The five people you meet in ESG

And why they are all a little wrong

In addition to writing a newsletter, I frequently engage with a wide range of people on topics such as ESG, sustainability, DEI, impact, Responsible AI, and more.

None of these topics are well understood, but ESG especially isn’t, which is why I write this weekly newsletter! Just when I think my book might be too much of an ESG 101, I come across someone who has read too many nebulous articles and YouTube videos about the subject and makes confident ESG proclamations. A few minutes in, it becomes clear they don’t understand it.

Many types of people don’t understand ESG, and they all react to it in their own special way. So, who might you meet out there? First, let’s examine why different people exist because it is built on the same flawed messaging.

Despite my best efforts, ESG isn’t well-defined

With the rise of ESG, the stakeholder economy, and global tipping points in the late 2010s and early 2020s, financial services firms perpetuated a distorted view of ESG to capture shifting market sentiment around values-based investing. These players spun up a surprisingly sticky narrative built around these themes:

• Companies do well by doing good

• Companies outperform the market by driving sustainability and social change

• Engaging in any environmental or social work is a win-win

None of these things are necessarily true, nor are they ESG.

As I perpetually define it, ESG is:

The material Environmental, Social, and Governance risks that affect a company and opportunities that drive toward long-term value and sustainable growth.

Yet no matter how many times I push this definition out into the world, nudge them toward this mindset, or explain that this is the path to corporate stickiness for the sustainability office, it is massively underpowered against the distorted narrative. As a result, even LLMs don’t understand it well.

Maybe I’m the problem.

If I was going to create a more popularized, but incorrect, definition, it might be:

Any environmental or social-related topic, but especially decarbonization (don’t forget about decarbonization, for Pete’s sake!), that impacts the world and its people.

This is definitely not ESG and points to mostly values-based or calculation efforts that are now being pulled back as the global economy becomes increasingly uncertain and volatile. Still, this is probably as close of a popularized definition as exists, so what kind of people do I come across?

The five people you meet in ESG

The impact purist trying to strategize

This person wants to retrofit saving the world into quarterly returns. It’s earnest, and they may have been trying to save the world for decades but are increasingly finding their work under corporate scrutiny.

As a result, they can’t make it work anymore. No matter how they slice sustainability data, even with new formalized models, when they drag the data out into the sunlight where executives live, it doesn’t stick.

This archetype sees ESG as a Trojan horse for impact. If they pull the lever of materiality hard enough, they believe corporate skepticism will plunge into a pit of sharpened sticks.

Fortunately, I can usually nudge them toward real ESG, but they’re always disappointed it doesn’t scratch their moral itch.

The academic or business consultant who found ESG last week

Honestly, I’m jealous of these people. They drop a surface-level hot take, slap on a misinformed link, and boom! LinkedIn fame, conference invites, and a mystical aura of ESG thought leadership, all before lunch!

These people are usually ‘deeply concerned’ about the pullbacks as if they just uncovered capitalism’s darkest secret that non-material issues don’t get funded.

Their takes are technically correct but painfully shallow. They revel in companies’ failures as social media fodder and completely miss the real opportunity to offer useful advice around business integration and transition.

Their true agenda? Sounding like the smartest person in the room, pointing, and more pointing.

The myopic planet-saver

If you hear a refrain of “Shut it all down!,” I suggest you run. These individuals want oil and gas companies to apologize, shut down the wells immediately, and transition to wind farms by the next quarter. To them, ESG is an irrelevant distraction, and materiality is just a capitalist excuse for not moving fast enough.

Ironically, they get ESG better than most. They just don’t like it. To them, ESG isn’t revolutionary enough. It’s a systemic band-aid when what they want is a total transplant to new models.

I struggle in these conversations because I also don’t want the world to burn. Still, I recognize that turning off dirty energy tomorrow means schools and hospitals don’t get power. But other trade-offs and complex transitions aren’t as exciting as their imperative to save the planet and, certainly, not as viral.

To them, ESG is a corporate sellout, and I am too. To me, it’s how a company’s survival strategy eventually meets its sustainability goals, but it takes longer.

Carbon accountants gone wild!

I literally can’t deal with these people, and if you’ve been subscribed for a while, you know why: the regulations and standards drive me crazy!

These folks would measure the carbon emissions of a PowerPoint presentation if you let them. “Are there employees breathing too heavy? Surely, the GHG Protocol has something for that.”

The regulations drive them, the focus companies have paid to carbon accounting and their connection to it, and an unhealthy addiction to Excel spreadsheets.

Every incremental improvement in carbon accuracy fills them with an artificial high.

Here’s what I want to say to them to detox them, but I only ever write about it here:

1. Carbon isn’t always material.

2. You could focus on material decarbonizing instead.

3. Precision does not mean progress.

Carbon accounting is the altar at which they pray, and the regulations are their gospel, which they pound against the pulpit as they preach. When I stand up in the pew and ask about more material issues, like climate risk, I am splashed with holy water and cast out in shame.

The values-based hypocrite

This conservative values warrior completely missed the memo that ESG isn’t values-based. They view ESG as a liberal manifesto, and this affront cannot stand! They conflate values-based investing with ESG and then point to its downfall when it doesn’t hold up in an economic storm.

The reality is that they are attacking the wrong thing and getting it wrong themselves. Instead of critiquing actual values-based work, they decry “woke capitalism” and lump material and non-material efforts into a single bucket.

There is no room for nuance here, only ESG and whatever fictional opposing force they’ve created.

Their feelings are hurt, and they think ESG is corporate therapy for liberals. “Where is the traditional focus on the business and merit?”

Conservative doods, this is literally the entirety of capitalism and investing.

Yet, instead of challenging real values-based marketing fluff, they torch everything, including material work, with the same fire. They tie what they think ESG is to the stake and set it ablaze in their own righteousness. Meanwhile, ESG is down at the pub enjoying a drink.

As a result, their efforts are easily defeated, which we see repeatedly in courts and proxy resolutions that get 4% or less support from shareholders.

Values-based efforts are not ESG, and they often fail to hold up during times of uncertainty. Period. If you are an academic or business consultant, feel free to take that line out as the takeaway in your viral post.

Room for at least one more?

There are many other archetypes, like the ‘passionate person who doesn’t know how to channel their efforts’ and ‘the ever-skeptic,’ but this list represents the ones that just consistently get it wrong.

As I’ve written before, I don’t care what you call your company’s ESG efforts, but I do believe an approach with an ESG mindset, one that considers materiality, stakeholders, and long-term resilience, is the path to driving lasting change and potentially impacting the world as only you can.

In this space, I encounter a passionate mix of moral crusaders, ego-driven individuals, Excel addicts, and LinkedIn enthusiasts. And look, I do talk to people who are doing the work, and every day, I hear more and more are coming around. Somewhere in the evolving chaos lies my hope that companies will grasp the importance of connecting business value to environmental, social, and governance risks and opportunities.

ESG may not be as viral or consistent as I’d like, but it is essential for building a more resilient and sustainable business.

So, I suppose there’s a sixth person you meet in ESG—me. I don’t always get it right, either.

Good to meet you! How can I help?