Wednesday Morning Rant [Joe Mannix]

2020 and 2021 saw the dramatic rise of ESG. ESG and DIE was the hot topic of conversation at a dramatically increasing number of major companies. It was front and center in corporate strategy and in earnings discussions. It was hard to find corporate executives who weren't talking about it. That ideological conformity was the most important corporate concept had taken root.

According to data compiled by the Wall Street Journal (via archive.is), the number of corporate earnings calls with Wall Street analysts where ESG/DIE was a topic of conversation skyrocketed. From the fairly slow burn of a few years prior, the topic began to dominate. It was the new hotness, and everyone was very proud of it. Now, fewer companies talk about this stuff on earnings calls. It started last year and the fall-off since Q1 of this year has reversed short-term increases and then some. Companies mentioning ESG or DIE are back to late 2020 levels and the recent trend is sharply negative - as sharply negative as it was following the first COVID quarter.

Finance chiefs and other executives have significantly quieted down in public settings about their environmental and employee diversity efforts as opposition has mounted from a confluence of interests: investors who want companies to focus on their operations, not the social good, and conservative groups and political leaders who have seized on corporate support of such causes to rally "anti-woke" constituents -- for example, calling for boycotts of brands that advertise their support of the LGBT community in the wake of recent disputes with Target and Bud Light.

Yet underneath the normal Pounce and Seize Spin, the WSJ is reporting on a real phenomenon and a real problem: this crap is becoming dangerous. It's becoming dangerous for the bottom line, it's becoming dangerous for brand reputation and by extension, it's becoming dangerous for sales and therefore dangerous for the executives.

Academics agree - sort of:

"The easiest thing to do is just to stay out of the conversation and emphasize other facets of business that are going to be perceived as less controversial and more core to the traditional metrics of the business," said Jason Jay, senior lecturer of sustainability at Massachusetts Institute of Technology.

The Wall Street Journal thinks that's what's going on:

While such instances of "green-hushing" may be part of a larger strategy for many companies to avoid weighing in on divisive issues, there is little sign that public companies are pulling back from the initiatives themselves, such as DEI employee training and emissions reductions.

But this approach has a valuable side effect for these companies: future flexibility. Yesterday, they did it and boasted about it at every opportunity. Today, they do it and shut up about it. Tomorrow, they might not do it all, and still shut up about it. It needn't go that way, but this retreat from messaging gives these companies the option to ease off the accelerator - or even apply the brakes - and not have to talk about it.

And that might be very valuable. Much ink is being spilled at the moment about how this year's "Pride Month" backlash - a backlash driven by the targeting of children - is spilling over into wider opposition to (or at least declining support for and acceptance of) homosexuals, "diversity" activism, etc. If the pendulum is actually staring to swing back, these executives are probably hoping to leave an exit lane open.

Maintain popular pressure, consumer action and value destruction. Continue to force the issue and compel them to take that exit.

posted by Open Blogger at 11:00 AM

| Access Comments