ESG is the flavor of the season, post Glasgow where it has transitioned from regulatory to risk to climate (sorry cash) resilience with the key to access to climate finance. At the grave risk of green washing, ESG has been the favorite hot expert title on LinkedIn, with each one a freshly minted ESG expert with little appreciation for the intellectual genealogy of the term from CSR to SROI to Impact Investing to Triple Bottomline to Sustainability. ESG or Environmental, Social & Governance is a meta-framework meant to capture non-financial risk with a multiscale import, as it works both top down and bottom up with global scales of compliance jostling for competition with local politics. ESG as a global ethical barometer is driven to tick box measures and standardized aggregated metrics for rating agencies, gives the impression of being politically aloof, masking its origins in ecological and social justice for communities located at various places, nested within scales of Global Production Networks (hat-tip to Prof. Neil Coe, my Labour Geography teacher).
The problem with non-financial disclosure it that it is non-financial, with no clear translation of E&S risks to the bottom line. There are academic researchers who attempt to build in the E&S Risk to the balance sheet, however the alphabet soup of GRI, TCFD, SASB and BSR add layers of complexity which add to the paper trail. The datafication imperative of ESG couples it to the digitization agenda. But data is good for evaluating performance, however culture as a local determinant is hard to quantify.
ESG needs to ground itself in local realities of workers’ rights and environmental loss. People work within local laws, although global SA8000/RBA standards help express worker voices. Worker collectives take audit findings to take companies such as Dyson to court in the UK, by workers. Local politics adds teeth to the global ESG regimes. Many Malaysian suppliers have been banned from exporting to USA and Canada over forced labor complaints.
ESG should be taken as dynamic toolbox to solve problems taking up from the notion of dynamic materiality to solve business issues, rather than an embellishment. ESG from a ‘Jobs to be Done’ approach compels the paradigm to think beyond green washing. Materiality thresh holds for ESG risk, brings the skin back into the game, as the woke millennials feel for brands who take care of their workers, even if companies do not. The CFO will care for the quarterly numbers.