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Weekly Short
4 August, 2023
In the week of our 28th birthday, and as many of us prepare for what remains of summer, we wanted to take a moment to reflect.
There is an insidious force building – particularly recently – which we think needs to be challenged, and challenged strongly. We see it in BlackRock – the former poster child for ESG investing – backing away fast from the idea that social or environmental criteria should influence where you invest your money. We see it in the way commentators and politicians have latched on to the issues at Coutts and NatWest and moved swiftly from there to trashing the whole DEI agenda. We see it in the way the failure of Labour to win a byelection in a seat they haven’t held since 1970 has led people from across the political spectrum to backtrack on green policies and pledges. And we see it as a thread running through some of the discussions we’ve had with clients recently – change is slowing, resistance is growing, they are finding themselves having to fight harder to get things done.
Joining the dots between these suggests there is a growing backlash against the sustainability movement. It feels as though the gloves have come off, and many people are piling in – not just to take issue with a particular example of corporate behaviour, but to suggest that business has somehow been blown off its course by an agenda that has the audacity to think the corporate world could be a force for good.
Now, we’re all for challenge, and we would be the first to say there are there are examples of organisations taking misguided action in the name of DE&I, ESG or corporate purpose. But to suggest that this somehow reveals a fault line in the whole movement strikes us as insanity.
What do these critics really want? A world in which companies continued to hire mostly white middle class men, missing out on vast swathes of talent and the chance to better represent their customer base while they’re at it? A corporate set up that means major institutions such as banks fail to recognise the considerable influence they have on the climate crisis through the decisions they make about finance and lending, while we face the hottest month on record ever, and Europe literally burns? A business culture in which organisations fail to seek out a sense of purpose that sets out what they can – through their core business – contribute to the world, so motivating their employees and creating their place in a progressive future?
Much of the recent debate has presented this as a zero-sum choice. The public, we are told, wants a bank that is honest, pays a good rate of interest and sets reasonable charges, rather than one that is supportive of communities, inclusive and diverse. They want a supermarket that sells a wide variety of low-cost food rather than one that invests in its employees and looks for ways to minimise carbon. But it isn’t purpose or profit, just as it isn’t customer service or carbon, or any other false binary being presented as such.
To state the blindingly obvious: large corporations are inextricably bound up in the societies in which they operate. They have a very significant impact on many of the biggest issues that we face – from climate change to inequality – and it is absolutely right that they understand these impacts, monitor and manage them, and work to amplify the positives and reduce the negatives.
This is not to deny that navigating the space where business meets society is complicated. Nor to pretend that businesses get things right all the time. Companies would do well to remember that not every issue is material to them, and they should focus on those ones where they make the biggest impact and which have the biggest impact on their business. Equally, they should steer clear on proclamations about the rights and wrongs of issues to which they have little or no connection.
But for the world’s sake, let’s not throw the baby out with the bathwater. We still think that the world would be a better place if the companies that employ us, service our needs and keep the wheels of the economy turning have a clear sense of why they exist, the role they play and a plan for doing more of the good stuff, and less of the bad. In the long run, the health of a company reflects the health of the society and environment in which it operates, and we neglect that health at our peril. We need businesses to figure out what they can do now, rather than hiding behind a far-off net zero target. We want them to find ways to incentivise innovation and change, and reward the people who make it happen. We want them to be honest about their mistakes, and what they will do differently as a result, and to engage with critics without letting those critics drown out the better angels of their nature.
We need to move forwards, not backwards, and do so quickly. Take the hard decisions that lead to actual change. Let’s embrace, rather than give up on, the idea of using the enormous power of business to create positive change and generate business success by so doing. This is not the moment to pander to woke capitalism taunts but to move towards waking up capitalism, before it’s too late.