Here I sit in my local café, inspired by yet another online course, this time on making the business case for sustainability. The course takes us step by step through the calculations needed to prove the value of sustainability efforts. We carefully convert watts to kilowatts and then to dollar savings so we can then discount them into present value.
An important caveat: we can only include non-monetary benefits in our net present value analysis if we are to convert things like a healthier workplace, family-friendly employment policies, etc. into monetary value.
But how?
And, perhaps more importantly, should we be putting them in monetary value in the first place?
Many corporations of large scale, and certainly those listed on the stock exchanges, are reporting their impacts on the climate etc. via the ESG reporting lens.
They have committed to bold goals in the short- to mid-term future. These are separate to their P/Ls and other financial reporting. Some might say, it is even more impressive to prove your results in terms of people helped, tons of CO2 reduced and level of transparency than attaching a monetary value to them.
In this day and age, for those who have money, making more money is ridiculously easy. What’s harder is to make a demonstrable difference.
So here’s my challenge to the instinct to quantify everything in terms of money: try not doing so and see what happens.
Criticism of ESG investing usually cite greenwashing and the inability to connect financial support of highly-rated ESG stock with actual environmental, social and governance benefits.
Those who take these criticisms seriously should then be prepared to take as much responsibility for the actual results of ESG programs, not just the financial aspect of them.
Ironically, while society benefits more from the actual achievement of ESG programs rather than the financial values placed on them, even the most “forward thinking” of our current capitalistic systems to incentivize this achievement comes back to money.
CEO compensation is increasingly being hinged on their company’s “ESG performance.”
May I suggest that this is akin to rewarding your child for good behavior with one chocolate chip apiece (a real-life tactic!) only to find that your child comes to expect them for any and every good deed, and won’t budget without them? It might even make them diabetic. I hope you see my point.
(Now that you’ve read this far, please let me connect this crazy loop by pointing out that the gap in CEO pay and employee pay may in the future be used as a factor in ESG indices!)
So the pattern becomes: ESG efforts → corporate and personal profits ↺
Will this whirling dervish bring us closer to the goals promulgated by national governments and the UN? And how will inflation, the continuing pandemic, necessary reskilling of the workforce, supply-chain problems and geopolitical instability contribute to this?
Only time shall tell.
Top photo by Pascal van de Vendel on Unsplash
References:
https://www.pwc.com/gx/en/issues/esg/exec-pay-and-esg.html
https://www.wsj.com/articles/why-companies-shouldnt-tie-ceo-pay-to-esg-metrics-11624669882
https://news.bloomberglaw.com/esg/executive-pay-tied-to-esg-goals-grows-as-investors-demand-action
https://www.dividend.com/esg-channel/ceo-pay-to-be-a-big-esg-issue/
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