by Sona Khosla
Chief Impact Officer
A conversation with Al Gore and corporate executives
With rising interest in ESG over the past few years, we at Benevity have been hearing about more leaders bringing enhanced focus, alignment and action to business aspects that used to be considered the realm of Corporate Social Responsibility (CSR) or Sustainability — but are now core to every business’s strategy. While this sounds like it could be managed through organizational restructuring, appointing some new C-suite executives and investing in more projects and people, it is turning out to be a lot more complicated than that.
Believing we are better together when it comes to solving big hairy problems, Benevity hosted an intimate virtual event for corporate sustainability and ESG executives at some of the most iconic and sustainable brands, moderated by none other than Al Gore, former Vice President of the United States and Chairman of Generation Investment Management (one of Benevity’s investors). During our time together, we touched on everything from stakeholder management, the rising voice of the employee, consumer demand for transparency and action, to the need to intentionally drive toward positive externalities.
It was a passionate and inspiring conversation about how the worlds of environment, social and stakeholder capitalism are all coming together for ESG leaders. Here are the four themes we explored.
1. The E and the S are inextricably linked
Al Gore painted a picture of the climate crisis that called on everyone to take action today, stressing that the problem is no longer a future one. He referenced a recent report that found that one in three Americans lives in an area that has endured an extreme climate-related weather disaster. Just look at 2021 alone. In the span of few months, communities were damaged from devastating wildfires, storms or record-breaking rains. Six of the seven largest fires on record and in the history of California occurred in 2021. Almost two months after Hurricane Ida hit, the U.S. was still recovering from this catastrophic hurricane, which worked its way up the East Coast, taking lives, power and communities along the way. Canada is not immune either. Lytton, British Columbia, was destroyed by fire in one day in June, after setting Canada’s all-time temperature record of 121 degrees Fahrenheit (49.6 degrees Celsius). While 63% of Alberta was in drought at one point in the summer.
The damaging effects of these disasters are exacerbated for many vulnerable communities, who are already grappling with the ramifications of social and racial injustice, income inequality and health disparities. No matter what side of the climate debate you’re on, it’s an undeniable truth that the environment is having a direct impact on communities and people’s well-being. So it’s no wonder that the E and the S are being considered together now more than ever.
2. Stakeholders have more say — and sway — than ever before
There’s another undercurrent driving this integration: stakeholder expectations. No longer are investors, boards and regulators the only ones guiding the direction and requirements of the business. Employees, B2B customers, consumers and the public are just as invested in how business is done, making their voices unignorable. This is changing ESG from a risk mitigation, or even a value creation, strategy to an engagement opportunity with multiple stakeholders.
Employees are highly vocal and passionate and are demanding of CSR executives, who have historically focused less on initiatives for employees. Social justice has become nonnegotiable for employees, which is driving it to the top of the executive agenda. In fact, Benevity’s own data recently highlighted that 40% of U.S. employees are willing to leave their current employers if they don’t prioritize social or racial justice in the workplace. With the “Great Resignation” and the war for talent, it’s perhaps not surprising that a great deal of our discussion with this group of leaders focused on managing employee expectations and passions. This focus was noticeably different than in the past, when the discussions were primarily centered on a company’s philanthropic activities and nonprofit partnerships. This alone signals a massive change in the way ESG and CSR will be approached and executed in the years to come, with employees having more of a voice.
The degree to which companies are engaging employees varies, but it’s clear employees are no longer passive participants in top-down corporate initiatives. Many leaders talked about having community boards, communities of practice and/or employee resource groups who provide consultation on the company’s environmental and social strategy, plans and execution. In some cases, they were named the primary stakeholder as they have a deep influence on the company’s culture and success.
There was another silent stakeholder named — possibly the most powerful one of all — the planet. A Senior Vice President of Sustainability from a large global retailer highlighted the importance of speaking up for the planet when she mentioned that, in her company, it’s considered a stakeholder, alongside investors, employees and customers.
3. The common denominators are transparency, accountability and action
Even though each of those stakeholders has its own expectations and demands of business and leadership, the one thing they seem to agree on is that all corporations must step up their action and demonstrate transparency and accountability into how they’re moving the needle on environmental and social issues. B2B customers were highlighted as being especially explicit in their expectations that a company demonstrate its commitments, standards and actions before they choose to do business with it.
Science-based targets appear to be quickly becoming the standard, with some leaders setting aggressive short-term targets and others focusing on a longer horizon. Alongside a desire for more transparency and accountability on a business’s commitment to environmental and social progress, stakeholders also want opportunities to take action. This is driving a need for scalable, global technology to enable employees, customers and the public to support a company’s corporate initiatives and take action in the form of volunteering, donating, engaging in learning or adopting positive social or environmental behaviors.
With targets set and technology in place, companies then start to focus on the data required to report on their progress. This is where things get even more complicated.
4. The next opportunity — and challenge — is measuring impact
All of this demand for transparency and accountability is heating up discussions about which data matters, how impact should be measured and the need to be able to compare and benchmark. Unsurprisingly, our conversation steered toward the need for standardization, and a litany of acronym-filled measurement frameworks came up, including SDGs (Sustainable Development Goals), SASB (Sustainability Accounting Standards Board) and GRI (Global Reporting Initiative). Even with technology and reporting in place, there’s a lot of data, a lot of standards and a lot of people who want that data. But not all of it is created equal.
The desire for standardization is understandable as executives find their feet in this new world that demands that businesses start demonstrating their tangible impact to stakeholders. We have to move from what one executive called “poetry and marketing” to a data-driven approach to social impact. The question still is which reporting frameworks will become the standard? Even with consolidation, the process is overwhelming, and it remains to be seen if the quest for data will satisfy the needs of stakeholders or do justice to the impact business is having on environmental and societal change. It’s a noble pursuit, but are we embarking on an impossible mission? And will a focus on measurability and metrics lead to the adoption of behaviors and beliefs that have unintended consequences?
The discussion quickly evolved into a conversation about focusing on positive externalities versus negative externalities, with executives citing the benefits of their CSR programs on factors like employee recruitment, engagement and retention. However, the challenge of capturing the non-financial value of a company could not be understated.
Al Gore wrapped up the event by discussing the work of Simon Kuznets, the American economist who invented the accounting framework we know as GDP. In 1937, when Kuznets was honored for this invention, which was intended to give policymakers a toolkit to avoid another Great Depression, he said it shouldn’t be used as a guide for economic policy because it leaves out a lot of things. Seven years later, it was codified. The problem was that it intentionally excluded all sorts of externalities — positive ones like public good, and negative ones like the depletion of resources. Unfortunately, this has caused a world in which even when GDP goes up, there can be more negative externalities, as well as a continued underinvestment in critical societal systems like education and health care, which are at the core of opportunity for human beings. Today, we find ourselves trying to retrofit these factors into a form of capitalism that was never intended to account for a company’s potential to generate goodness in the world.
At the end of the event, I couldn’t help but reflect on how we seem to be witnessing a breakdown of traditional systems of power and inequity. In their place, we are seeing the start of new systems of knowledge and power emerging — ones that have purpose, equity and justice baked in from the beginning. The question becomes if, and how, business will embrace this opportunity.
The path forward
Questions of capitalism aside, within corporations, it’s clear that most executives are responding to these macro-shifts by working through a process to bring those topics and challenges for E and S together within their business — using this integration as a lens and engagement opportunity, instead of just a framework. In some companies, that’s manifesting as a new structure that puts everyone working on environmental and social issues together under a single C-suite leader. In others, it’s about driving alignment on these imperatives across existing teams, including Sustainability, CSR, HR, Investor Relations, Marketing, Operations and Product. In either scenario, this integration requires influential cross-functional leadership and more focus on science-based targets, data, reporting, technology and wrestling with the big and important questions of our times. And action. Urgent action. I would argue there’s nothing better for executives to be spending their time on.