The only way is ethics: why ESG starts with the CEO

Ensuring that the whole organisation takes ESG seriously requires a cultural shift, supported by appropriate policies and processes, including how budgets are assigned, employees are incentivised and outcomes are reported to shareholders, Stibbe argues. The CEO, or a board-level director at the very least, should take ultimate responsibility for a transformation of that scale.

He adds that the downside of having a charismatic CEO who may regularly extol the virtues of ESG on the speaker circuit is that they may not achieve enough progress internally to give their rhetoric much credibility. 

“If the company isn’t delivering, that’s a problem,” Stibbe says. “There is often lots of PR fluff in corporate annual reports. One way you can tell a genuine statement on ESG from one that’s less genuine is if it talks about challenges and admits to errors.’”

It’s an approach that consumers appreciate too, notes Kay, who adds: “This is not about saying we’re perfect or we have all the answers. It’s about having an open dialogue with our community, where we’re saying: ‘We’re going as hard and fast as we can in this direction, but there will be difficulties along the way.’”

There’s also a danger that the CEO may deliver on their ESG objectives but at the expense of the bottom line, because balancing purpose and profit can be incredibly tricky. Polman was widely revered during his decade-long tenure at Unilever because the firm remained profitable while he focused on improving its ESG performance. But Emmanuel Faber, CEO and chairman of Danone, was not so fortunate. In March 2021, he was ousted by investors, many of whom blamed a decline in the firm’s shareholder value on his pursuit of an ESG agenda, which included adopting the bold metric of carbon-adjusted earnings per share.

Source: Raconteur
Author: Sam Haddad