ESG-Environmental, Social, and Governance is a set of aspects considered when investing in companies that recommends taking environmental, social, and governance issues into account. So, what are the reputational and brand implications of pursuing or not pursuing this agenda, and how will it impact your ability to recruit top talent. Join “Can You Hear Me?” co-hosts Rob Johnson and Eileen Rochford as they dig into “The ABCs of ESG.”
ESG-Environmental, Social, and Governance is a set of aspects considered when investing in companies that recommends taking environmental, social, and governance issues into account. So, what are the reputational and brand implications of pursuing or not pursuing this agenda, and how will it impact your ability to recruit top talent. Join “Can You Hear Me?” co-hosts Rob Johnson and Eileen Rochford as they dig into “The ABCs of ESG.”
Rob Johnson [00:00:18] Hello, everyone, and welcome to another edition of Can You Hear Me? I'm Rob Johnson, president of Rob Johnson Communications. Thanks so much for being with us.
Eileen Rochford [00:00:26] And I'm Eileen Rochford. I'm the CEO of the marketing and strategy firm The Harbinger Group. So today we're talking about ESG. ESG is environmental, social and governance and how businesses and organizations make themselves more attractive to top talent and responsible investors, among other things.
Rob Johnson [00:00:42] That's right. ESG is more than an acronym. It's a driving force. In today's investment landscape, companies around the globe are realizing that integrating ESG principles into their operations isn't just about being green. It's about being smart about being responsible.
Eileen Rochford [00:00:57] It's also about being competitive, if you think about it. Because in an era where investors are increasingly concerned about the environmental impact, social responsibility, and corporate governance of companies that they choose to invest in, ESG has become a critical factor in companies that ignore ESG. They're just missing out on optimizing their brand value.
Rob Johnson [00:01:16] And so for those listeners who may be new to this, let's break down ESG. We've already done it in a basic way. E is for the environment. It's about how a company manages its environmental impact from reducing carbon emissions, using resources sustainably. S is for social activities that cover diversity, employee wellbeing and community engagement. It's about being a good corporate citizen and G is for governance. It's about the rules, the practices and leadership that guide how a company operates. Strong governance means transparency and accountability, and these are things we talk about all the time when we're talking to leaders about how they should be leading.
Eileen Rochford [00:01:51] That's right. There seems to be a nice connection here between each of those letters, ESG and to many of the best practices that we talk about here on the show frequently, transparency and accountability in particular. I would also add credibility. But we're going to get to that.
Rob Johnson [00:02:06] Transparency and accountability, give you the credibility anyway.
Eileen Rochford [00:02:09] They do. It's all connected, as I love to say. So today we're going to explore specifically the reputational and brand implications of pursuing or not pursuing anything related to the ESG agenda and how to adopt a resilience mindset in pursuit of ambitious goals like being carbon neutral by 2050. Or here's another one, even just cutting our carbon emissions by half by 2030. All of these goals that are out there, I think they seem pretty daunting. And ESG has been, you know, just for the past six, seven years, increasingly at the forefront of strategy and planning for many, many companies. And it might be that, you know, people are kind of experiencing some fatigue around it, like, how the heck are we going to do that? Those dates are not that far off in the future. And there's a lot to be done, a lot to be considered. But I want to just put it in perspective.
Rob Johnson [00:03:02] Especially the 2030, yeah.
Eileen Rochford [00:03:04] Yeah the 2030 is real. You know, that's seven years from now or less, right? So why now? Why is this a big deal, particularly now? I think there's a lot people should hear and understand and then we'll get into, you know, how the situation is an opportunity for many, many brands and great organizations to respond to with that resilience mindset that I just mentioned. So I bet a lot of us don't realize this, but the United States has a unique responsibility to lead on this issue. And that means not just, you know, citizens, but all of our businesses and organizations who contribute to the carbon emissions issue because we produce two times as many carbon emissions from fossil fuels and cement than the next closest country, which is China. And the third closest, which isn't too far behind China, is Russia. Two times. That's massive. So just get your head around that for a second.
Rob Johnson [00:03:56] And what's even more amazing about China is, you know, technology wise and industrially, it's developed so much in the past 20 or 25 years, you know, and expansion and construction and things of that nature. And to know that we are ahead of them is really remarkable.
Eileen Rochford [00:04:12] And not in a good way.
Rob Johnson [00:04:13] And not- no, not a good way ahead of them. In a bad way.
Eileen Rochford [00:04:16] Yes. Very, very bad way yeah. So I think anyone paying attention to headlines in the last couple of years has seen this one. Our planet has been heated up by two degrees Fahrenheit, and that's since 1880. One of those degree increases occurred just since 1975, and a large percentage of that one degree since 2017. So this has escalated rapidly right in our lifetime right now. And that's going to compound. So the problem is becoming harder to get our arms around and it's more urgent as a consequence.
Rob Johnson [00:04:45] More attention being paid to it, the worse it seems to be getting. And that seems counterintuitive, but we really do. It is something that we really need to focus on, something the companies, for as daunting as some of these parameters may seem to them, you know, it's like we can't say no, we want to be carbon neutral by 2050. It's like, "Oh, how are we going to do that?" The answer is "yes, we're going to be carbon neutral by 2050." But I would dare say that few places have a real clear idea about how they're going to achieve that.
Eileen Rochford [00:05:09] Yeah. And the 2050, that's so far off really, when you think about just in the last six years, a huge percentage of the last 1% degree raise took place. That means that the urgency is very real. So pushing it off until, "oh, 2030, that's seven years from now, 2050, that's 27 years from now." That's not such a good idea. And there's reasons why we're going to get into that, the reputation of it. But there's also five risks that I think it's important for us all to think about because these things are pushing to the forefront, the urgency to pay attention and to kind of coalesce around what to do about ESG issues. So those five risks are obviously climate change. That's everything contributing to that increase in temperature and increase in emissions. That we just touched on. And then there's water stress. That's a global worldwide issue. It's also particularly critical in our hotter states, in the United States, where we're seeing the implications of a lack of water, a reduction in availability of water, which is core to life, can't live without it. Species destruction that's accelerating at a pace we haven't seen in the last hundred years. Many critical species, too, enable us to produce food and things like that. Then just widening inequalities in general in terms of economic disparities.
Rob Johnson [00:06:25] The haves and the have-nots.
Eileen Rochford [00:06:27] Right. And then war and geopolitical conflicts which we're seeing right now front and center in the most horrible way in multiple, multiple places. It's just it's so, so sad to witness. So those big five risks, they're increasingly making what we're talking about today even more important to address. Now, I want to raise one from the business perspective. And this hits home. Just a few weeks ago, Gavin Newsom, governor of California, was successful in the passing of California, SB 261, all companies operating in California must disclose their risks from climate change. Investors know that climate change is real and they know it's going to disrupt business operations worldwide. And I think from what I've read and kind of pulled together, Newsom's taken a big gamble here, but hoping that the disclosures will lead to, you know, the pressure needed for companies to act responsibly, if you will. So something to think about. There's a lot more wrapped up in it, but that's new. And any company operating in California is going to be affected by that. So that means transparency can't be avoided, particularly if you're in that state. So you're probably going to be seeing that elsewhere, you know, across the United States.
Rob Johnson [00:07:35] And it's not perfect, but you need to be part of the solution. Right?
Eileen Rochford [00:07:38] Right. So it's kind of like, you know, everywhere you turn, maybe six, seven years ago, even in the early 2000s and teens, it was easier to kind of think about ESG as a fluffy nice-to-have that only organizations that directly dabbled in things that were related to the environment needed to pay attention to or do something about. But it's like we're being surrounded on all fronts now. So I think it's increasingly becoming clear and the sentiment is growing that industry and business can and should be part of the solution. And that's where the reputational implications come to the forefront when the public says you need to do something.
Rob Johnson [00:08:20] So, if you can see around the corner and see those risks and you need to be sharing them and addressing them. And the scary part about this is I'm sure there are things that we sit here and talk about here today in 2023 that we can't possibly imagine, maybe a year or I know you're supposed to be anticipating things, but this is moving so quickly. There will be things right now that you can't anticipate, like, you know, a year or two from now, you say, "oh I wish I knew that." And so that's going to be a challenge as well.
Eileen Rochford [00:08:50] Mm hmm. Yes, it will.
Rob Johnson [00:08:51] So you had an interesting opportunity to really dig into this subject, didn't you?
Eileen Rochford [00:08:56] I did. I attended a sustainability conference just yesterday or the day before at Marquette University, Sustainability 2.0. I learned quite a bit, certainly, that the- like I said, this urgency is increasing at a pace that I don't think people are able to see because of headline fatigue. You know, the headlines about the environment, the headlines about the geopolitical conflicts, all the coverage that we've seen in the last couple of years about decreasing water levels there, it's just we're being inundated with this and humans tend to shut down when we're overloaded by that kind of information. And I fear that's really what's happening. But from a business perspective, what I think needs to change is leaders can see this as an opportunity, an opportunity to reposition organizations and to shift mindset to be about resiliency. It's not about compliance to these regulations.
Rob Johnson [00:09:54] Well, it is, but if you only look at it from a prism, then you're missing the important thing you're just talking about, which is opportunity.
Eileen Rochford [00:10:00] Yeah. So not every organization is held to the standards of the regulations, right? But collectively, every business can play a role. And that's why I'm saying every company in every industry can see what's happening right now and seize the principles of ESG as an opportunity to increase brand value. Every single organization.
Rob Johnson [00:10:23] Yeah that's very important. And another thing that we want to talk about as well is that companies realize, aside from the opportunity that you were talking about, which is a good way for them to look at it, they also understand that to be attractive to responsible investors, or if you're a financial services firm to invest in other companies to decide how the investing will be done, these companies must take ESG seriously. Companies looking to attract responsible investors should integrate ESG principles into their business strategy. I'm sure many of them that are listening already have done that. So kudos if you have and if you're fighting it or if you don't have a pathway to figure out how to get it done. That's why we're talking about this today. Now, this could involve setting clear environmental targets, implementing diversity equity and inclusion initiatives and strengthening corporate governance. And I want to reference one of my clients who is all in on this as an ESG committee. So there's mindfulness and they're purposeful and they meet regularly and they have set a list of priorities for addressing. So this includes monitoring the ESG aspects of investments with potential folks there they want to invest it with and that are being invested. Sharing research and analysis on ESG issues. And you were talking about how important it is related to 261 in California, how important it is for these businesses to sort of know, share that sort of thing and be part of the solution, collaborating with clients and the industry to support the acceptance of this thinking. So it's like leading on this and saying, "hey, this is important, this is the right thing to do," and listening to clients and their evolving ESG related concerns. So clients may not just jump right in and say, "Yeah, perfect, everything is great." They may have some pushback, they may have legitimate concerns, they may not all want to do it, but how do you make that work? So, in other words, there is a lot of work that goes into it. This doesn't happen by accident. And this is not something you're going to have one or two meetings on and be like, "All right, we're good. Check the box."
Eileen Rochford [00:12:13] Yeah. So let's touch on something that I think you were alluding to in the example. It sounded like the demand for greater visibility into risks and vulnerabilities is kind of underpinning this move, this focus within your client organization. Would you say that's a fair statement?
Rob Johnson [00:12:32] It's a fair statement because if you're sitting there thinking about your investment or how your company does business and you're looking at how you're going to coexist with another company, a client, whatever the case is, you want to make sure that you're all on the same page. You want to make sure that they are committed to it as well. Because when you take on risk per se, there may be obvious risk involved with, say, an investment. But then you're also talking about risk with are they doing business the responsible way that will allow them to succeed. So there's a couple of layers there.
Eileen Rochford [00:13:02] Yeah. And like I was saying before, you know, some companies adopt the compliance mindset and if you even take this point, the point about demanding people, organizations wanting this visibility and understanding of the risks and vulnerabilities that any organization they may invest in or work for or faces, if you look at that for a second, you can consider that mapping your own vulnerabilities and doing kind of that risk assessment for yourself, whether you're, you know, mandated to comply with these regulations or not knowing that public sentiment in general is going to move in this direction at a rapid pace on an increasing level. By doing that mapping, every organization can create opportunities to change, change for the better. And it's not because you have to, but because by doing so, you're ensuring that 20 years from now you're fit for purpose, You're ready to go, you're not on your back foot because of what's slamming you from climate change or water stress or any of the factors that might impact your manufacturing or the industry that you're in. You thought about this before and you communicated that out through your brand and you improved your reputation by doing so, by sharing transparently the actions that you're taking to move in this direction proactively. Again, whether you're governed to do so or not or mandated to do so or not, it's a fantastic opportunity as I see it. I just encourage our listeners to think about everything related to ESG, because it's been pushed to the forefront of our minds and to everyone's minds globally. If you're getting ahead of that now and shaping your organization's strategy and then your communications around those movements, you're going to be so well positioned for the future in ways that your competitors probably won't be.
Rob Johnson [00:14:55] Because they may not have spent as much time and effort thinking about and enacting certain policies that are going to help moving forward.
Eileen Rochford [00:15:03] Right. They're going to be caught up in that compliance mindset and that is box checking and that's, you know, buying- offsetting carbon credits, essentially, which, you know, those do a lot of good. That's one way that you can check the box on the environmental side, it's expensive, certainly contributes to improvements in important places. That probably will take time. But if instead you're attacking your own operations again, I'm just talking on the environmental side. But if you're attacking your own situation by transitioning to full electrification, that's just one example. There's so many others by adding solar into the picture at your industrial facility. There's so many ways that this can be done. And with the Inflation Reduction Act 18 months ago, all that money just kind of flooded the market. What's available for industry companies, businesses from the federal government right now is unprecedented. Take advantage of it and decide to change for the better. Again, it's that resilience mindset, really thoughtful about the choices you make, but construct your own communication strategy behind that as you're moving along.
Rob Johnson [00:16:10] I'm really glad you brought this up because what we've been talking about the entire time so far has been "it's the right thing to do." It's the way the world is. You don't want to get left behind. These are all good. I think these are all good enough reasons to embrace ESG. But what you're talking about now is, for the people that are like, "what's in it for me?" You just told them what's in it for them? We're talking about subsidies and incentives. So if doing the right thing isn't a powerful enough argument for you, all of a sudden we're saying through the Inflation Reduction Act subsidies, incentives, giving you real incentive to act on this and to make some real demonstrable change to your company and the way you do business.
Eileen Rochford [00:16:45] Yeah, a lot of companies have been hiring people just to interpret the opportunities for their industry and their business size and such that are available to them through the Inflation Reduction Act. And that's a really smart move because of course all money runs out. Right? And if you can use that to spur faster movement in a positive direction, that's going to again, position you to be resilient in 20 years. And you should. But don't forget communications along the way, right?
Rob Johnson [00:17:11] Since that's our bailiwick here, don't forget that, it's really important!
Eileen Rochford [00:17:14] Well, it's funny, again, speaking about this conference that I was at there was this really interesting moment where a committee that had been formed in Milwaukee. It's a kind of a joint partnership between academia and industry and utility providers. They put together a grant application for the National Science Foundation, and their idea is to address water and electrical resiliency. So I'm sitting there and I happened to be sitting next to another very accomplished communications professional, and the two of us are listening to this information and getting pretty hyped about it because a lot of the things that they're talking about it were very innovative and it felt to us like, boy, they could win this thing. And there's a lot of money at stake for Milwaukee, and it touches Chicago a bit to to take advantage of. But what we said to each other, I turned and said, you know, I'm struggling to understand this, and yet they're asking for matching funds, industry support, sponsors from the region, things like that. And there isn't a single communications person at that table. And so I really hope that that's just who they selected for this panel discussion. But yet in their strategy sessions, I'm hopeful that they have a communications person who is really sharp riding along during that entire process to help position them for great communications, because you have to do it from the get go.
Rob Johnson [00:18:36] I mean, listen, you need communicators anyway. That's a little self-serving, but it's true from our standpoint. But this is a very complex issue. You were talking about hiring people that can find an opportunity to sort of get more involved in ESG and to take advantage of the subsidies and incentives and things of that nature. But if people can't communicate this thing internally at first to get that full buy-in, they have no chance, no chance to be successful with this. And all of those very ambitious parameters that have been set forth are going to seem really unattainable unless you have communicated this, unless you have taken action items and you have completed them and everybody's on the same page. So in the immortal words of a gentleman named Mark Heisten, "leadership is communication." Our last podcast guest!
Eileen Rochford [00:19:20] I think every show we have from here on out, we're going to be quoting Mark Heisten, "leadership is communications."
Rob Johnson [00:19:26] I was texting you earlier today asking you to make sure I got the quote right. I was listening to our podcast again because I'm doing a presentation in the next couple of days and it's related to making the case for being a good communicator. And I've included it in there from our friend Mark Heisten. And that was the reason I asked you for it when we were texting earlier today. But as it relates to probably every episode moving forward, I think there's going to be a point in time where no matter what we're talking about, where we're going to be able to drive that point home. So yeah, he said it last episode and I dare say it's probably going to come up a lot.
Eileen Rochford [00:19:59] It's one of those beautiful examples of such a simple thought that is overwhelmingly compelling and clear.
Rob Johnson [00:20:06] And yet so many people don't think about it because frankly, as a communicator, I didn't think of it! I'm always sitting there trying to explain the importance of communication with everybody. And then it's like,"how do I get through to them?" And when he said that, it's like the light bulb went off. It was incredible. So, Mark, kudos. And the final point we want to make here, and this is a really important one, is that the businesses are genuinely committed to ESG. We talked about that a little bit, but they are also positioning themselves not just for success in the financial markets because you're gonna be looking at responsible investing, but also for a brighter and more sustainable future. And that is simply good business and that is going to position you far better than maybe some of your competitors who aren't spending the time and energy on it. As we mentioned earlier. And here's something we haven't talked about yet, Eileen. This is going to dramatically impact your ability to attract top talent, because a lot of the people coming into the workforce, a lot of people who have been identified as high achievers in the workforce, are going to be looking for this ESG and asking, how are you making your company better? How are you making the world a better place?
Eileen Rochford [00:21:05] Right. There was another panel at the sustainability conference at Marquette that I attended, and this conversation was about the impact of the recent ruling that struck down the, for universities to accept students based on race and other things and give them kind of a leg up in the application and acceptance process. And pardon me for not remembering the name of the ruling, but I know it was Students V Harvard and I think North Carolina, Chapel Hill, something like that. It's been in the headlines. But the point is this. That ruling does have the potential to really dial back diversity in academia. And then there are repercussions elsewhere, right. That companies are now taking a closer look at. And the negative implications of not fostering diversity are widespread. They're huge. And so that's just an academic level. The type of thinking and sharing and variety of ideas that are present in an environment when you have many people present of diverse backgrounds, far exceeds when you have like what it used to be at Marquette. When I went there, there were vast majority white and probably Catholic people in those chairs in the classrooms. And that is truly not the case today there. And the professor who was speaking talked about what a different place it is and how the students expect it. They want it and when they graduate, they're going to want that of their employers and they're going to ask questions before they accept any employment. Like, "will I have a voice there? Does this company support my community? Does it support issues that are important to me and my values? Is it trying to improve all of these terrible situations that are going on in the world in the ways that it can?" Where, you know, a change here, a change there can really add up and they're going to just go elsewhere. If your company can't answer those questions to their satisfaction. As the number of people graduating from higher education continues to decrease. That will have a significant impact on companies of all sizes, organizations of all sizes in their ability to bring in top talent, it's going to get more and more competitive to do so. So realizing that, you know, this isn't a social bucket of ESG, making sure that you're paying attention and not just paying lip service to doing what you can to make the world a bit of a better place and being authentic about how you're doing that, being credible about how you're doing that and how you're communicating about that is essential. It's a really important piece of doing that properly and well.
Rob Johnson [00:23:43] I couldn't agree more. And it's a very important issue. And there's a lot there's a lot more that we could dive into. But I think that we've kind of touched on the ABCs of ESG. So I think we've gotten to some of the basic points that we really need to drive home with everybody who's listening today.
Eileen Rochford [00:23:56] Yeah, we're not trying to get all the way to X-Y-Z just whetting your appetite. But really, if everybody understands that every organization can contribute here and should find a way to do so and think about it as an opportunity for improving your resiliency to be prepared to succeed in the future, That's a big win. And really think about how your communications need to come along with you while you are making those decisions and setting that strategy.
Rob Johnson [00:24:19] Absolutely. Hey, before we go, do you want to alert our listeners to the fact we have a Can You Hear Me podcast page on LinkedIn now?
Eileen Rochford [00:24:27] Oh, thank you. Yeah. Okay, everybody. So we now have our own dedicated page on LinkedIn in the show notes. We're going to share that and please follow us on LinkedIn and soon we're going to be introducing some other nice communications supplements to this show that we think are going to be really exciting. So stay tuned for that and look for the link in the show notes. But I think that's going to do it for the latest episode of Can You Hear Me? I'm Eileen Rochford.
Rob Johnson [00:24:52] And I'm Rob Johnson. We thank you for listening. And remember, you can find Can You Hear Me? wherever you get your podcasts, Apple, Spotify, Google podcasts and more. And if you have the ability to leave a positive review, if you like what you've heard, please do so on those platforms. Thanks for listening.