Voters do not understand the meaning of ESG in practice. Here's Why Killing The Word May Be The Only Way To Save It
With ESG constantly in the spotlight, many companies are grappling with how best to talk about it with their stakeholders. our latest research Indicates Republican and Democratic voters with Penn State both believe that certain ESG components, such as climate mitigation, are tied to their financial fortunes. Based on our findings, companies should consider moving away from the broad term, ESG, and focusing on specific areas that voters and lawmakers care about.
ESG is an investment framework that weighs corporate action to reduce risk across materially relevant environmental, social and governance business sectors. Research has shown for some time that voters do not understand ESG. However, a survey of Americans on its components, particularly those related to investments and government’s role in them, revealed that ESG may be misunderstood.
Our latest study found a supportive majority for some type of long-term D-exposure. For starters, Both Republican and Democratic voters believe that corporate climate mitigation is vital to their financial fortunes. For Republicans, this belief increases when we ask about specific topics such as resource management and biodiversity. It falls flat when we ask about net-zero goals. This likely stems from these voters’ desire for concrete results and accountability – what they indicate is important to them.
Differences emerge between Republicans and Democrats when it comes to social issues. While voters support issues that are fundamental to humanity such as access to education or fair wages, other issues—gun control, LGBTQ rights, voting rights, and DEI—see important divergence across specific party lines. Interestingly, businesses tend to invest the most in efforts that aim to address social issues, potentially contributing to the blowback against companies this year.
We also probed the appetite for political efforts to curb ESG investing. Despite the current political rhetoric, hunger is low. may be to blame failure of proposals To ban ESG investments in State Pension Funds, including Interest rates have gone up as a result of Texas, In fact, nobody likes to lose money, and voters (even Democrats) see the market as a better money driver than the government.
So how can companies act on this data and reduce the blow they face for being good corporate citizens? Businesses may consider dropping the lightning rod term, “ESG”.
already, fortune 500 companies are return to corporate responsibility (CSR) as a way of distancing himself from the political row. But this approach does little to improve stakeholders’ understanding of their efforts.
A more strategic approach creates an awareness of corporate actions that appeals to voters, customers, investors and policy makers. It certainly takes more effort to send messages to disparate groups, but it’s critical to building strong relationships based on shared values.
For example, communicating conservation and biodiversity efforts to Republican voters will improve brand reputation with conservative voters, lawmakers, as well as their Democratic counterparts. If a company is primarily focused on social issues, explaining how its investments contribute to long-term value gains adds to any association with Republicans.
‘Say-Karo Gap’
While being more specific with communication efforts helps win over stakeholders who lack understanding of ESG, it also builds trust based on transparency and accountability.
The companies have been speaking out on any and all issues over the past few years, or at least that’s what the voters told us. From 2021, overall support for companies speaking out on social issues unrelated to their business has fallen, Two possible reasons for this are the perception of a gap between corporate announcements and real-world action, and the overly broad range of topics discussed. To reverse voter skepticism, corporations focus specifics in their messaging around efforts undertaken within the various ESG pillars.
voters’ preferences
More concrete communication should also take advantage of voter beliefs when it comes to the limits of government’s responsibilities. Vigorous bipartisan opposition to limits on corporate investment, support for investor stewardship of financial decisions, and belief that business has a role to play in improving society should all convey the message.
Again, it is important to tailor these points to specific audiences: voters and MPs alike express alignment with their party’s traditional views of government. For Republicans, the focus on free markets and shareholder benefits is still a winning argument. For Democrats, corporate responsibility to stakeholders and government oversight are priorities.
Beyond these narratives, our findings should provide a strong mandate for companies to focus on developing the economy by de-risking their businesses and improving society, especially when it comes to the environment. Whatever their efforts are called, the label is less important than the specifics. This means talking more about concerted efforts to reduce environmental risks, how programs de-risk business, and how this progress aligns with policy priorities.
ESG certainly has its challenges – and it is by no means a silver bullet to solve all of humanity’s problems. But it is misunderstood, not monstrous.
Lindsey Singleton is chief development officer for ROKK Solutions, a bipartisan public affairs firm. She is co-author of Navigating ESG in the New Congress, an annual research conducted with Penn State on voter views around corporate responsibility.
The opinions expressed in Fortune.com commentary are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Luck,
