This is a summary of the book titled the “ESG Mindset” written by Matthew Sekol and published by Kogan Page in 2024. The author evaluates “Enterprise, Social and Governance” aka ESG practices for long-term sustainability of corporations and their challenge to the corporate culture The author finds that deployments can raise issues which might affect transformation and growth, and most companies interpret these practices to suit their needs. This poses a challenge to even a standard definition and acceptance of associated norms. Leaders also are quick to get at the intangible behind these practices by cutting them to the simplest form which risks diluting its relevance. The author concludes that to realize ESG mindset fully, the companies must be committed to go all the way. He asserts that these practices are not merely data. But technology is the invisible “fourth” pillar in ESG. There is demonstrated success in the campaigns of companies that have embraced ESG, but the mindset goes beyond operations. As with most practices in the modern world, ESG must remain flexible.
Environmental, Social, and Governance (ESG) practices are rooted in Corporate Social Responsibility (CSR) and Socially Responsible Investing (SRI) but differentiated itself by 2004 with its broader definition of "material value" and willingness to deal with intangibles. ESG is difficult to define as it links intangible values with material results. Companies must align their ESG mindset to manage crises in an increasingly complex world. ESG is not merely data, but requires companies to prioritize, interpret, and communicate their data to stakeholders. Companies must inventory their "data estate" by reviewing internal and external data sets to ensure transparency and sustainability. Challenges faced by companies include global emissions increasing by 70% between 1970 and 2004, climate change, and public pressure from stakeholders. Publicly traded companies can provide guidelines on how their boards make decisions, including those involving ESG or affecting stakeholders.
Globalization has led to systemic issues such as child welfare, climate change, forced labor, equity, and justice, resulting in crises. Boards must shift their decision-making practices from short-term to long-term to pursue their material goals. Technology, such as blockchain, the metaverse, and generative AI, can support ESG transformation by solving problems and facilitating goals. However, companies must modernize legacy technology, break down internal silos, and solve complex cultural fears of change. Technology also produces data that is integral to ESG analysis and decision-making, but it exposes companies to cybersecurity risks. Critics and controversy can hinder ESG, especially in the United States, where polarization and activism from both the left and right complicate the issues ESG already faces. Companies must collaborate to ensure ESG's relevance and address the accuracy and fairness of ESG scores.
ESG pillars interconnect and can be analyzed to uncover new issues and improve resilience in a crisis. Companies must recognize that long-term interconnected crises will become material to every company over time. Changes addressing systemic problems can influence both internal workings and external stakeholders. Companies like PepsiCo, Lego, and Target have successfully leveraged their investment in ESG goals in various ways. PepsiCo founded the Beverage Industry Environmental Roundtable (BIER) to address systemic industry issues, particularly around water use. Lego committed to switching to sustainable materials by 2030, while Target leveraged the social pillar of ESG by hiring a diverse workforce and practicing community outreach. Paramount aligned stakeholder engagement with its core product, storytelling, demonstrating its commitment to addressing systemic issues with an ESG mindset. The ESG mindset goes beyond operations, as large-scale disruptions in the Environmental and Social dimensions may leave businesses struggling to react. Companies can leverage their ESG goals while remaining profitable through B Corps, value chain improvements, and industry collaboration.
ESG must adapt to a complex and volatile world, addressing systemic issues, intangible value, and global economic development. Companies must move from the following data to promoting measurable change. Technology can help address complexity but requires stakeholder buy-in and coordination. Companies face pressure to standardize ESG goals, define the ESG mindset, and demonstrate how to implement it, especially in the face of political agendas and pushback against DEI programs.
It is interesting that there can be so many parallels to draw between organizations and data science projects from an ESG perspective. The same sets of benefits and challenges apply to the long-term sustainability of these projects and charters. It is not just about the analysis, operations and predictions but also how it is presented to stakeholders.
