Yesterday’s Harvard Business Review included a piece by economist, author and member of the Board of Directors of 3M, Chevron and Conde Nast Dr. Dambisa Moyo. She presented a list of ten questions that companies should ask themselves concerning their approach to ESG. This is not your typical generic list of softball lobs that you’ve read on multiple LinkedIn posts. Most of Dambisa’s questions are hard-hitting, thought-provoking and reflect matters not always discussed thoroughly in corporate conference rooms.
In introducing her list, she says “If corporations fail to address these questions, there is a risk that they will be overtaken by rivals and, at the extreme, could even cease to exist.”
Dambisa’s top 10 questions, along with excerpts from her answers are below. Most of these echo matters we’ve written about in the past.
1. Is ESG undermining your company’s competitiveness? Fears that excessive emphasis on ESG could harm a company’s competitiveness are not misplaced. In fact, there are valid questions about whether, if a company places too much energy into ESG objectives, it risks losing its focus on growth, market share, and profits.
2. Does driving the ESG agenda mean sacrificing company returns? ESG advocates suggest that returns from ESG investment funds are not lower than those of traditional equity funds. In fact, returns can be higher than on broad base indices… Even so, investors should not discount the value that an active ESG agenda grants companies in terms of the license to trade — the right to operate a business, which is granted by governments and regulators.
3. How are you navigating ESG trade-offs?The shift from a world of financial shareholder primacy to broader stakeholder capitalism encompasses a far-reaching agenda… All of these aspects of ESG are beset with trade-offs that business leaders must navigate.
4. How does ESG change due diligence? Today, thorough due diligence efforts also require an audit of how an acquirer or acquiree meets certain ESG standards. ESG audits will also matter when raising capital; debt-rating agencies and investors require this additional data, too.
5. Should you become a public benefit corporation? Financially, companies need to examine the implications of changing their status from Delaware LLC to a PBC or B-corp — for example, whether or not PBCs are allowed to trade on various stock markets around the world. Business leaders must be alert to any changes in decision rights and restrictions of a PBC structure.
6. How should corporations address societal concerns such as racial equity? For the sake of employees, customers, and clients, corporations must be more transparent on how business leaders will handle these concerns, and broader ESG issues, as they emerge.
7. How do you develop a global approach to ESG? A more comprehensive ESG approach must be inclusive of different countries and cultures… it is impossible to make meaningful progress globally without having China and India on board — even if their desired speed of change might differ materially from those in the Western world.
8. How do you build an ESG framework that is future-proofed for tomorrow’s economic realities? Business leaders need to focus on ESG design and a system of thinking that applies to how the economy will be shaped in the future — not just how it is structured today.
9. How do you vet company performance of ESG? Companies already use independent external auditors for financial, operational, cyber, and worker audits. The question is whether ESG standards will need to be assessed and monitored by independent third-party accounting or law firms, or whether ESG will be overseen by a global body or by national regulatory organizations.
10. How should corporations navigate the ever-changing landscape of ESG? As companies devise metrics to track ESG progress, they must be able to compare performance across time, peers, other industries, and against evolving regulatory standards. As they do so, they need to anticipate where regulation on all aspects of ESG will land.
It is worth reading the article in its entirety. We’ll have more on on these questions in the near future.