ESG is here to stay, so get with the program

Posted On May 23, 2023

Do you know what ESG is? If you do, chances are you’re already looking for ways to optimize it for your company. If you don’t, you might want to get caught up.

ESG stands for Environmental, Social and Governance. It’s a measure of an organization’s emphasis on sustainability and other ethical issues. And according to Kai Gray, CEO of Motive ESG, it’s here to stay.

Gray, who joined me recently on “What’s Working with Cam Marston,” says that companies – particularly publicly-traded ones – are going to have to account for ESG whether they like it or not. The government is using it as a factor in federal contracts, and younger generations of investors are giving it greater importance.

“When you look at the buying habits of Gen Z and millennials, particularly young millennials, they have a very different perspective with the way they think about the world,” Gray said. “They’ve grown up in a time when access to information was ubiquitous. Researching a company is not hard anymore.”

Part of that research now includes a company’s ESG score. Gray’s firm provides advisory services to companies looking for ways to improve their scores and make themselves as attractive to these investors as possible. One way Motive ESG does this is helping them determine what’s really important to their particular business and helping them identify actionable measures to improve those things. With nearly 200 different metrics used to calculate ESG, that’s not a small job.

The Environmental portion is fairly self-explanatory – a company’s emissions and other environmental concerns. Gray says the Governance portion is the most overlooked, but may be the most important – it has to do with ethical leadership.

“I think any investor should look at G. No matter what you care about when it comes to E and S,” Gray said. “You’re not going to invest in a company with a really low G score, without really investigating.”

The Social component, Gray said, tends to lead people to form political opinions about ESG, but he says it’s really “a measure of workforce health.” That includes training, safety, opportunities for advancement and the like. Only a small portion of the assessment has to do with diversity.

“I think the term ‘social’ in today’s current climate gets polarized immediately,” he said. “People hear ‘environmental, social’ – they forget about the G — and they’re just like, ‘Oh, this is just woke capitalism.’

“All of our clients would not fit into that stereotype. All of them come to us because they see ESG, and sustainability at large, as a business driver for them. It’s not a check-box item. This a way to differentiate themselves, either with their market or with their customers.”

Gray says that’s precisely the attitude companies should be taking toward ESG. It shouldn’t be viewed as just another expense that gets in the way of the bottom line, but as an opportunity to set one’s business apart in the marketplace and to attract and retain talent.

“There are very much going to be winners and losers in the ESG world,” he said. “There are going to be companies that differentiate themselves by being proactive about this, and there are going to be companies that go kicking and screaming, just like with all other things.”


Categories: Blog, Podcast, What's Working with Cam Marston