Expect your ESG to be measured in 2021.
Even among closely-held, family-owned and partnership-owned businesses that extend beyond self-employment and Main Street into some kind of B2B (business-to-business) enterprise, prepare your firm to be asked some unusual, perhaps uncomfortable, questions next year.
I write this as I join America, waiting to see who will be inaugurated in January as our next president. It remains a bit early to tell.
But, admittedly, the passion of politics and the fervor of the furious has masked the reality of the emergence of ESG in 2020. I’m even adding a page to my website later this month on it.
“Environmental, social and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature,” one investment fund says on its site.
Not yet with an agreed-upon technical definition, and without any real quantitative metrics or benchmarks, ESG surfaced first over the last few years in the investment industry as a theme for self-identifying companies to claim “the moral high ground” of progressive social values.
If you don’t closely follow the markets, you even would have missed it. Investors have rewarded its cornerstone premise around hewing to a higher standard in progressive social values.
However, even in the legendary Wild West of free-market capitalism, progressivism has announced its entrance, and SMBs (small- and mid-sized businesses), particularly beyond Main Street, will need to pay closer attention in 2021. Yes, the rules are changing.
D&I, or diversity and inclusion, is one of the critically important parts of managing a business’ ESG, that is, just taking a look at a company’s workforce, and how it fares on a diversity yardstick. Less than a week ago, an article by The Wall Street Journal’s legal reporter focused on how the bigger clients of law firms are increasingly asking about the diversity of their law firms’ workforces, expecting, even requiring more attorneys.
I tend to treat such issues bluntly, even in uncomfortable ways.
Many, if not most, of us from the business despise “the heavy hand” of government with “the blunt instrument” of affirmative action to address and cure the legacy results of historic discrimination. It allows no subtlety, no nuance. Increasingly it’s becoming passe.
I’d encourage you to think about it this way, as a workplace-focused form of voluntary reparations.
If historic preference in favor of white applicants by private employers effectively discriminated against minority candidates or population, resulting in impoverishment, then shouldn’t social justice argue that a fair remedy – yes, even social reparations – is employment discrimination for minority applicants that includes and even features discrimination against members of the majority?
In the last couple years, some notable and well-publicized cases on academic admissions – two recently, one at Harvard, one at Yale – focused on the discrimination against white and Asian-American applicants in order to discriminate any favor of black and Hispanic applicants.
Rather than take its finger off the white side of the scale at Harvard and Yale, and let merit rule, each appeared to compensate by putting its finger on the black and Hispanic side of the scale. (I always thought applicants of Asian descent were a minority, as well, but I guess the Ivies didn’t care!)
Be forewarned that ESG extends beyond the workforce.
If you’re a manufacturer or a big energy user, think about “sustainability” as a value, e.g., use of recyclables and/or “green energy.” Pay attention to your waste stream, and how your own vendors handle both the raw materials and the waste.
Beyond your hiring practices, take a look at other human capital and governance issues, among them, who and how do you promote leadership? What about the parents of young children in your workforce? Do your operating policies make sense in a family-friendly and/or remote workforce environment?
This is a fast-moving, rapidly evolving area, so much so that in just a year this article will seem like some primitive artifact. But it’s real. It’s here. It’s not going away. Every forward-thinking businessperson – particularly those who claim an interest or commitment to social justice – needs to think it through, plan and adapt accordingly.
Sam Waltz is the publisher emeritus of Delaware Business Times.
