Communicators helped to ruin ESG. Now it's time to get more precise.
By Stuart Lambert, co-founder
There is a certain smugness to much of the reaction to Larry Fink’s public proclamation that he is going to stop using the term, ‘ESG’.
ESG is “on it’s way out”, according to some of the more gleefully frothing commentary, which also claims that investors have “wised up” and that the finance industry’s “love affair with responsible investing is coming to an end.”
This is of course nonsense.
Firstly, the underlying idea behind ESG, for which the abbreviation 'ESG' is just a convenient label, is going nowhere. In fact, it is becoming more urgent and more, not less, deeply woven into financial and corporate decision-making.
The consideration of material environmental and societal risk factors both to and by a company remains as vital to investors, policymakers, people and planet as ever. More so. We're entering uncharted territory when it comes to global heating. The 1.5-degree Paris target lies in ruins; COP is discredited; more and more conversations are turning to the panic button labelled geoengineering (specifically SRM). Social and income inequality has hit record levels just as the world faces a series of interconnected immediate-term crises: cost-of-living, energy, food, water.
No, Environmental and Social risks, and the Governance with which companies disclose and mitigate them, have not miraculously vanished because ever more people bizarrely like to use the word 'woke' as if being enlightened to injustices is a negative thing. The politicised reaction to a term which is, after all, just shorthand for a reality with which no credible, sane scientist or economist would argue has been startling.
Secondly, if anyone has helped to kill usage of the term ‘ESG’, it certainly isn’t Larry Fink, investors or rabid conservative politicians. It is communicators, whose misuse of the idea has led directly to confusion and needless culture war nonsense.
When an investor framework categorising material risk factors to and by a given business is misappropriated as a marketing label (no, there should not be 'ESG' award categories in the PR industry, something I've pointed out previously), then something has gone wrong.
And an issue that’s of existential importance to people and planet is turned into something irritatingly superficial.
To be honest, if I was an American politician, I'd probably rail against it too, this term that has been made so ubiquitous that it loses all value, misused as a synonym for sustainability (it isn't, it never was), conflated with the idea of ethical behaviour or investing (it isn't, it never was).
So much so that people are now outraged to find out that a tobacco company can have an AAA ESG rating (Newsflash: They always could, and that should never have come as a surprise. The problem there isn't ESG, it's your misunderstanding of it).
COMMS HAS BEEN THE PROBLEM
All of this could have been avoided, if ‘ESG’ had been communicated correctly in the first place and all along – by the ratings agencies, by BlackRock, by other institutional investors, by the media, by corporations themselves, and certainly by their communication teams and agencies. You know, doing what we’re supposed to do as a profession: bringing clarity and accuracy to ideas so that they land correctly and engage the intended audience the right way.
That, sadly, didn’t happen. Instead, we’ve seen ESG used as a catch-all badge for ‘stuff that companies are doing that’s somehow related to environmental or social causes’, often without proper disclosure or data, let alone a whiff of scientific substantiation.
But here’s the thing. It doesn’t matter.
The word ‘ESG’, and whether you use it or not, matters not a jot. In fact, if ‘ESG’ falls out of mass, popular parlance, that’s probably a good thing. The idea is all that counts. And the idea is very much alive.
As Fink himself said, dropping references to ESG will not change BlackRock's stance on decarbonisation, corporate governance and social issues. Stopping using the term ‘ESG’ won’t, in fact, change anyone’s stance on these things, nor their legal requirement to disclose and act on them, let alone their moral responsibility to do so.
Let’s imagine that you say instead you believe in reducing your company’s negative impacts to environment and society (which is all ESG is about). Nobody sane will question or criticise that.
Let’s imagine that you say as well that you believe in maximising positive impact for environment and society, which is sort of just common sense, right? (Who doesn’t believe in that?) Well, that's ‘Purpose’ – another term co-opted into the culture war BS.
Now let’s imagine that you say you do both! As part of a proper, integrated impact strategy, one that connects your approach to doing no harm (ESG) and your approach to doing good (Purpose). One that connects the corporate mandate to protect value-at-risk (ESG) and the corporate responsibility to create real value for society, as well as shareholders (Purpose). Guess what? Few would question that either. Because it's Just. Good. Board. Strategy.
So, if calling these things ‘ESG’ or ‘Purpose’ has become a risky affair because among your particular stakeholder audience(s) are people who are, for whatever reason, triggered by these terms, my advice is…don’t.
Just…ignore the terminology. Don’t let it distract you. Because what matters is intent, action, impact. Not semantics.
At Blurred, we will continue to make our argument that ‘ESG’ and ‘Purpose’ need to be connected as part of an ‘ESGP’ impact strategy. Because we couldn't care less about political sideshows or culture war nonsense. We're here for those companies who can see past the semantics and want to just…be better.
Be better, so they have a better story to tell. That's what Blurred has always been about. Using comms as a forcing function for betterment. Using the process of interrogating and improving your corporate narrative to identify weaknesses and opportunities in your wider business and impact strategy. Because your corporate narrative is your sustainability or impact narrative.
SEVEN PREDICTIONS (SPOILER ALERT: IT’S ALL ABOUT IMPACT)
But while we continue to proudly talk about ESGP, I also have a few predictions for how we'll see the broader discourse evolve, in terms of language:
A marked return to the use of the ‘safe’ term ‘sustainability’, which is no bad thing, apart from the fact that widespread understanding of what ‘sustainable’ precisely means is also inadequate, so an ongoing education job is required before we hit the same problem;
Far more precise conversations about specific action in specific areas: we'll hear about 'action on decarbonisation', and 'action on water', and 'action on biodiversity' and 'action on DEI' etc, rather than these things being loosely badged 'ESG' – again, a good thing;
‘Action’ and evidenced ‘impact’ will be what investors, regulators, employees and the wider public increasingly look for: it is measurable, inarguable, and can't be politicised;
ESG will revert to its proper usage as a risk framework for investors, the communication domain of CFOs, Corporate Affairs Directors, General Councils, Chief Risk or Sustainability Officers and IR teams.
Discussion focused on ethical investing will belatedly separate from ESG (as should have always been the case); ‘Impact Investing’ will become the widely accepted term – this process is already underway, connected to the rise in Impact Accounting
The closer we get to 2030, the more we're going to hear about the UN Sustainable Development Goals (SDGs) again. In 2025 the SDGs will be everywhere because the human brain likes neat, decimal periods. “Five years to go” will be a powerful moment of reappraisal…and likely panic.
We’re going to hear a lot more about ‘wellbeing’ and the idea of a ‘wellbeing economy’ – the sort of conversation that Canada and Scotland and New Zealand and Finland are already having; of a different way of measuring what real societal impact an economy delivers, through Purpose-driven organisations and meaningful work.
LET’S GET ON WITH IT
But whatever happens, the imperative remains. We have a lot of change to make and solutions to find, and, with each day lost debating semantics, less time. So call it your sustainability strategy, if that feels less contentious. Call it your impact strategy, because that's what it objectively, practically is. Call it whatever you want. The work remains the same. Ever more legislation demands that you gather the data and disclose accurate numbers for negative Environmental and Societal impact, and your plan to mitigate them. That won't change.
Ever more regulation demands that you be precise and accurate and honest when making claims about and citing data that purports to show positive, purposeful impact. That won't change.
Ever more urgent climatic, ecological and social justice issues demand that you focus on not only doing no harm but doing some good. That won't change.
In fact, in all three areas, the requirement for you to do so is only going to increase. That's not a debatable or ideologically contentious position. It's reality.
Use whatever words you want. Just do the work, properly, for the right reasons, and with the right accountability for outcomes and impact. There is no such thing as ‘the future’ but as the result of choices we make now.