Don Baer, Senior Partner, Brunswick Group
Juleanna Glover, Founder and CEO, Ridgely Walsh
Bruce Mehlm, Founding Partner, Mehlman Consulting
Moderator: Phil Wahba, Fortune


CEO Initiative 2023: The Esg Debate

Conferences

A little earlier, we heard about the backslide on important equity issues, issues that not too long ago were a top strategic priority for many business leaders and still is arguably we want to continue that conversation now on the environmental social and governance factors that are coming under fire. Yes, I said ESG um which has become a toxic trio of letters for some people. But there are critics who call eg policies. On the one hand, capitalism uh that focuses more on pushing social and agenda, political agendas and getting best returns for investors. On the other hand, there are critics who say that ESG policies have only led to an illusion of change and don't really have a substantial impact. They call it corporate green washing and a word that I learned yesterday, Pink Washing as we saw in the wake of all the folly around the Bud Light and Target Sagas earlier this year. So have we entered a post ESG era and what lies ahead for business leaders trying to balance their strategies and stay true to their core values? So joining us to discuss are three people who specialize in helping business leaders like you walk this tight rope and we've seen a lot of people fall off the tight rope lately. We have Don Baer who is a senior partner at the Brunswick Group. We have uh Juliana Glover, uh founder and CEO of Ridley Walsh. She also advises corporate clients on high six challenges across the diverse range of areas. And we also have Bruce Melman who is a founding partner of Melman consulting where he helps leaders and organizations understand, anticipate and navigate political risk and figure all this out. So, uh please welcome them to the stage. Welcome, Don. Thank you. Hi, Juliana. Hi, Ruth. I uh really love this topic because it is keeping journalists um very busy. So let's talk about ESG um it seems that no matter what they do, companies and ceos get big bats thrown at them and we saw that, let's talk a little bit about the LG DB Q saga as we saw this summer. Target's minding its own business. It is a company that has a long history of supporting pride and having merchandise and they did absolutely nothing. Zero, nothing different this year than they have in previous years. And then all of a sudden, you know, what storm descended on them. So I'm just wondering why don't we start with, is it worth it for companies to be vocal about social issues or is it just, you know, somebody's waiting for them to pounce on them and, and create a APR drama or as we saw in the case of a light and target real problem. So should companies stay quiet and just hope that they can dodge everything or do they need to stick to? Um you know, the messages that they've been sharing with people all these years? So why, why we start with? Uh Don so thank you, Phil. It's great to be here, especially with uh my colleagues up here. Um I think that's a false choice. I, I don't think it's an either or question. I think it's a yes and question. Uh And the fact of the matter is uh I don't think companies can or want to dodge any of these issues uh because they recognize uh and this is fundamental to really the theory of eg not to mention the practice uh that it's, it's essential for them to be good businesses and to be able to do their jobs and grow uh in the economy that we're in. And the one we're moving into uh having said that they don't necessarily have to go out on point. And I mean, the two circumstances you're talking about, they were looking at ways that they could build markets, right? They could build growth. It turned out in a couple of those instances that it worked against them rather than for them because we are in a highly of, of uh flammable and dynamic sort of environment now. But I, I don't think that for instance, not running ads about a particular topic, uh, for consumers, uh, necessarily leads to not being involved in those issues quite the opposite. Um, thanks, Bill Don. Uh, uh, Bruce, it's good to be with you all. These are both gentlemen that I've known for a really long time in this town. She uses the term gentleman, very broad. Um, so I, you know, I, I, as a room among a room full of CEO S, I'm not gonna tell you anything you don't know already, which is, it's kind of about the money. So, I mean, every CEO that I work for, um whether it's um you know, someone like or um you know, maybe the CEO S, you know, those CEO S, you know, Indra was sort of famously known for performance with purpose. Um that was put in place before Larry Pink, uh Fink's letter in 2018. And what she was doing there was she was future proofing Pepsico um by embedding um conservation diversity. Um And, and uh more helpful eating into the um into the business model and that stock has continued to just climb and climb and climb in the, I think it, she left in 2018 almost the five years since she's left. Um I think that's a credit to sort of the, you know, thoughtful leadership on her behalf for the 12 years that she ran that business. Um I'll take the CEO, for example, um he's built a business where he first started hiring, uh, uh, refugees and, um, training and, um, you know, offering language of services that business has turned into a multibillion dollar, um, uh, uh, yogurt and, um, uh, dairy beverage business. Um, he's not doing anything other than he believes and he's trying to build a great business. It happened to be that, you know, the refugees in his community he knew would make great workers. Um uh Let's take, you know, so, you know, building a great business is embedded with the, you know, these ESG values, but I'll put one more number out there and I'm kind of hesitant to do so because um I know Bruce is very much sort of the king of numbers in Washington. He's great at this charts and metrics. But um the uh investments in ESG uh is, are going to be about 53 projected to be 53 trillion in companies and um uh uh um equity markets like that by 2025. So that's gonna be one third of the total assets under management. Um There is no way that any leader of any business out there cannot consider how they're running their business under the rubric of that much money chasing um investments in that space. So it's, it's indivisible. Um I'll just say one more thing which is Bud Light that was also about money. Um But it was money on the Republican side. So, um if you saw lots of attacks from the right on about that ad that uh Don Junior tweeted later on that day. Um Don't attack A B and B. They're big Republican donors. Uh The uh National Public Congressional Committee uh put up a tweet where they were Duncan on the, on the advertisement went down moments later because somebody pointed out that EV gave half a million dollars to the NRCC. So, um you know, my hope is that you all as leaders will follow your principles and understand that the noise sometimes being directed to you from the right is not necessarily about those principles. I I'd only add first to be called the King of Numbers in a for a city that has a $33 trillion debt. Uh Thanks. Uh My sense is um there's a right way to do it and the wrong way to do it. And I think uh heading through the very socially volatile Trump years hitting a global pandemic following the global pandemic with the murder or amidst that having the murder of George Floyd. Um There was a real hue and cry for greater engagement and I think some of the backlash, the anti esg backlash we're seeing is leading to what I would argue is a right sizing at the end of the day in the 2020 businesses should be engaged but you're businesses, you're not NGO S and I think important to understand how and when to engage, makes a difference. I think the risks of doing it wrong in a uh in a permanent culture war environment are both bottom line and uh and uh distract you from your mission. So uh you're gonna have to stay engaged. You're not going to be able to duck these things, but there's a way to do it smart and there is a way to kind of haphazardly in your way or stumble your way into mistakes. Well, in, in this super politicized environment, um would it, is it not better for CEO S to take a show, don't tell approach when they want to support? Uh cause I mean, one of the things that jumped out of the meeting last year was I remember when Citibank announced that they were going to provide funding for any employee who had to travel somewhere for abortion services. And it was announced in an eight K like that is so sexy in a SCC filing as opposed to, you know, a blog post or somebody going on on C NBC. And, and so I'm just wondering, is, is uh is that a, a AAA better approach uh to avoid, you know, getting engulfed in flames? And, and does it just make more sense to take a low key profile and more credibility? Well, I i it's, it's a better approach is the right approach. I mean, because again, I want to come back to the fundamentals here. It's amazing how much three little letters, you know, have caused so much controversy. But uh if you go back to one of one of the fundamental uh statements or documents with regard to all of this was the business roundtable statement. It's crazy to think about it, but it's only uh August 2019 when the stakeholder capitalism statement came out from the business round table under the leadership of Josh Molden, who, formerly of the W Bush administration, who is hardly a radical um uh with the leadership of Jamie Diamond, uh Alex Gorsky, formerly the CEO of, of Johnson and Johnson. And I think about 100 and 20 if I can use the term fortune 500 CEO S who signed on to it. And the whole point was that, that uh business, it was a new statement of stakeholder purpose and, and that uh as you all know that it was more than only profits and losses because you had to look beneath that to the role that uh uh businesses are playing in their communities with, with their own employees, with a whole range of other stakeholders. But the point was it was about their business, right? And it's always been about the business and the health of their business, as I say in a fast vastly changing economy. Um And the same with regard to the environment, of course, as relates to sustainability. Um So sure, the statement in an eight K makes a whole lot more sense than taking out a billboard somewhere telling people because you're trying to run a business or a, or a tweet you're trying to run a business and, I mean, these CEO S, that's what they're here to do and, um, it ought to really be as focused on them. Yeah, I imagine it's a little bit harder for consumer facing brands because that's, that's the mass, right. Uh, as opposed to an industrial company that that would uh that would do that. Although I'm sorry, but the point is every brand has stakeholders who have an interest in this, of course, what we have seen in the last four years, in particular is the role that employees play, right? So the the people that CEO S are leading play uh with regard to uh their statement of how they feel about these things. I wanna include you all with a couple um for, for some and a in a moment. But here we are in the capital of this glorious Republic, beautiful city. I do love Washington. But um you know, the political climate here seems to um love drama and, and so I'm just wondering, you know, is, is uh uh you know, is, is, is our political class responsible for, for uh part of the responsibilities for all these uh you know, conflagrations um around these matters. I mean, is that, is that one way Washington could help uh CEO S and big corporations is to cool it a bit. I would not look to Washington for, um, uh, you know, advice on any of this. I will point out that I do think that, um, on the right of center there are, um, you know, whether it's, uh, Rawa or, you know, others I think that they're doing is they're chasing eyeballs on Fox and they're chasing eyeballs on Newsmax and it's an increasingly narrow segment of the population. Uh You know, I know everyone's worried about the, you know, the head to head numbers with, um, Trump against Biden or, or maybe not, um, where, you know, it looks like Trump is um, really competitive against Biden. But if you dig deeper into those numbers and, you know, I should look to you on this too. So, um, if you dig deeper into those numbers, those are, those are complaints about Biden, they're not support for Trump. Uh, and we're 14 months out and I think the Biden record is very much going to be something we're going to hear a lot more about in coming months and there'll be a different understanding of it by then. If you're waiting for Washington to bail you out, you're screwed. They're not, they, they're, I'd say more of a symptom than the cause, but they're not going to help. And if your theory is, this will all blow over, you're screwed. It seems to me it's a four part thing. It's team process words, action. Team have a diverse standing army within the organization that thinks these things through diverse in every way, including ideology, work with others in your sector process. They should practice your supply chain, team practices for Taiwan invasion and every other consideration your team to think about what might happen and how to be ready for it to do the same thing. And if you're asked to sign on to, if you're asked to oppose legislation, you should read it before you sign it. Three words, talking to your employees is a lot more valuable than talking for your employees. So if your employee resource groups only have an engagement with the CEO, when they're upset about something, you're in trouble. If they hear, if they hear you regularly and they know you're listening to them, then you'll be able to dodge some of the stuff where it really isn't the best thing for the company to get involved. And on words externally, stop virtue signaling. This is about value, not values. And if there is no business reason that you're doing it, do it on your own time and on your own dime finally, actions, you know, I think the point you made show don't tell, take actions, don't think about what's your tweet. What's your press release? What are we gonna say? What are you gonna do if you want to support vote rights? Give your employees time off to vote, support voter registration drives. There's so many things you can do in your community separate and apart from when there's a Twitter storm. And since ultimately, you're going to want support from Republican and Democratic elected officials. The worst time to get involved is in a political maelstrom. There's 364 other days, or maybe it takes a week when you can actually do things that make a difference. The panel just before us had two great organizations to get involved in. We have a question over there, Simon, is it working? Yes, thank you, Simon Freakley Alex Partners. Um It seems to me that one of the foundational problems here is that the ES and the G never deserve to be in the same word. And we therefore, uh find that these things get muddled. People manage to the average and of course, environmental issues are quite different to social issues, are quite different to governance issues and so doing good is not at odds with doing well and therefore it uh doesn't mean that it isn't good for business to talk about things that matter and people that get very worried about fossil fuels or not tend to um have all sorts of things to say about ESG when really they're talking about the, but for many of us in the room and maybe even all of us in the room that have um employees or customers who are under 40 unless as leaders of organizations, we don't have something real to say on the environment and what we're doing to be responsible, environmentally have something to say on social issues and what we're doing to be responsible on that. And also on governance, then I think we'll find that we'll lose our followership as leaders. And so the question for the panel is if we were to unbundle the Ss and the G and narrate this differently, how would you suggest that we do narrate it differently? So we don't fall into this averaging trap. I'm happy to start. It's uh I think the G you're right as a brand that's not going in the right direction and they're not obvious that they fit together and a phrase you use then in your preamble there, you know, doing good. I think that's the type of, of language that often gets businesses in trouble. You don't exist to do good. You exist as a business. Now, you should do good if you want to attract and retain employees if you want to uh contribute to your stakeholders. But, you know, I wonder how many folks in this room would say that chick-fil-a is socially responsible because they're closed on Sundays. A lot of Americans would think that's the socially responsible thing to do. It's a, it's a large and diverse country. It's a lot of stakeholders. I feel like the E is going to proceed a pace. Um I'm not sure the S is everybody throws in what they want into in the s and I've never really understood what the G is anyway. Um, I wanna, I wanna sort of add, add to what you just said. Uh Simon, which is, um, I think that there are many, many businesses out there where it, when they, when they do, do you call it virtual signaling? But when you have an emphatic statement of values that actually helps you grow your business, one, there are many customers that are attracted to it many potential employees. And if you're, if you're, if you're meeting your numbers and you're growing in, you know, you're growing in a smart way. I also think that um CEO S can differentiate among other leaders in the analyst community by being articulate and careful stewards of the people around them, their communities and the environment. Of course, you know, I, I think that that can be priced into um how investors look at you, whether it's shareholders or whether, you know, you're looking, you're looking to a court, you know, a private investor from the outside. I mean, I think leadership really matters. Um And I, I do think that the noise on the right right now, um it's, it's unprincipled, it's angry. Yes, it is very, very loud, but I know Bud Light is now selling more than molo again. So, I mean, and all these, these, these will be storms, they can be short term. Um But I, I do think that for, you know, leaders of organizations, you are the embodiment of values and those are going to trickle over as to how you govern the enterprises that you're running. Um Well, I'm not saying tweet it out. I'm not saying I know I'm all for the A K strategy but um you know, there's, it's, it's, it's indivisible from who you are. So I just, I want to pick up on where Bruce was because I think this is not about doing good. This is about the fundamentals of capitalism in the 21st century and about businesses that will work and be sustainable and that will thrive. And in fact, the E the S and the G are important. Let me just talk about the s very briefly. Um That is not about virtue signaling. It is about doing the things where you invest in the communities where you operate and you keep an eye on the health of those communities because they are essential to your success. It's about investing in the people that are essential to your enterprise success. Uh And I would even go so far as to say, making sure that you have diverse employee basis because that is the best way to succeed in the 21st century because you're gonna have better decision making. You're gonna have a, a greater sense and understanding of the lived experiences of everyone that your business is appealing to and the people who are driving that business. So, on that note, please join me in. Thanking uh our panel for, we could have talked for an hour about this. Really, we could have, but uh there's a break now. So uh join me in. Thank, join me in. Thanking them.