What you’ll learn below:
- What makes sustainability “real”?
- Where ESG will land in company priorities?
- What does decarbonization have to do with any of this?
Intro
I’ve been talking to industry leaders about where the anti-ESG backlash is going to land the acronym “ESG,” and here’s what I’ve concluded: Companies are going to continue to build out their ESG strategy, but the words are going to change—again. “Sustainability” is about to come back into vogue, with an emphasis on its being … well, sustainable, in the truest sense of the word. At Adamantine, we call that real sustainability.
Both True readers know that for some time my team and I have distinguished between political pendulum swings and directional pressure from stakeholders. (See “The Pendulum Train” and “Riding the Anti-ESG Rollercoaster.”) In the context of ESG—and decarbonization efforts—we believe that the language pendulum is swinging, but the direction of travel with regard to ESG pressures will remain the same. This essay clarifies how you, the oil and gas leader, can stay the course with confidence by articulating your sustainability strategy in a compelling way.
Both of these things are true:
- ESG and decarbonization pressures are directional in nature and continue to grow, pressing oil and gas leaders to expand and accelerate their real sustainability actions.
- Anti-ESG and other anti-“woke” politics reflect an important pendulum swing, to which company leaders must have a persuasive response.
The situation
As companies navigate the opposing forces of ESG expectations and anti-ESG backlash, we at Adamantine are advising our client companies to identify and articulate a position based on enduring principles and business strategy. This stance will allow the oil and gas leader to stake out some solid, high ground in an unstable political landscape. By clearly and consistently narrating your sustainability journey, you can reconcile directional ESG pressure with the rapid swings of the political pendulum. As a leader, you’ll avoid the political perils of seeming to overreact and then overcorrect.
Here’s how this tension is going to resolve: Companies will begin to characterize ESG and decarbonization efforts as part of their larger real sustainability journey. In this context, “real” signals some major differences from the “sustainability” of the recent past. Chief among them:
- Financial sustainability. Companies’ ESG and decarbonization strategies will be grounded in a core business plan and financial viability.
- Durability. Companies will articulate how their materiality assessments have identified ESG risks, drivers, and opportunities that are material to their business viability and success. No longer a venue for virtue signaling, ESG in practice will morph into a framework for company leaders to contemplate and manage material risks and position their companies for changing business opportunities.
- Discernment. ESG critiques have gotten a lot right. Many ESG checklists are nonsense or even counterproductive, driving companies to play to the scoreboard rather than focus on meaningful action. Many companies, investors, agencies, and organizations have embarked on superficial ESG journeys, rather than investing in incremental progress. The b.s. being called from both right and left will make ESG activities better by driving real results.
Seize the day
Once again, both of these things are true! Companies still see mounting pressure to expand their ESG and decarbonization plans from a broad swath of stakeholders, from insurers to federal agencies. Meanwhile, external and internal voices are asking if the anti-ESG movement doesn’t require a reversal of course. Company leaders can hold the high ground by embarking on the following tasks:
- Explicitly acknowledge the conflict. Company leaders are wise to hold a conversation among their senior leadership and then with their board to name the conflict at hand and the ensuing pressures. Acknowledging that these two things are true at the same time creates the foundation for you to articulate the company’s course.
- Restate your fundamental philosophy. The company’s ESG and decarbonization strategies are tied to your company’s business plans, values, culture, and strategic advantage. Restate in the most basic terms why you are doing what you are doing and to what ends. If you did have some halfhearted virtue-signaling efforts, make course corrections. Your plans should be more than defensible; they should be durable and compelling.
- Consider your words. Over the last five years we’ve morphed from “corporate responsibility” through “sustainability” to “ESG.” We’ve talked about an energy transition, energy transitions (plural), an energy evolution, and energy transformations. As opportunities allow, consider which are the right words for your company and why you are using them. We anticipate a move back to “sustainability,” with ESG and decarbonization activities under this larger umbrella. We expect “sustainability” to be defined, with caveats, so that it conveys specific commitments to meaningful, incremental progress that can be measured and verified.
- Craft a set of talking points. Put a bow on these efforts with a set of talking points about your strategy, analysis, and commitments. This will allow your leaders, employees, and stakeholders to proceed with confidence.
At the end of the day, we want Adamantine’s clients to focus their energy on those strategic efforts that will improve the durability of their business. That’s real sustainability—and to get there, companies must be confident that they aren’t getting swung about by the political pendulum. Real sustainability requires a thoughtful conversation, a recommitment to company strategy, and a clear statement of intent.
Our team can facilitate an internal conversation on navigating ESG and anti-ESG pressures. Just reach out to request a quote. Do you think my crystal ball reading is right? Let me know what you think.
To standing your high ground,
Tisha
