As the world has grown more concerned with combatting widespread issues like climate change and social injustice, the environmental, social, and governance (ESG) movement has gained momentum to ensure businesses are doing their part, by transparently reporting to investors and stakeholders their positive and negative impacts on the environment and society, allowing those backers to make informed decisions about the companies they finance and support.
Last September, the World Economic Forum (WEF) drew up its version of a curated list of ESG goals, to encourage businesses to inform stakeholders of non-financial contributions in such areas as employee wellbeing and human rights. The WEF went through a six-month consultation process with 200 companies and investors, to draw up a set of universal metrics, in line with the United Nations’ Sustainable Development Goals. It comprises 21 core “stakeholder capitalism metrics,” and 34 expanded ones, all under four main pillars.
For instance, companies that have taken the pledge have agreed to report publicly on greenhouse gas emissions, water consumption, and single-use plastics (the planet pillar). For the people pillar, metrics include numbers on diversity and inclusion, a pay equality ratio, and employee well-being rates. The prosperity pillar involves economic contribution and total tax paid; and the governance pillar includes information on anti-corruption initiatives.
Today, at the annual Davos gathering—taking place virtually this year—more than 60 global companies announced they have signed onto a commitment to follow this common set of ESG goals. The announcement will take place during a panel on Implementing Stakeholder Capitalism, featuring the WEF’s founder, Klaus Schwab, Salesforce CEO Marc Benioff, and Bank of America CEO Brian T. Moynihan, among others. In total, 61 companies across industries and geographies have signed onto the pledge. Others include Siemens, PayPal, Heineken, Deloitte, Sony, Unilever, Dell, and Royal Dutch Shell.
Maha Eltobgy, senior director with the WEF, who has been leading this initiative, says the purpose of the coalition is to demonstrate that CEOs and board members are taking environmental and social factors seriously, and the agreement to report numbers shows it’s not just a symbolic gesture, but an effort in transparency. “[It’s] a demonstration that these CEOs are supportive of making non-financial reporting as rigorous as financial reporting,” she says.
While all the pillars are important, Eltobgy says the pandemic has perhaps showed businesses the renewed importance of the people section. “The social part has always been kind of lagging in ESG,” she says, “but I think it’s really been accelerated by COVID, and I think that’s good.”
By joining the pledge, the companies are committing to report to their investors and stakeholders the metrics that are most relevant to their businesses, “or briefly explaining why a different approach is more appropriate,” Etolbgy says. In addition, they’re committing to be public advocates for the goals, encouraging business partners to do the same, and advocating for an ever-evolving, more consistent standard so that “there’s convergence in this very complicated ecosystem of metrics and disclosures around sustainability,” she says.
That’s easier to do as a coalition, rather than leaving it to individual companies to construct their own, separate systems. “Something like this requires strength in numbers, and just a loud, private-sector voice,” Eltobgy says. It’s especially effective because these are large, often multinational companies, that she says together represent a market cap of about $4.5 trillion.
Eltobgy hopes these companies are just a first wave, with more companies soon to come on board. She’s optimistic, because stakeholder capitalism is fast becoming mainstream—and a priority at the very top. “It’s moved from being a discussion just amongst ESG practitioners,” she says, “to something that really has climbed up the corporate ladder.”