Here are some strategies to enshrine ESG/DEI into corporate DNA without having to resort to PR doublespeak
In 2024, several major firms reportedly scaled back their Environmental, Social, and Governance (ESG) and Diversity, Equity and Inclusion (DEI) commitments.
These actions have raised concerns and sparked debate about the sincerity and feasibility of corporate sustainability efforts. Microsoft reportedly laid off its entire DEI team despite announcements of commiting substantial investments. Other firms have slashed budgets to the same effect.
All these measures have been linked to broader cost-cutting measures in the tech industry as firms recalibrate their strategies amid economic uncertainties, financial pressures and changing business climates. Shell and BP have both been accused of “greenwashing”, where a minuscule percentage of their energy output actually comes from renewables. Both firms have been criticized for continuing substantial investments in fossil fuels while scaling back on green initiatives, despite public commitments to transition to cleaner energy.
Obvious and not-so-obvious factors
ESG and DEI are interlinked concepts that together contribute to a company’s overall sustainability and ethical standards. While they focus on different aspects, they share common goals and influence each other in meaningful ways, namely, corporate social responsibility, governance accountability, risk management, long-term value creation, and corporate mission/image building.
In having to announce cutbacks and backtracking on ESG/DEI, each organization must have considered all its own strategic and market circumstances. Some of the most obvious include:
- Economic pressures: With a challenging macroeconomic environment, firms may prioritize cost-cutting and profitability over longer-term DEI and ESG investments within regulatory and corporate image considerations.
- Political and regulatory uncertainty: The evolving landscape of regulations and public policies, especially in the context of major upcoming elections and potential changes in ESG reporting requirements, can cause firms to reassess their commitments, even if it may result in bad optics.
- Investor sentiment: Increased scrutiny from investors and a focus on financial returns can lead to deprioritizing ESG/DEI initiatives, especially if they are perceived as not directly contributing to immediate profitability expectations.
- Internal challenges: Firms may face internal resistance or logistical challenges in implementing comprehensive DEI and ESG strategies, leading to slower progress or even rollback.
In terms of public relations principles, each of the organizations cited above has taken different approaches in terms of transparency and honesty. This affects their brand, consumer trust, and other subtle public opinions that will be brought to bear on future corporate DEI/ESG decisions.
Thinking differently about DEI/ESG
Other organizations can learn from the abovementioned challenges and actions thoughtfully and strategically, in order to build on their commitments without abandoning the two concepts at the first signs of difficulties.
- Integrate DEI and ESG into core business strategy
Instead of tagging them on like optional luxuries and fittings, firms should align these two concepts with their core business objectives, demonstrating how these principles can drive long-term value. - Engage stakeholders
Before taking unpopular actions, establish transparent communication with investors, employees, and the public about the benefits and progress of DEI and ESG efforts. This can help build trust and support, helping an organization to weather public relations repercussions with hopefully a soft landing. - Focus on measurable outcomes
Setting clear, measurable goals and regularly reporting on progress can help maintain accountability and demonstrate commitment. - Adapt to changing regulations
Firms should stay informed about regulatory changes and proactively adjust their strategies to comply with new standards, following the other tips here to be consultative and proactive, rather than clandestine and evasive. - Foster a culture of inclusion
Encouraging a culture that values diversity and sustainability at all levels of the organization can help embed these principles more deeply into the organization’s ethos. When this happens, the wider benefits may erode other transient challenges and pressures to cut back on such a positive mindset. - Uphold transparency and corporate integrity in good times and in bad
Organizations that handled the situation with transparency were often seen as more ethical and trustworthy. Even if stakeholders disagreed with the decision, they were more likely to appreciate the honesty and continue supporting the brand. Conversely, those that were not forthcoming faced a higher risk of negative publicity, loss of trust, and potential damage to their brand equity. Inconsistent actions and communications can lead to accusations of hypocrisy or greenwashing, especially if the firm (in good times) has previously marketed itself heavily on DEI/ESG principles.
Despite recent setbacks and unpredictable global pressures, the integration of ESG/DEI into corporate strategies remains crucial for sustainable development and ethical business practices. These efforts are not just ethical imperatives, but also strategic necessities in a world increasingly demanding responsible and inclusive business practices.
As such, continuing to prioritize ESG and DEI initiatives is vital for organizations to remain relevant and resilient in the face of future uncertainties.
