Marketing is Killing ESG

Here’s how we can save it

COMMENTARY

By Ricardo Viana Vargas, PhD

Portugal and Brazil

Of all the things that Tesla founder Elon Musk did or said this year, his declaration on ESG – the acronym for Environmental, Social and Governance – may not have been the most newsworthy.

But it is among the most interesting.

In May 2022, the world’s most iconic electric vehicle manufacturer was de-listed by S&Ps influential ESG index for a “lack of a low-carbon strategy” and violations of “codes of business conduct” including poor conditions in its California factory and reports of racism.

Musk (who may or may not be the owner of Twitter by the time this article appears) Tweeted his outrage about being de-listed while Exxon, one of the world’s largest oil and gas producers, was still included. “ESG is a scam,” Musk wrote. “It has been weaponized by phony social justice warriors.”

Without endorsing Musk’s scathing review, there is something to what he’s saying.

ESG is certainly not a scam. But the more and more we use the term “ESG” to measure and influence the broader impacts of businesses on the planet and the people who live on it, the further we seem to get from its true meaning.

The origins of ESG: dreaming the impossible sustainability dream

Throughout the 20^th century, some of the world’s greatest thinkers had made efforts to find a definition of sustainability that could be applied to business. The goal was to find a way of mobilizing investors – the lifeblood of business – to influence the way companies and other entities treated the planet and the people who live on it.

In the 1950s and 1960s, big pension plans and trade unions in the United Kingdom and United States looked for ways to use their vast resources to impact social issues. In the late 1970s, the so-called Sullivan Code attempted to guide U.S. companies on ways they could influence their counterparts operating within the apartheid regime in South Africa. In the late 1990s, Fortune Magazine created its first list of the “100 Best Companies to Work For,” which ranked employers on social responsibility metrics.

It wasn’t until 2004 that the term ESG – which had been creeping into a number of different discussions of investing and social responsibility – became entrenched as the shorthand for a company’s performance on all issues related to sustainability. This was largely accomplished in “Who Cares Wins,” a report produced by a consortium of government agencies, universities and banks under the auspices of the United Nations Environment Programme Finance Initiative.

Fast forward nearly two decades and ESG has become an eclipsing presence in business. As the public has become more aware of the underlying principles, private companies, investment firms and banks are scrambling over each other to get an ESG designation. Various entities have been created just for the purpose of assigning these designations.

The value of such a designation is clearly demonstrated by Musk’s angry rant. In today’s business world, you are either listed as ESG compliant, or you are being looked at with skepticism by consumers, investors and journalists.

More…

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Editor’s note: This article originally appeared as a blog post in LSE Business Review online, London School of Economics, 31 January 2023, in the Sustainability category. It is republished here with the author’s permission.

How to cite this article: Vargas, R. V. (2023). Marketing is Killing ESG. Here’s how we can save it., commentary, PM World Journal, Vol. XII, Issue III, March. Available online at https://pmworldjournal.com/wp-content/uploads/2023/03/pmwj127-Mar2023-Vargas-Marketing-is-Killing-ESG-commentary.pdf

About the Author

Ricardo Viana Vargas, PhD

Brazil and Portugal

Ricardo Viana Vargas is Managing Partner at Macrosolutions, past Executive Director of the Project Management Institute’s Brightline Initiative, past Director of the United Nations Office for Project Services (UNOPS) Infrastructure and Project Management Group, and former Chair of the PMI Board of Directors. Passionate about transforming ideas into action and a popular speaker at international PM events, Ricardo is recognized worldwide as a chief advocate for the project economy. Specializing in implementing innovative global initiatives, capital projects and product development, he has directed dozens of projects across industries and continents, managing more than $20 billion in global initiatives over the past 25 years.

Ricardo shares his expertise with millions of professionals around the globe through his “5 Minutes Podcast,” which he’s hosted since 2007. He has written 16 books on project management, risk and crisis management, and transformation, which have been translated into six languages and sold more than half a million copies. His latest book Project Management Next Generation: The Pillars for Organizational Excellence, in partnership with Dr. Harold Kerzner and Dr. Al Zeitoun was released in 2022.

Ricardo holds a Ph.D. in Civil Engineering from Federal Fluminense University in Brazil and an undergraduate degree in Chemical Engineering, as well as a master’s degree in Industrial Engineering from Federal University of Minas Gerais in Brazil. Ricardo was appointed Honorary Global Advisor for the PM World Journal in August and named a PMI Fellow in December 2022.

He can be contacted at ricardo@ricardo-vargas.com or you can find him online at the following: