ESG Trends for the New Year
Did the pandemic cause, or simply coincide with the significant social shifts we have seen over the last two years? It’s hard to say, but it’s undeniable that societies across the world have put a stake in the ground when it comes to values, and to building a world that is more equitable, more livable, and more sustainable for future generations. From last social justice protests, to demands for fair working conditions in cereal factories, it’s clear that complacency is out, and compassion is very much centre stage.
These trends don’t just play out at the individual level – corporations are increasingly under scrutiny for the behaviours, not just from the community, but from employees and investors too. Never has ESG been more central to the future of business. So, what can we expect to see in 2022?
ESG Will be an Expectation
It’s been coming for a while now, but we expect that 2022 will be the year that ESG moves from being the preserve of larger companies at the vanguard of social purpose, and becomes a mainstream business operations requirement. The normalization of sustainability as a business imperative will be driven by coinciding factors: First, investors who want to move from not doing bad, to actively making a positive impact. These investors will seek out companies with a clear purpose, supported by a strong ESG strategy. Second, internal and external stakeholders will demand more from the companies that they work for, supply to and purchase from. They will demand transparency on businesses’ environmental commitments, working conditions, community citizenship and more. An ESG strategy underpinned by solid communications planning will be an essential requirement for organizations to respond to the new questions being asked of them.
DEI Leaves the Building
In the wake of the Black Lives Matter protests, many organizations reckoned with their actions (and often, inaction) to create cultures that invite, support and promote diverse teams. Many positive steps were taken, from education sessions to Native Land acknowledgments to unconscious bias training. In 2022, observers will be watching to see which companies appear to have ‘done’ DEI, and which take the next step in the journey. For many organizations, the expectation will be not only to ensure continued Diversity, Equity and Inclusion actions internally, but to adopt anti-racist policies that go beyond the four walls of their building. Companies will be asked how they have benefited from racist systems and structures in the past, and what role they intend to play in dismantling these systems to create a more level playing field. Is your business ready to become a DEIA champion?
Net Zero Grows Up
Net Zero, the goal for organizations to produce no net carbon emissions, is a laudable objective indeed. But like many big goals, it’s problematic. A lack of global agreed standards, inconsistent quality of carbon credits and disagreement about the effectiveness of technologies such as carbon capture and nuclear power risk Net Zero claims losing their meaning.
As the world increasingly recognizes the critical importance of limiting global heating to 1.5 degrees in accordance with the Paris Agreement, we will see changes that support organizations to make meaningful strides towards their Net Zero objectives. Expect to see the creation of international standards, the expectation of emissions being reported across borders and calculated into global supply chains, and increased consumer awareness of -and pressure around- Net Zero language. Tools and technologies will spring up to support emissions assessments and public reporting, making it easier than ever to track progress and harder than ever to make empty promises.
Large Corporates Under Scrutiny – But it’s a Trickle-Down Effect
On paper, it’s been a bumper couple of years for global behemoths. As of May 2021, Amazon saw its profits increase 220 percent. Walmart stock was up 36 percent at the end of 2020 alone, increasing the wealth of the Walton family by $40 billion. Elon Musk, owner of Tesla, increased his wealth by $200 billion over the last two years, simultaneously setting the record for any single year gain of any billionaire.
But the gains weren’t welcomed by everyone. In fact, the headline-grabbing growth caused observers to look into the tax arrangements, working conditions, pay and social environmental impact of these organizations. Amazon in particular came under extreme criticism for the conditions of workers, who received no sick pay during the pandemic and were famously so pressured to meet delivery deadlines that drivers would urinate in bottles in their car. Walmart workers at the pandemic frontlines received some of the lowest hazard pay in retail, while their base salaries often remained too low to meet the basic cost of living. Tesla moved its operations to Texas after criticism from California of its Covid-19 safety standards (triggering Musk to sell 6 of his 7 California mansions).
Meanwhile, Musk, Amazon owner Jeff Bezos, and Virgin founder Richard Branson competed to be the first private company in space, drawing ire from those struggling to make ends meet during a once-in-a-century pandemic.
While these may seem like ‘billionaire problems’, they are symptomatic of a wider expression of renewed community values. The last two years have laid bare the cracks in our social safety net, and social media has allowed us to see and talk about challenges at a never-before seen scale. While communities have banded together, some large corporations have removed themselves from the social contract, and stakeholders don’t like it. Amazon has been forced into a defensive PR strategy here in Canada, including increasing wages. Musk has flaunted the idea of leaving his role at Tesla in a series of Twitter tantrums and seen his stock price drop 24% due to the pandemic-induced chip shortage.
This scrutiny of the values and behaviour of large corporations won’t be limited to multi-billion corporations in 2022. Consumers, investors and other stakeholders will be looking to align themselves with purpose-led businesses that put their money where their mouth is. Companies such as Dove, Toms and Patagonia have already demonstrated the success of this model, and this year we will see more organizations work to align their strategy and culture with their stated purpose.
What changes is your business making in 2022?
