Stomach and Stamina: The Two Traits Leaders Need Now
Navigating ESG, reputational risk, and political uncertainty with discipline and purpose
I spoke with a friend in the ESG space early after Target's pullback from DEI. We debated whether the pullback drove foot traffic elsewhere or coincided with broader economic uncertainty.
Everyone loves a good story and wants data that supports their positions, but we weren’t convinced about the reasons behind the trend.
Three months later, the signals seem pretty clear, as RetailWire proclaimed Target foot traffic down for 11th straight week after caving on DEI, noting the increase in foot traffic at Costco, whose board came out in a stunning material defense of their purpose and approach.
Do I feel bad for the National Center for Public Policy Research, which keeps lobbing anti-DEI proxy resolutions at companies, forcing them to stray in fear? After all, their values-driven resolutions have gotten under 2% shareholder support lately.
I don’t feel bad. If anything, it seems a referendum on the merit of the resolutions.
Still, the proxy resolutions aren’t the point. The point is making boards nervous that they might be the next Target (figuratively and literally). As long as these resolutions keep coming, the fear persists.
Well, that and no one wants to be on the President’s radar.
Reputational risk, long the toe-dip into the world of ESG, has suddenly been pushed into the deep end of the pool.
While these few noisy stakeholders push companies one way, many stakeholders on the other end are willing to support those doing the work. This is fundamentally the imbalance we see across Target and Costco at the moment. These headlines and the resulting tension influence boards and management teams who don’t understand that ESG is business value.
ESG professionals often find themselves caught in the middle. They field internal anxiety while also trying to translate stakeholder expectations into action. Their job shouldn’t be to respond just to noise but to keep the company tethered to what matters.
And some are spending their time justifying their existence at the company.
If sustainability offices are ever going to make real business progress, they must move past the reputational risks and start delivering on value. Those who do will be better positioned to drive resilience and sustainable growth over the long term.
But it won’t be easy.
Short-term and long-term crisis handling
Leadership requires both short-term attention and long-term planning, but the long term is often overlooked for short-term financial reporting cycles.
Your company’s finances are grounded in the short term, while your purpose and potential are grounded in the long term. To protect both, you need to dig deep and rely on two different attributes:
Stomach: Ability to handle short-term discomfort, criticism, or media attention without panic.
Stamina: Sustaining purpose-driven and business-aligned actions through political, market, and social crises.
These aren’t new skills to cultivate but reflect the discipline required to lead with purpose through uncertainty. After all, leaders should already have the stomach to deal with competitive pressures and the stamina to plan M&A work, for example. However, its application here is slightly different.
ESG has been muddied so much by ‘doing well by doing good’ that it requires a fundamental belief that it is more than that and is a critical new perspective on the business and its value chain. It also involves some level of domain expertise, situational awareness, and a perspective on the connected nature of systems.
Business leaders aren’t always good at this, but ESG professionals are.
Having the stomach to deal with uncertainty
Uncertainty in business is nothing new, but with the rise of globalization, manufactured political crises, and the pace of intangible value creation and erosion, we’re facing something new.
As the world has gotten smaller, the challenges to business have gotten larger and more complex. Yet, perceived immediate consequences cause companies to shift strategy away from ESG. We can quickly judge the pullbacks as a short-term reaction to this new uncertainty, but it isn’t just one thing.
When companies pull back, it’s rarely for just one reason, despite how the trend is reported. In my evaluation, they tend to fall into three distinct types (with links to each analysis):
Followers: Committed ESG goals based on reputation with little to back it up, and even less real investment. These companies don’t understand ESG and use any political wind to back away.
Superheroes: Overleveraged purpose and leaned into non-material sustainability efforts. These companies tried to save the world with a mixed regard for their business, making them easy targets for pushback.
Pragmatists: Looked at the market and aligned goals with stakeholder preferences. These companies understand ESG well, and changes were made due to materiality.
Lately, however, it seems like the ESG world has come crashing down. Headlines repeatedly proclaim its death, and the malaise is palpable.
Many companies are finding business value in ESG efforts in this second act and continuing the work, but they might not be vocal about it. They may even only share their efforts with those who want to hear about them in what Johannes Lenhard coined ‘selective greenhushing.’ Keeping silent on issues, depending on the stakeholder.
Reputational risk is not only the stakeholder signal that it always was, but has now become a political weapon.
So, while the work continues, some don’t have the stomach for the reputational risk being surfaced in the headlines when they are targeted. This can have direct business consequences on two fronts: from the White House and opposing stakeholders.
In addition to corporate DEI efforts, this has manifested in pullbacks from law firms, especially those targeted by Executive Orders. This is a balancing act because being a target of the President could mean the end of the firm, or at least the perception of it. On the other hand, as Albany Law professor Ray Brescia put it:
If a government adversary knows the law firm on the other side of the table is more concerned about maintaining its reputation for having a good relationship with the government than winning, what won’t the other side ask for?
This is an excellent reminder of how leaders should consider these perceived threats thoughtfully. Which stakeholder is greater in the near term, the President or the ones driving your business? At a minimum, you should understand each.
One, you can fight in court; the other, you must continually court with your actions. While this may seem like short-term vs. long-term tensions, the results, as with Target and Costco, are playing out today, and we might see it play out with law firms and even higher education in the coming years.
Building stamina for the long term
The White House has shifted business focus to the short term, but leaders cannot ignore long-term strategy and business development. This trade-off will not serve anyone well.
Sustainability and ESG professionals should already be familiar with stamina, as the field has experienced ups and downs and pivots over the past twenty years. Even those new to the field have seen it recently move from impact to reporting to where we are now, fighting for relevance with business value.
For business leaders, though, it’s business as unusual.
To return to the above ‘pool’ analogy, leaders need to learn how to swim, or even chart new courses through the water to find solid ground again. In other words, remember that a well-run business will outlast a political movement, liberal or conservative.
Stamina is needed to maintain a holistic view of the business, and by holistic, I include ESG factors that can affect it. Let’s look at a quick example around a long-term perspective.
Starbucks, the global coffee chain, discusses climate change in its most recent 10-K, mainly around the risk it poses to its core business in the value chain. ‘Climate’ is mentioned around 22 times, but farmers, where the climate risk would manifest, are mentioned only 4 times. Still, Starbucks covers its Farmer Support Centers, which have agronomy and sustainability expertise available to farmers, within the 10-K.
If you look at their Impact Report, you will find 38 mentions of farmers and a wide range of long-term attention to climate risk through the assistance mentioned above. The report also discusses financing options for farmers, ethical and safe value chain practices, dairy industry stability, and more.
The climate and social risks around coffee regularly make the headlines. Starbucks’ long-term investment in farmers isn’t just ethical; it is sound business strategy embedded across the value chain.
Admittedly, the company has challenges around employees and CEO pay, but this example illustrates attention to one area of long-term resilience, which requires stamina. When Starbucks writes about its farmer programs, it talks in terms of decades.
Material programs like these consider the company’s core business and stakeholders from its value chain to its customers. Combined with some lessons from our short-term view, some key ideas emerge for success:
Continue consistently investing in material ESG issues.
Monitor and adjust, as needed.
Listen to your stakeholders beyond the noise, and be ready with a business value defense.
Communicate selectively if you must, and keep it authentic.
Seek domain expertise on key issues, set time horizons for risks and opportunities, and create workback plans.
But we can’t forget the discipline it takes to get us there. Discipline in ESG isn’t reactive to emerging trends. It’s a learned practice of deeply understanding the business and global issues and shifting plans, even when it’s uncomfortable or risky.
Business context and value
I recently met with an investor advising a small sustainability startup. They were working to sell carbon credits for trees, then planned to cut down the trees towards the end of their long life cycles for lumber. From here, they would replant the trees and start over.
The question to me was whether or not I thought this was a viable business model.
I asked, “Who would use the lumber at the end?”
In this case, that is the primary target group for such a solution because they have the business context, and an investment like this has material applications to their business.
A program like this wouldn’t be material to a pharmaceutical company, but might be to a publisher or property developer. Targeting intersectional customers aligns impact with the business context and could deliver additional value as models shift towards sustainability, like a reliable lumber supply.
This type of material investment in related impact is rare, but I see larger companies, like Starbucks and Microsoft (where I work, as always), taking this approach. On the other hand, it might be out there, but the ‘doing well by doing good’ narrative is so powerful that I’ve missed it.
Expect that storytelling to change.
I’ve been known to write ‘make it matter,’ but the message is different this time. Material ESG work doesn’t eliminate discomfort, but like an antacid, it makes it manageable, giving leaders something to hold onto when the pressure mounts: long-term value grounded in business fundamentals.
And this is where we are. Looking for impact through the business, not around it.
As the current administration looms and uncertainty intensifies, leaders face a clear choice to retreat into silence or advance with clarity and conviction. One path is reactive, driven by fear. The other builds resilience and credibility.
The future belongs to companies led by those with the stomach to withstand pressure and the stamina to stay the course.
If you’re in this work, don’t underestimate your role. You might be the reason your company keeps moving forward.