Locating the 'E' in ESG
Understanding the shifting focus between Environment, Sustainability and Governance
The UN’s top climate official has given some very stark warnings ahead of the Cop26 climate summit. Patricia Espinosa, executive secretary of the UN Framework Convention on Climate Change, suggests global security and stability could break down, with migration crises and food shortages bringing conflict and chaos, if countries fail to tackle greenhouse gas emissions.
In this context, what role do we expect of brands to help address these issues? This is not an unreasonable question, given Ipsos polling shows 68% of people globally consider that if businesses do not act now to address climate change they will be failing their consumers / employees. This is slightly higher than the related statistic of 65% of people globally considering that if governments do not act now to address climate change they will be failing citizens.
Of course, we expect brands to be effective custodians of our welfare, not just in terms of ensuring that the products and services we consume are well designed and safe but that the way they are produced is responsible. This clearly encompasses a range of social and environmental factors relating to the sustainability and societal impact of a company. One leading means of defining and measuring this is ESG:
E: protecting the environment
S: improving society
G: practicing good governance
In March 2021 Ipsos asked consumers across 28 markets to rank ESG priorities for multinationals. While all three aspects, ‘E’, ‘S’ and ‘G’, are seen as important, ‘improving society’ (S) came out as the top priority, with 41% of the votes globally. ‘Protecting the environment’ (E) followed at 31%, just ahead of ‘practicing good governance’ (G, 28%).
Given the scale and impact of the Environment challenges we face, it is useful to explore why this does not score more highly in what consumers expect from brands and governments. Having said that, it is important to note that there are some historical differences here - in 2019 Environmental scored highest in the Ipsos polling. In addition, there are differences by market – E and S are similar in the UK for example.
But nevertheless we argue that there are some themes which have meant that Environment can be more of a challenge in terms of peoples’ priorities of concerns which can have knock on effects in terms of shaping positive outcomes.
We deal with these challenges first, before looking at more recent developments related to the way COVID is perhaps influencing things; we argue that COVID means the different ESG strands will increasingly be seen as interlinked and they will collectively rise rapidly up our collective list of priorities.
Possible reasons why Environment concerns are not so much higher
Given the catastrophic warnings that we are hearing, we need to understand why Environment is not playing a much bigger role in peoples concerns. Here we do not seek to set out an exhaustive listing of this complex area but rather seek to identify a number of broad themes.
Human relationship with nature: There is a long tradition of considering human beings as fundamentally different from other forms of life. Aristotle suggested humans possess a rational soul or intellect and it is this alone that has access to ‘less corruptible sphere’ and has affinity with the divine ‘unmoved mover’.
Two thousand years later Descartes continued this hierarchical continuum of living beings with the ‘Great chain of being’ – polarising the world into a dichotomy between mechanical unthinking matter (minerals, plants, animals, human body) and the pure thinking mind (exclusive to humans and God).
With this tradition in mind, it is perhaps little wonder that we are accustomed to thinking of nature as something quite separate and less important than ourselves.
Sacred values: We hold some values as ‘sacred’: by this we mean something that people really care about, and are unwilling to trade or negotiate. What we choose to consider sacred and what is negotiated is, of course, a matter of debate but as we have previously discussed, it is these values rather than outcomes of our actions that often seem to be shaping debate.
Dan Kahan points to the way in which our disagreements or what we choose to focus on is due less to people failing to understand the science, or even that they lack relevant information. Instead disagreement is generated from the way “people endorse whichever position reinforces their connection to others with whom they share important ties”. We can consider these positions as reflecting a primacy of ‘sacred values’ shaping our behaviour and attitudes rather than a consideration of the outcomes of our behaviour.
In other words, climate change is seen as something that is associated with a particular set of political concerns rather than something that requires us all to be engaged. Set against social justice (which may have a range of perspectives included within it) then we can see how concern about Environment is in danger of being supported by a subsegment of the population rather than being given broader importance in peoples minds.
Misinformation challenges: Whilst there has historically been a great deal of misinformation concerning the denial of the reality of the human causation of climate change, a recent paper by sustainability researcher, William Lamb and co-authors suggests this has been replaced by more subtle discourses that accept the existence of climate change, but justify inaction or inadequate efforts.
Alongside his co-authors he points to the underlying logic used to discourage climate action, revolving around four key questions: (1) Is it our responsibility to take actions? (2) Are transformative changes necessary? (3) Is it desirable to mitigate climate change, given the costs? (4) Is it still possible to mitigate climate change?
While each of these build on reasonable concerns and fears, they can readily become arguments for delay when they ‘misrepresent rather than clarify, raise adversity rather than consensus or imply that taking action is an impossible challenge’. As such we can see how this can reduce the focus on Environment in peoples minds.
The connected nature of ESG
We can see the case for the way in which Environment does not necessarily always have primacy (relative to Social and Governance) in the way in which we hold governments and companies to account. And to reiterate, there are inevitably other reasons for this but we see these as offering some ‘meta’ explanatory value.
There is, however, a case to be made that COVID is changing the way in which we think about and prioritise the different elements of ESG. has created an environment where more people than ever before are re-evaluating their lives, ‘switching jobs, moving house and even breaking up’. Perhaps we can see the way in which the new landscape has created a window where we are seeing the world afresh. Albert Camus famously pointed out that plagues can make us feel that “we are strangers in our own country”, looking at things anew.
When people are rethinking how they live their lives and starting to question the way they live then we start to be uncomfortable with any disconnect between our values and our behaviour. During COVID we could see more clearly the linkage between many of the values that we hold sacred and our behaviours - finding these were in conflict.
More specifically, over the course of COVID we have seen more clearly the way in which injustice has played out, showing us in a very clear way the fault-lines in societies as the less powerful have suffered most. At many points where there is a contradiction between our beliefs and behaviours of the time we can choose not to look too closely: COVID made that much harder for Social injustice.
Arguably this has focused us ever more on the Social rather than Environment aspects of ESG. And the distinction between the different elements of ESG is of course artificial: there are huge Social costs to climate change, just as there are huge Governance implications. People simply need support to see these linkages and understand the issues.
To this end, COVID has perhaps had another impact on how we see ourselves as humans – in a very salient way we can see that we are very much part of nature, inhabiting bodies that are vulnerable to the wider (viral) eco-system we inhabit.
COVID has created a rupture, making a window where surely there is an opportunity to help people to make these connections more clearly and see how care for the environment is not something that is limited to a particular value system or disconnected from Social justice and good Governance.
We have a point of disruption of our experience and beliefs that means we can surely help people in the way they look at the Environment, to more effectively manage misinformation and understand the consequential impact of not collectively participating in sustainability behaviours.
Of course, there is no trade-off between the different elements of ESG – Ipsos research shows time and again the way they are inter-related. People expect leadership from brands and governments on each of these elements.
And not only that but people are seeing the linkages between them: indeed, 65% of people globally feel the pandemic is in some way linked to our mistreatment of the planet. This is an argument for the emergence of ‘planetary health’, the notion that human health and wellbeing is intrinsically linked to the health of the environment.
Against this backdrop, there is a need for brands and government bodies to show leadership in helping people to navigate these spaces and to see how their behaviours are part of a wider opportunity for change.