A report suggests commitments to responsible business lack the deep roots to be considered immutable amid a change in the political weather. By Nick Hughes.
Retreat or reset? Will 2024 be remembered as the year when businesses retreated from ESG or simply pressed the reset button? That was the question at the heart of a recent report from Ipsos in which the market research company distilled the views of more than fifty global sustainability leaders – comprising its ESG council – including several from the food sector.
Alive and just about kicking. The report’s conclusion leans toward the view that headlines proclaiming the death of ESG – the principle through which businesses prioritise environmental and social issues alongside corporate governance – have been overstated, although it caveats the position with a warning that: “Time will tell if the events of early 2025 have a significant long-term impact.”
Return of the Trump. Those events, needless to say, revolve around the election of Donald Trump as US President and the ideological backlash against anything resembling corporate responsibility, be it in the form of climate action or diversity and inclusion policies. Before Trump’s win, the report suggests companies had been adapting and refining their approaches to responsible business, rather than turning their backs on it entirely. “A complex interplay of factors, including sustainability goals, profitability, and shareholder expectations, had driven a recalibration, and a necessary reset for long-term ESG viability and impact,” it states.
Emptying the green tank. That’s the ‘glass half full’ reading of the watering down of environmental commitments last year by the likes of Coca-Cola and Unilever, the latter the subject of a recent Bloomberg report that the founders of Ben & Jerry’s want to buy back their brand after a number of ESG-related feuds. As of last week, we can add to the list the oil and gas major, BP, which has canned its pivot to green energy as part of a laser-like focus on shareholder value. BP wants a return to the high profit margins enjoyed by rivals Shell and Exxon, the upshot being we can surely dismiss the idea that the incumbent energy giants are ever going to lead the green transition.
Policy wobbles. European governments are, for now at least, still speaking the language of net-zero but recent policy shifts speak to a collective loss of nerve here too. The UK government recently gave full-throated support for a third runway at Heathrow Airport and reports suggest it is minded to support a second runway at Gatwick. The EU, meanwhile, recently published a ‘Vision for Agriculture and Food’ that many experts believe falls well short of the level of ambition needed to decarbonise the food system. And last week the European Commission published its omnibus simplification package, which included scant detail on the environmental impact of replacing mandatory sustainability reporting rules with voluntary standards for 80% of listed companies.
Business leadership. All of which means there is greater onus on businesses themselves to set an ambitious path on ESG that gives policy makers the confidence to follow. As a collective, Ipsos council members, which include the likes of WSH, Sysco, Mitchells & Butlers, Diageo, Nestlé and Unilever, remain largely positive about the ability of an ESG framing to drive long-term value creation; 90% agree that ESG is fundamentally changing business practices, and 98% collaborate with other departments to embed sustainability.
Lacking depth. Yet there are signs ESG lacks the deep institutional roots to be considered immutable amid a change in the political weather. Respondents note how initial ESG strategies were often theoretical, not practical, and developed in isolation from day-to-day business operations and commercial considerations. “When the initial targets were set, we may have underestimated the scale and complexity of what it takes to make that happen,” Unilever CEO Hein Schumacher admitted last year as the company – long held up as a pioneer of sustainable business – rowed back on some of its commitments. Schumacher was suddenly relieved of his post last week.
Core value. Ipsos says council members are in broad agreement that for companies to deliver ESG in authentic and credible ways, it needs to be woven into the business’s mission and core value proposition. This cannot be taken for granted. “For many council members, there is still an essential mind shift required to see ESG as a route to resilience, growth and long-term sustainability, rather than being a side concern,” the report states. Objections from other departments, resource constraints and escalating reporting requirements, dynamic global supply chains, and volatile economic conditions can all stand in the way of translating ESG commitments into tangible action.
Makers and fakers. For those businesses for whom ESG was only ever a tick box exercise, ‘Trumpism’ and the global shift towards the populist right has given them tacit permission to drop the façade. If 2024 was the year of a necessary ESG reset, 2025 may be the year that reveals who will ultimately make it and who was faking it all along.
