listened to a panel on The State of the ‘S’ in ESG (posted online). The panelists were:

• Crystal Barnes, Senior Vice President of Corporate Social Responsibility & ESG at Paramount

• Devin Glenn, Global Head of Diversity, Equity & Inclusion at Blackstone

• Ellen Holloman, Partner, Global Litigation Group, Cadwalader at Wickersham & Taft

Then on Friday, I presented at an ESG Conference at the Center for Social Value Creation at the University of Maryland’s Robert E. Smith School of Business. After my session, I listened to a panel (which was not recorded) on Post-Pandemic Efforts in Diversity, Equity & Inclusion with:

• Deepika Yadav, Project Manager: Diversity, Equity, and Inclusion
  at International Finance Corporation

• Tracy Akinade, Associate Director, Community Engagement & Economic Impact Office of Experiential Learning at Johns Hopkins Carey Business School

• Alpana Mittal, Senior Manager Social Impact at Twilio

The murder of George Floyd and COVID were catalysts for corporate social efforts

On both panels, the murder of George Floyd and COVID were discussed intersectionally with advancements for the S in ESG. You could hear threads of a ‘before and after’ underpinning the discussions. For example, Tracy Akinade told a story about how the dean asked her to co-lead a graduate student collective to engage people from diverse backgrounds. The goal was to uncover where they were lacking around community engagement after Floyd was killed. What she observed out of these activities was an evolution into a focus on accountability that was distinct from previous DEI efforts.

By the end of the panel, Tracy made an incredibly poignant statement that points to the reason for the difference.

This is a heart issue. It’s about what matters to that person.

I agree. Now, companies don’t have a heart, but people do. Those who run impactful DEI efforts lead with it and find the hearts in others. So while the E and G have structure, quantitative metrics, and a broad impact, the S can be qualitative, very personal, and impact us individually and within our communities.

Post-2020, some companies moved from DEI reporting simply repeating their US Department of Labor’s EEO-1 filing in their CSR reports (quantitative/broad) to focusing on impact (qualitative/community). This manifests in thoughtful yet strategic programs and if done right, across the company’s culture.

Crystal stated that corporates should not “act on instinct, but act on impact,” referring to the race to address the social issue of the minute. She referred to one of Paramount’s programs, called Content for Change. This program drives diverse content for underrepresented groups and embeds diversity across the content-making process. The engagement helps avoid bias, driving authenticity and accountability while staying aligned with the core business.

The S is in the middle for a reason

Like I mentioned above, I often talk about the S with the E and the G, but I never quite put it together in the way that Ellen did:

We talk about the S in ESG all the time. You can’t talk about sustainability, for example, without talking about communities…and people. Certainly, good governance requires you to have some kind of understanding of social issues…

S is in the middle for a reason because it feeds both….

Let’s build on that idea by observing Alpana in the other panel. She described how some DEI and CSR projects sound good at first but then lose steam because:

1. They aren’t ESG aligned

2. They aren’t strategically aligned

Think about how ESG is fundamental to business and can’t be a separate activity. You can create a sustainable impact by leveraging the S in the middle and considering its strategic alignment.

Alpana described the company’s strategic integration in a high-level example where they keep equity top of mind for every social program, investment, and decision. In other words, the S isn’t a decision or program running outside the business but is core to it. This leap is where leading companies are and one that applies to E and G efforts as well.

Ellen put it a slightly different way. She explained that what’s changing is that we’re finally thinking about these issues as financial considerations. So, for example, a diverse hiring pipeline is just the beginning, but your reputation is a bottom-line issue. Retaining and growing employee talent is a long-term investment in value for the company and the employee.

Alpana believes that we may start seeing stakeholders hold companies accountable for their social efforts over the next few years. I suspect that against the relief of those reporting on impact and understanding where the S fits in ESG, she is right.

Data, impact, and the courage to stop

Since we can’t know what’s in people’s hearts, these complex social justice efforts and programs are measured in qualitative data with some quantitative components. Unfortunately, many legacy programs follow a quantitative approach (measuring diversity) instead of also measuring individual and community impact (qualitative). For example, you might measure a program’s participation rates over time (quantitative), but success is a story told in documented evidence and sentiment (quantitative).

For example, Deepika discussed the EDGE certification to uncover where the organization is around gender equity issues. Per an IFC/EDGE announcement earlier this year:

The certification process involves a rigorous third-party review of representation across the pipeline, pay equity, effectiveness of policies and practices, and inclusiveness of an organization’s culture. As an integral part of the assessment, employees receive a comprehensive survey to assess perceptions of career development opportunities in the workplace.

There is a mix of quantitative and qualitative measures in this review, and executives are clamoring for this data to articulate the progress of efforts to their stakeholders of all kinds. While EDGE is an example of a way to measure impact successfully, too many executives only focus on disclosures.

We hear about disclosures all the time, especially with the intense focus on carbon at the moment. Still, internally, the ask around the S data isn’t as clear when executives knock. As Devin pointed out, she has historically responded to many requests for S data. At first, the asks for data were an encouraging sign, but the demands became too voluminous and seemingly of little value. As the one responsible for the data, she thinks the better question is, ‘what are you going to do with the data?’

In other words, disclosure, for disclosure’s sake, doesn’t drive progress. This was followed up by a response from Crystal, who stated that data without accountability means nothing. She encouraged stakeholders to ask for the data only if they take action. Then, she said something remarkable:

Data should encourage you to be ambitious and step into where you are uncomfortable because you have mapped out where you want to go.

Map out where you want to go and use the data to give you the courage to address the complex challenges you need to.

And when the data isn’t showing progress? Devin said that one of the challenges is the reluctance to stop underperforming social programs, but this is necessary. Stop doing what isn’t working and use the data to inform your decision. As I always say, data is the proof of your story. Have the courage to make the call, even if it is to walk away. Your efforts will be better served with what’s working.

Wrap

There was a forward-looking question on where both panels see things going in the future, but I’m going to leave you with one thought about accountability. Earlier, I wrote that Alpana believes we will start seeing greater accountability for ESG commitments. When asked where we would be in five years, Tracy rang out a clear call to those who aren’t taking these issues seriously today.

We’re going to see who truly meant it.