ESG: Fiddling while Rome burns?

The world emits around 50 billion tonnes of greenhouse gasses every year. One has to ask, therefore, given the reliance on this amount of CO2 production and consumption, how far are we all prepared to go, as individuals and businesses, to achieve ESG related goals? To put it another way, Is the ESG movement serious about tackling the major global ESG issues or is the ESG movement really about preparing business to operate in an environment that is generally more hostile — in ESG terms? In short, is the ESG movement fiddling while Rome burns?

First, let me make a confession. I am not a businessperson, nor do I have extensive experience of finance. I have spent more years in my life in a University, than I have out of one (I am a professor of criminology), so there may be gaps in my knowledge or understanding. However, having recently taken on an ESG role in a finance company, there do appear to me to be some crucial questions about the concept of ESG and the ESG movement that are not yet being asked — and they must be asked and answered if the goals of ESG are to be met and if we are to live sustainably on our (only) planet.

Let me also say that I think ESG, as a concept, as a movement, is brilliant. It is the best and, in all probability, the most important global social and economic movement to emerge in the last 40 years. I also want to say, to pay tribute to, the very large number of business, finance and ‘conservationist’ colleagues, working in a large number of private companies and global and local organisations, who speak with great knowledge, enthusiasm and hope about ESG matters. These champions of ESG are totally committed to the principles and practices of ESG and they speak on the matter with boundless energy.

The first problem we run into with ESG, however, is that, to date, the conversation about ESG is predominantly limited to the above converts. I know quite a lot of people, most of them are well read and pretty well-informed! Yet, none of them have heard of ESG. Despite the fact that we all (globally) gain from achieving the goals of ESG and that there is no down side, there are no losers in an ESG world, not one single political party is running on an ESG ticket (although this seems like a no brainer to me; who would vote against ESG?). The discussion about ESG, any action on the ESG front, is, therefore, taking place within a restricted enclave. Within my own company, the understanding of colleagues (many of whom are millennials) was pretty thin — to my surprise. This situation has to change. If we are to achieve the goals of ESG, these goals and the practices (changes in our lifestyles) needed to achieve them, must be embraced and supported by us all.

To be sure, many of us, particularly in the West, have begun recycling household waste (although we may not understand why and are simply required [forced] to do it!). Many organisations and businesses now purchase from sustainable sources and recycle waste products. Indeed, again in my own company, we have started to sort and recycle our waste having discovered that our building has quite a sophisticated recycling programme. Most people, again in the West and broadly speaking Asia, are aware of the concept of a carbon footprint and that theirs might be quite large — having reduced only recently due largely to travel restrictions brought in because of Covid-19.

The problem here, however, is the scope and impact of these changes in behaviour. Systems thinking teaches us that small, incremental changes in individual decision-making and action lead to system-wide changes. The big question here, though, is: are these small, localised changes enough to make any real and meaningful impact on global systems? Are a thousand flowers blooming enough to make the garden grow or do we need some more fundamental landscaping? It may well be that the global ESG movement is still in the early stages of its development and implementation (although if we believe David Attenborough [and others] we are already on the precipice of a global catastrophe), with the long term benefits yet to be realised. It may well be that it is being too harsh, too critical to be posing these sorts of questions at this early stage. Sooner or later, however, we must find answers to these questions.

A related question focuses our attention on the targets of change. Is tackling our individual, or a company’s, carbon footprint an easy target? Yet just a drop in the ocean compared to the carbon footprint of the global transport industry? It costs us very little, as individuals or as companies, to reduce our carbon footprint, but reducing the major carbon dioxide producers/users would cause (cost) significant business and personal change. Are we prepared to accept these sorts of changes? Changes of significant magnitude to affect global ESG factors. We are not just talking about transport here, we’re talking about global agricultural production, global systems of production and consumption of consumer goods, amongst other things. These are things that require very significant changes in all our lifestyles. Are we prepared to accept these sorts of changes at the magnitude required to achieve the desired (or some would say: necessary) outcome?

Most of the above we already know about, even if we are not yet asking all the necessary questions or getting to gips with the issues raised, but there are topics that are, as yet, not on the ESG agenda — when their ESG implications are significant. We don’t hear very much about large complex manufacturing (possibly because it is so large and complex — there may well be a ‘Parkinson’s Law of Triviality’ at work here: “The time spent on any item of the agenda will be in inverse proportion to the sum [of money] involved.”), we don’t actually hear a great deal about fishing or aquaculture and we hear almost nothing about insects (apparently excellent sources of protein), but, to date, in all the conversation about ESG I have heard nothing about crime (outside of general concerns about Governance). As a criminologist I am naturally drawn to issues focused on crime. I am also fully aware of the difficulties in measuring and reporting it, so, while estimates will vary, the impact of crime (and much of this falls within the broad category of organised crime) on the UK economy alone has been shown to amount to over five billion pounds per annum. It is not just that organised crime does not subscribe to the objectives of the ESG agenda, much organised crime, in the UK but also around the world, actively contributes to anti-ESG objectives. Crime and organised crime, therefore, represent serious challenges to the ESG movement. We cannot ignore these challenges.

It was Margaret Thatcher and Ronald Reagan that let the neo-conservative bull out of its pen. For the last 40 years this bull has ravaged around the planet, bringing us to the precipice of ecological and social collapse that the ESG movement is dedicated to redressing. The academic (sociological) term for neo-conservatism is globalisation. It is hard to imagine now and un-globalised world; we cannot turn the clock back. If the ESG movement, however, is to avoid fiddling while Rome burns, we urgently need a new definition of globalisation, a new and reformulated type of globalisation that is capable of tackling the big challenges that we face in a future oriented and positive manner. This is something that I can sign up to, can you?

Professor Kevin Haines

Head of Social Policy, Bedford Row Capital PLC