Now that the term (or abbreviation) “ESG” has become a political hot potato to the point of being weaponized, companies are actively working to avoid it. But how do you talk about ESG without saying ESG? And is doing so okay – or maybe even better?
A Short History of ESG
“It’s been such a long time, I think I should be goin’, yeah.”Long Time, Boston
ESG isn’t really new – it’s evolved through the years since at least the 1980s and arguably dating back to Henry David Thoreau. Even though next week I enter a new decade of life, I’m not old enough to speak directly about Thoreau’s time. However, I can talk about the 80s until now, which included the evolution of ESG terminology and concepts in this way (generally):
- Environmental, health and safety compliance (1980s)
- Recycling (1980s)
- Environmental management systems (late 1980s-early 1990s)
- Safety management systems (late 1980s-early 1990s)
- Sustainability/sustainable development (mid 1990s)
- Greenhouse gas emissions (mid 1990s)
- Quantifying financial value of EHS management (mid 1990s)
- Integration of EHS (late 1990s)
- Corporate social responsibility (CSR) (early 2000s)
- CSR reporting (early 2000s)
- Supply chain management (mid 2000s)
- Responsible sourcing (early 2010s)
- Internal controls for EHS and CSR (mid 2010s)
- ESG (late 2010s)
This is just a rough timeline based on my experience and others may have different views or additional topics as my perspective is focused on E and S. For instance, those with a corporate governance leaning will notice there is no mention of Sarbanes-Oxley which was huge for G, but didn’t really trickle down to E & S until much later. There is a point to this more than being a history lesson: what we now call ESG is a metamorphosis of at least 40 years of development.
What is Happening?
“I thought happiness was Lubbock, Texas in my rearview mirror.”Texas in My Rearview Mirror, Mac Davis
When ESG became mainstream around 2018 or so (I know the term is older than that), I advocated for its use because it took hold in executive minds more than any other in history. That was beneficial, especially in contrast to the problems that existed with the perceived ambiguity of “sustainability” and “corporate social responsibility.” At the same time, I hoped even then that the term would fade away as a result of its success. My hope was (and still is) we can move away from considering ESG a standalone concept as it becomes simply “business”, “strategy”, “product development” or embedded in operations. In other words, I expect “ESG” to evolve into its next state – being wholly integrated into company functions, operations and ethos.
Where From Here?
“Are we there yet? How much longer?”Every child on a long car ride with their parents.
Have we reached my ESG nirvana? Not really. I had not anticipated an anti-ESG movement would be a catalyst for moving from “ESG.” But you know what? It may actually be what was needed to move towards integration and the end game. Yesterday I wrote about how BlackRock is approaching their messaging transition by couching ESG in terms of specific topics. That is something of a step backwards in my view, but there are reasons why that makes sense for them as institutional investors communicate specific expectations to management of their holdings.
But what about operating companies – how might they manage the transition away from “ESG” to both help avoid political repercussions and be meaningful at the same time? As I mentioned above, you can start with thoughtfully choosing alternative words and phrases to replace “ESG.” Discussing specific programs like climate and DEI may be necessary, but it would be good to consider changing the conversation to indicate that ESG topics are integrated into everyday thinking and operations. That is the ultimate goal anyway, isn’t it?
There is a problem with this, however: non-financial and ESG reporting standards require clear metrics and narratives on specific elements of ESG. To some extent, that is an obstacle to this ESG evolution. But that is a matter for another day.
Anyone interested in ways to transition to business integration can check out my book Killing Sustainability (2022), available as a free resource to PracticalESG members, or on Amazon for non-members. Members also have access to other guidebooks, checklists and recordings on this as well. If you’re not already a PracticalESG.com member, sign up now and take advantage of our no-risk “100-Day Promise” – During the first 100 days as an activated member, you may cancel for any reason and receive a full refund.