Five Reasons Why ESG And Wokeism Are Taking A Beating

Were ESG, DEI and sustainability fads that have since died? It certainly feels like it in some circles, doesn’t it? I don’t believe they are dead at all. But the question is, why the current disenchantment with something we desperately need for saving ourselves and our only home?

My simple assertion, one we’ve been making for a long time now, is that we were trying to solve existential environmental and social challenges unnaturally:

1. We were asking consumers to consume less. Consumption is a basic human aspiration. Except for a few evolved souls, it is naive to expect ordinary humans to consume less. Interestingly, economies built on excessive consumption—that caused the problems in the first place—were lecturing the developing world to consume less.

2. We were asking businesses to sacrifice some profit for purpose. Humans aren’t indiscriminately altruistic, yet we condemned self-interest and demonized profit.

3. We were forcing behavior change through regulation. We tried to beat businesses into behaving responsibly even while we’ve always known that genuine behavior change comes from within. At best, regulation reduces bad behavior, it does not encourage good behavior. Doing no wrong is not the same thing as doing good.

4. We were using incentives and cheaper capital to channel inclusive prosperity. The Principle of Least Effort tells us that humans always choose the easiest option to get what they want (in this case, profit). What the world needs is innovation to maximize greater good. So, rather than drive the innovation required to produce goods and services that solve environmental and social challenges, we largely ended up creating financial (trading) instruments that many took advantage of and profited from.

5. We thought mandating measurement and reporting would do the trick. Management researchers and behavioral economists have regularly warned against the overuse of measurement and reporting, yet we have done exactly that. It is no surprise that the result was attempts to game the system through massive greenwashing, box-checking, and window dressing rather than meaningful action. Metrics and reports seem to have become the end in themselves rather than means to an end.

These unnatural tools and measures were going against basic human instinct, hence the backlash.

So, what is a better alternative? To answer this question, one simply needs to look into leaders and organizations that have been thriving by doing good long before the above ideas became vogue. Patagonia, Tata, Faber-Castell, Mars, and many other companies have been doing well by doing good for decades, if not hundreds of years. Why? How?

Were they less profit- and growth-oriented than the average company? No. Were they led by self-sacrificing servant leaders? No. Were they led by socialist leaders? No.

They wanted profits and growth as much as anyone else, but they deeply understood a concept that most people find it difficult to grasp—that the more you give, the more you receive. Leaders of such companies saw themselves as stewards of planet Earth and humanity, and proactively decided that they wanted to be successful by solving human problems and making society better off. They strongly believed that if they created business models that profitably solve the most pressing social problems, their companies would be more successful over the long term.

At Stewardship Asia Centre, we have been studying such leaders for over a decade now. It turns out that rather than incentives, regulation, or a philanthropic or socialist leaning, they are driven by a proactive choice to do well by doing good. We call it Steward Leadership, which is the genuine desire and persistence to create a collective better future for stakeholders, society, future generations, and the environment. Rather than fighting human nature, Steward Leadership takes today’s challenges head on without compromising personal ambition, profit, or growth. In fact, Steward Leadership uses personal ambition and profit as tools to solve the challenges in a win-win-win way.

Steward leaders’ proactive choice (of creating profitable solutions to social and environmental challenges) stems from their underlying values:

1. Interdependence: View the world as an interconnected system in which your success depends on the success of others.

2. Long-term view: Create sustained value for both current and future generations.

3. Ownership mentality: Take proactive responsibility to create positive environmental and social impact.

4. Creative resilience: Persist to find innovative solutions to disruptive challenges.

The solution to save the world lies less in pushing more carrots and sticks, and more in creating a values-based revolution through inspirational education on Steward Leadership. We have always known that intrinsic motivation is more powerful than its extrinsic cousin. It is time we stepped up our efforts to inspire more people to take up steward leadership because it aims to drive personal success by giving the world what it needs. In corporate parlance, it aims to maximize profit by maximizing purpose.