Sustainable DEI: How Tumultuous Times Are Influencing a New Model of ESG to Support Social Action

Purpose

As countless social issues hit our nation in divisive battles that cross the red and blue line, organizations must now establish an internal compass to assess the way these issues reflect their values, mission, and commitments to employees and shareholders. They must define their purpose or rather their ‘why’ for existence so that quick, fast hitting decisions can be made to ensure the fast and furious social changes, learnings and lessons our society is experiencing does not impede their fundamental values, purpose and mission.

With the recent celebration of Indigenous Peoples Day and recognition of World Mental Health Day organizations are grappling with integrating impacts of these critical social issues along with legislative and political changes such as the Supreme Court overturning Roe v. Wade’s abortion protections and essentially, women’s reproductive choices and significant workforce changes due to the influx of refugees as a result of the war in Ukraine and immigration from border countries.

The corporate response to these social challenges is a profound demonstration of the way human rights, social justice and mental health and well-being have become central to an organization’s diversity, equity, and inclusion ambition. It reflects how these issues significantly impact employees and stakeholders within the local communities in which they operate. It is also a meaningful expression of the social vertical that many organizations are forming within their Environmental, Social, and Governance approach (ESG). Their strategy encompasses not only a company’s bottom line, but importantly, addresses critical issues affecting their employees, shareholders, and customers. With actions such as the World Health Organization calling for measures to tackle mental health at work, President Biden’s proclamation of Indigenous People’s Day recognizing the sacrifice, struggle and enduring spirit of Native Americans and 118 companies stepping up (The First Movers) publicly stating their support for women’s right to choose the social tides in our nation are not only changing they are redefining the structure and work of diversity, equity and inclusion in corporate spaces.

A comprehensive and integrated ESG framework representing an organization’s purpose and ‘why’ can protect and guide companies during tumultuous and ever-changing social, economic and political times.

It’s not easy, but it is necessary.

A Thoughtful ESG Strategy Is an Umbrella for Both Rain and Shine

The power of ESG is unleashed when it becomes a fully integrated approach that incorporates corporate responsibility, diversity, equity, and inclusion with practical accountability metrics as a mechanism to take action when social issues threaten to change the way employees and shareholders are supported. When approached in this way, it creates a sustainable and thoughtful effort that is woven into the fabric of the way an organization works, reaching far beyond event triggered moments like a Supreme Court ruling, a redefined heritage month, unprecedented immigration or a renewed awareness and focus on mental health due to impacts of managing work and life through a global pandemic.

For ESG to be effective, a comprehensive and holistic approach is needed in every sense of the word. For example, the environmental component of ESG includes green energy, efficiency, recycling, and emergency responses to weather catastrophes, all of which affect employees. The social component includes employee well-being, social justice and addressing human rights and has everything to do with diversity, equity and inclusion. Governance includes accountability and the way these issues are handled internally, the ethics and values involved, and the role of the board (meaning, ideally, keeping the organization accountable).

Companies that are clear on their purpose and who they are and why they are know how to respond meaningfully to domestic and global events, both internally and externally. They are unafraid to ask provocative questions — such as: What does equity mean to us? Do we believe in the freedom of all people? How does that translate to our employees? How do we protect the freedoms of all our stakeholders? What do we stand for? And how do we respond when these beliefs are challenged politically or socially?

Knowing the answers to these questions and integrating them throughout a company’s policies and activities translates to greater value immediately and in the long term. There will only be a greater need for this moving forward.

Companies that Know Their Lane(s) Drive Change

The First Mover [AP1] companies that publicized their support of a woman’s reproductive freedom of choice were not operating in a vacuum. In 2015, facing a similar patchwork of state legislation (this time targeting marriage equality), 379 companies from American Airlines to Dow Chemical to Wells Fargo signed on to an amicus brief submitted to the U.S. Supreme Court in defense of marriage equality, essentially saying that equality was good for business. On June 26, 2015, it became the law of the land.

In 2019, more than 200 companies did the same thing, signing the “friend of the court” brief affirming that discrimination on the basis of gender identity “would undermine the nation’s business interests.” In June 2020, the Supreme Court ruled that Title VII protected LGBTQ+ workers against discrimination.

In 2022, the beauty brand Dove moved the legislative dial decidedly in their constituent’s direction. They created a campaign to raise awareness for CROWN Act legislation, which makes race-based hair discrimination illegal. The law has since passed in 17 states. Dove, one of Unilever’s purpose-driven brands, has consistently outperformed the rest of its portfolio, and these campaigns are only one part of a comprehensive ESG strategy, which for example includes requiring suppliers to pay their employees a living wage.

Create a Framework

When a company knows who they are and why they are, it can develop a working ESG framework that is relevant to its core values and mission. An effective ESG framework is not a one-size-fits-all proposition. A beauty brand will have a different framework from a pharmaceutical company. Then, with a deeply thought-out framework in hand, a company can look for opportunities across their business, externally and internally, to maximize impact and create value for their employees, customers, and shareholders while aligning to their purpose. This will avoid the alternately ad hoc approach to world events that risks alienating consumers and employees and will, instead, create a powerful consistency that fuels resiliency, reputation, brand sustainability, and innovation.

The measurement is not only in business profitability but in the ability to have working value statements that can be actively seen, heard, and felt by shareholders throughout the business’s ecosystem. Nothing less is required today.

Why Bother

In the war for talent, purpose-driven companies are increasingly attracting and retaining the best talent. From socially conscious millennials to legacy-driven leaders, employees and shareholders want to know that the values they hold are supported by their organizations and that mental health efforts are being centered by focusing on well-being as an essential component of a job’s value proposition.

Additionally, with the increased focus on ESG from all stakeholders, organizations have to place their efforts addressing social issues above and beyond mere profitability. The question today is not how do you measure equity, but rather, how is equity meaningfully integrated and driven throughout a company’s metrics, leadership, benefits program, and ultimately, the actions that are taken in response to the continuous awareness and actions that are expected by companies to address social issues that are affecting the workforce today in profound ways.

In other words, is it equity for all or just for some and how is it being sustained beyond words in a defined purpose executed through an ESG approach’? This is a question that every company must answer today.