Developing New Nomenclature for Corporate ESG: Call it ABCDEFGHIJKLMNOPQRSTUVWXYZ!
Amid the flurry of discussions around renaming Environmental, Social, and Governance (ESG) practices, the business world seems poised on the brink of a lexical overhaul. Is it disingenuous?
From boardrooms to forums, the proposition to relabel ESG as something more politically palatable encapsulates the breadth of debate. Here’s an idea: why not rename ESG “ABCDEFGHIJKLMNOPQRSTUVWXYZ”?
Let that name roll off the tongue.
Beyond this alphabetic jest lies a profound truth: no matter the terminology, the essence of ESG—enacting The Humanverse-centric approach to business—remains unchanged.
The Core of ESG: Unchanged by Nomenclature.
The conversation about renaming ESG should not distract from the foundational goals of these responsible business initiatives. At its heart, ESG, or any other sequence of letters we choose to represent it, underscores the imperative for companies to adopt practices that benefit both society and the environment. This involves cultivating leadership and corporate cultures that are deeply committed to positive outcomes, through vision, culture, capital allocation, products and services, and internal incentives that align with the well-being of communities and the natural world.
The Crucial Role of Standardized ESG Measurements.
A pivotal argument in the discourse on ESG nomenclature is the irreplaceable value of working to achieve standardized measurements across Environmental, Social, and Governance criteria. Harmonization of standards is essential for businesses to continue to transform themselves by making continuous, sustainable improvements against uniform targets such as waste, harmful emissions, energy use, water stewardship, soil health, inclusive workforce, supply chain transparency, and the like. This uniformity allows for clear, globally recognized benchmarks, fostering international cooperation and accountability.
The risk of continually shifting the goalposts with new terms and categories is significant. It threatens to unravel the progress made toward a unified understanding of important ESG targets, accountabilities, and measurements. Such upheaval could send us spiraling back to a time of less optimal business practices and outcomes, undermining efforts to address pressing global challenges cohesively.
Merit in the Frustration with ESG.
There are legitimate reasons for the backlash to “ESG,” yet those frustrations are not in the naming, nor the categorization of the environmental, social, and governance risks. The frustrations are founded in the lack of clarity of what fits in the categories; what should be measured; the inconsistency among the different standards systems, frameworks, reporting activities, and requirements; the targets themselves; the massive “greenwashing” by some companies: and the imbalance in the system with some heavyweights benefitting from either owning the voluntary standards and certifications with the capital backing them; or some players having been “first movers” in the markets, leaving others behind. There is a boondoggle on ESG that needs tapering by doubling down on the purity of ESG itself.
The Detriment of Distraction.
While there is merit in the frustration, renaming ESG will not solve the problems, and while perhaps undertaken with good intentions, distracting ourselves with new ways to say the same old thing inadvertently serves the interests of those businesses that are less committed to genuine progress. Diversion from substantial improvement allows for stagnation of action under the guise of compliance, stymieing the momentum toward real, impactful change.
A Lesson from the Harmonized Tariff Code.
Reflecting on my years as a trade analyst and economist at the U.S. International Trade Commission (USITC), I invoke the Harmonized Tariff System, which draws from the Dewey Decimal System, offering a powerful analogy. This global standardization of product and service classification at country borders has been instrumental in simplifying and facilitating international trade, showcasing the effectiveness of a common language, classification, and reporting system in creating order and fostering cooperation. Similarly, a standardized approach to ESG reporting and metrics is critical for aligning global business practices with sustainable and responsible objectives.
Countries should work together to get the ESG classification right. A good place to start is to regroup at the World Trade Organization (WTO) on the age-old issue of: Standards! The WTO is a great forum for converging on standards around ESG.
Conclusion: ABCDEFGHIJKLMNOPQRSTUVWXYZ and Beyond.
As we circle back to the proposition of calling ESG by any name as long as it encompasses the alphabet, it's crucial to remember that the debate over the nomenclature should not overshadow the real work to be done. Whether we stick with ESG or adopt ABCDEFGHIJKLMNOPQRSTUVWXYZ, the priority remains clear: to advance a human-centric approach that ensures business practices contribute positively to society and the environment. The focus must remain steadfast on substantive actions and the adoption of unified standards that drive us toward a sustainable and equitable future. In the end, it's not the name that matters, but the impact.
Written by: Devry Boughner Vorwerk, Founder + CEO, DevryBV Sustainable Strategies