Why companies are becoming more political

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Head of the consulting firm specializing in sustainable development BSR, Aron Cramer is one of the best advisors to large companies seeking to improve their environmental and social impacts. When we spoke this week, he issued some warnings to leaders with a narrow view of what it means to be a responsible company. Cramer thinks traditional corporate approaches to controversial political issues — avoiding them a mile — are becoming increasingly unacceptable.

With growing concerns about civil liberties and democratic integrity in many parts of the world, “it will increasingly be ‘which way’. Hold on,” he says. companies are weighted – and many CEOs and boards aren’t comfortable doing that.”

In the United States last year, clear signs of an epochal shift emerged when companies from Amazon to General Motors opposed “discriminatory” election legislation proposed by Republicans in various US legislatures. ‘State. .. According to Kramer, companies should expect more pressure to intervene in such matters. Especially from a new generation of employees who “want their values ​​to be reflected in their organization”.

The latest example of this trend comes from the UK, where 200 companies have challenged an Act of Parliament, which imposes major new restrictions on public protests. Keep reading about it, the intersection of ESG and M&A, and the most claimed environmental threats in the World Economic Forum’s new Global Risks report. Simon Mandy

‘Dangerous’ UK police bill provokes backlash from businesses

©Bloomberg

The recent spike in environmental and social protests in the UK has prompted a harsh response from Boris Johnson’s government which is trying to push through tough new restrictions and penalties around protests. Many companies are now adding their voice to the frowned upon chorus.

“This bill is dangerous. He is an authoritarian. I read a statement from Ben & Jerry’s, a subsidiary of Unilever, a Vermont-based ice cream brand. Clothing brand Patagonia and cosmetics company The. It is one of 200 companies that participated in public campaigns against the bill, like body shops. The intervention addresses the responsibility of companies to speak up on legal and public policy issues, even if there is no obvious direct impact on the company. I raise interesting questions.

The bill is being debated today in the House of Lords, the Senate of the British Parliament, before being voted on on Monday. If passed, in recent years major protesters, from Extinction Rebellion to Black Lives Matter to UK isolation, will face a much higher risk of prosecution and imprisonment. Tampering with statues like slave trader Edward Colston Defeated by anti-racism protesters Currently up to 10 years in prison. If protesters make enough noise to cause “serious disturbances” in nearby organizations, they face up to 51 weeks in jail. Other sections of the bill stated: “This will significantly expand the ability of the police to impose conditions on the rights of lines and public meetings. Keep fully open what those conditions are.” , This Helpful Analysis This is a lawyer-led non-profit Good Law project.

The definition of corporate social responsibility has generally focused on how a company conducts its business, rather than how it uses its voice to influence the law. .. However, many companies resisting the new policing bill have social and environmental responsibilities at the heart of their public brands, but they need to take that stance in order to fulfill their mission. I thought to myself that I felt it.

“These are the important values ​​that are inherent in our business,” Patagonia UK representative Alex Beasley told me. “It’s about staying consistent and putting our values ​​into practice. It’s not about increasing sales.

Still, the intervention makes business sense, said Chris Davis, sustainability manager at The Body Shop, a Natura subsidiary in Brazil. For many Body Shop employees, he pointed to the company’s proud commitment to social justice as the main reason to work there. Many consumers are also attracted by these qualifications.

This puts the likes of The Body Shop and Patagonia in a different situation than the big UK companies which have not publicly criticized the bill, despite consumers being biased towards the liberal end of the range. to augment. For example, a large consumer company like Tesco runs the risk of alienating a large number of conservative shoppers. “I can understand their hesitation,” Davis said, saying where political involvement is involved, “there are still boundaries that many companies won’t cross.” Simon Mandy

ESG is becoming an important part of the M&A space

As entrepreneurs had strategies when building ESG-friendly start-ups over the past decade, they were usually very passionate about the cause or very dissatisfied with the mainstream market. I created it because I was ready to attack on my own. It seemed dangerous.

How will times change? There has been a lot of M&A activity in the ESG world over the past year, with established companies rushing to buy ESG-friendly tidler, establishing eco-friendly credit for their existing businesses and from investors. Avoid criticism.

First half of 2021, 140 low-carbon energy M&A deals completed globally, each worth over $50 million. Additionally, the two blockbuster deals included Goldman Sachs to buy ESG-focused asset management firm NN Investment Partners with €1.6 billion and Blackstone to buy Sphera, an ESG data and advisory group, is of $1.4 billion, both aimed at increasing durability reliability.

And if this survey Despite any guidance from EY, enthusiastic business should continue in 2022, and some of the founders of ESG start-ups are very happy (i.e. rich).

The numbers are mind-boggling. Nearly two-thirds of global CEOs expect their company to pursue acquisitions over the next 12 months, according to a survey. This is an increase from 48% at the start of 2021.

Even more surprisingly, 99% of CEOs surveyed say they have taken ESG issues into account during these acquisitions. This leads us to wonder who these 1% contrarians are, but that is another matter).

Only 6% of EYs said they were in fact shunned from trading due to ESG concerns. This suggests that these ESG concerns are deeply embedded or are already being adhered to by companies considering them.

Either way, it is becoming clear that corporate boards are no longer willing to ignore the need to uphold ESG values. Moreover, financiers claim to be more discerning when companies engage in these transactions.

ESG is maturing, but is now at a higher level, Joyce Cheung, president of global research at JP Morgan, told Moral Money before investors accepted sustainability claims. Pretended to wave a flag of caution. M&A area.

Joyce Cheung, JP Morgan Global Research Chair

Joyce Cheung, JP Morgan Global Research Chair © Bloomberg

It’s easy to see why investors are becoming more cautious. Last year there was a wave of hype around the idea that ESG strategies are good for investors. For example, Morgan Stanley economists have published two widely read reports advocating ESG strategies. Improve returns for investors — And reduce downside volatility.

But this week, a team of Colombian economists are releasing their own research taking aim at Morgan Stanley’s claim that it’s an ESG strategy that typically requires investors to make modest sacrifices with their return.

Colombian researchers aren’t the only ones hesitant – 65% of CEOs interviewed Investor resistance to promoting ESG-focused M&A deals has created tensions in de-risking.

However, such comments are not likely to discourage a company’s board of directors. Nor is it host to entrepreneurs who want to ride the green wave. Take Trevor Neilson with you. He used to work in the venture capital world, but last year he left to co-found Waste Fuel, a waste-to-energy startup.

It once looked like a dangerous career move. However, Neilson becomes an entrepreneur because he is convinced that his company will be taken over by one of the investors (who is already a top client) or will become the next “climate unicorn”. It now claims to be a “safe” option. Compared to the world of VC. Kristen Talman

Today’s chart

GM130114_22X Identifying the most serious risks in the world over the next decade

Environmental threats top the list of the world’s most significant long-term risks, according to a recent survey of around 1,000 experts and employees.

In the World Economic Forum’s annual Global Risks Report, survey respondents named “the failure of climate change” as the biggest long-term threat over the next decade. The report predicted that “chaotic climate change” would continue and warned that a transition that failed to consider “social impacts” would exacerbate existing inequalities and lead to greater geopolitical tensions.

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