A former agency boss of mine once told me that “do great work, and the rewards will follow”.

Pretty wise words, although of course in people-based businesses at times of extreme change and with short-term targets swirling, it’s never quite that easy.

In the UK, a change of Prime Minister at a time when the cost of living is spiralling to practically unimaginable levels is bringing sharper focus to companies balancing short, mid and long-term aspirations to transform. Corporate commitment to purpose, regardless of ‘great work’ in the near-term, will likely face a greater test and be under greater scrutiny.

According to the Financial Times this week in a piece about the “crossroads” ESG has now reached, “a choice between utopian and dystopian paths is likely to shape business for a decade”.

Along one path, “woke-washing” abounds as businesses take cynical decisions with short-term interests, and corporate purpose and values are steamrollered by war, pandemic and climate change, writes Andrew Hill.

Along the other, companies navigating these pressures see “corporate purpose as virtue rather than virtue-washing”, and “reassert their original human centre” through the way that they attract young talent, price goods and services, and make decisions more obviously and altruistically. They adopt “unconditionally caring cultures”.

The point is that the two paths are becoming more distinct, hence the crossroads. Which will doubtless mean that reputations for pursuing one path or the other will be more clearly-built.

The piece continues: “Leaders must recognise that “businesses designed to create value for society are also good businesses that manage to sustain themselves during crises”. In other words, it may be necessary for leaders to reframe purpose as an indispensable way of improving resilience, as altruistic enterprises did during the pandemic.”

Being crystal clear about what purpose is, rather than attempting to fudge it, is surely going to become a greater priority regardless of levels of stakeholder cynicism about ESG. But with tough times bringing what really drives a business into sharp relief, there’s a need to sharpen the approach to communicating that too. Scrutiny will surely increase, as will the lasting impact of truly purposeful actions.

In a sharp piece in The Times, HSBC’s former head of responsible investment Stuart Kirk outlines why ESG has become confused, as two meanings - one about investment risk, the other about environmental and sustainable change - have never been reconciled.

China’s ESG funds have more than doubled in value in little more than a year, according to Bloomberg. Yet in an article that pictures a solar farm next to a coal-fired power station, it points out that asset managers’ definition of ESG aligns to a political agenda “including a 2060 net-zero goal along with energy security, rural employment and poverty alleviation”

Determining what is really meant by ESG, how a purpose is really being applied, and what a business really wants to achieve for its stakeholders will likely put a premium on further clarity, not further fudge.

The ESG News Review is written by Steve Earl, a Partner at BOLDT. 

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