Many years ago a client asked me why I’d advised that a proposed piece of ‘news’ about having great customer service was unlikely to get much media traction. I said that journalists want to write about things going wrong, not pat backs for them going right.
The same thought struck me this week when reading World Economic Forum founder and executive chairman Klaus Schwab’s remarks on governance, the third but central leg of the ESG stool, in making the case for a new model.
“When our institutions are well governed, we pay little attention to them. They are simply invisible infrastructure supporting the economy and virtually all aspects of the social order,” he said.
And therein lies the challenge for communicators: governance in itself is rarely going to set pulses racing. Those working on ESG strategy and making progress compelling will understand that strong governance is often the root of positive social and environmental action. But boardroom make-up and decision hierarchies are more difficult to make interesting than action to address pay imbalances or reduce plastic usage.
Governance’s time may have come though. Schwab’s proclamation that “our institutions and their leadership are no longer fit for purpose” frames WEF’s case for a fourth model of governance - the third being the emergency approach required by COVID-19 - comprising long-term strategic thinking, an end to top-down approaches and the cessation of emphasis on short-term financial interests.
In many ways, this is in line with the case made by ESG titan Larry Fink of BlackRock this week. As The Guardian put it, Fink’s belief is that “climate policies are about profits, not being ‘woke’”.
His annual letter to CEOs - with thanks to Summit Strategy’s Derek Young for his analysis - is much-anticipated and much-scrutinised. This latest letter centres on the point that surely everyone working in ESG areas is very familiar with - that we are in an age of stakeholder capitalism rather than predominantly shareholder capitalism. But it does so more clearly and cohesively than I’ve seen before, summed up by one sentence: “We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients.”
Or as the Wall Street Journal put it, Fink wants to save the world and make money doing it.
The WEF appeal for Governance 4.0 acknowledges the need to better ESG metrics, and that many businesses simply are not at the stakeholder capitalism table yet, but outlines how and why public and corporate governance must evolve.
As The Edelman Trust Barometer summed up in its annual findings this week, public distrust risks hampering efforts to combat COVID-19 and climate change. Yet the recent BOLDT (disclaimer: my employer) trust report pointed to corporate trust levels rebounding in 2021. Overall, trust in businesses and their leaders seems to outstrip that in politicians currently: a good place to be when it comes to governance action, and ensuring that strong governance has positive impact on environmental and social targets under stakeholder capitalism priorities.
The stage is set for governance to become more prominent and more potent in how ESG progress is communicated and stakeholders are engaged. There are multiple challenges - strategic, creative, operational and executional - for communicators in making that happen.
Understanding which governance factors are most material to the business across the whole stakeholder environment, and getting to grips with why, is likely a shrewd way to start.
The ESG News Review is written by Steve Earl, a Partner at BOLDT.
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