The headlines come fast and furious: Conservative Republican politicians are coming out against “wokeness.” There’s no question that red-state politicians see mileage with their base in the anti-woke rhetoric, and they believe they’re having an impact on corporate behavior. See this report from the Daily Caller, founded by Tucker Carlson of Fox news.
But is the anti-woke backlash actually a threat to companies seeking to advance DE&I and pursue responsible ESG strategies?
Let’s start with what the anti-woke movement is all about. There are really two separate issues that have become blended. The first is related to a culture war. The second comes from a belief that ESG efforts by companies come at the expense of profits.
The culture war is a pushback against social justice efforts. Rep. Jim Banks, R-Ind., chair of the U.S. House of Representatives Anti-Woke Caucus, explains it this way in a report from MSNBC: “Everyone has by now heard this word (woke), but it means something very specific. It means that all the so-called oppressor groups must be punished for their past and present alleged sins.” Translation: social justice advocates are the enemy, out to punish us, and we’re going to fight back. It’s an effective fundraising tool.
Most of the legislative efforts in red states related to the culture war issues are aimed at voting rights, school curricula and library books, not at corporations. Here’s a detailed analysis of the critical race theory efforts from Henry Louis Gates Jr. of Harvard in the New York Times. Some companies may feel a need to weigh in on these issues, and could draw retaliation for doing so. The most serious damage to a corporate interest thus far is the famous Disney loss of special self-governing status for opposing Florida Gov. Ron DeSantis’s “Don’t Say Gay” legislation.
In the Page CCO Guide on Stakeholder Capitalism and ESG, we advised companies that there is no need to speak out on every social justice issue that comes along, but there is a strong imperative to advocate for the principles that the enterprise has embraced and to work for long-term success for the enterprise and all its stakeholders, including the future generations who will have to live with the decisions that we make today.
Most important, though, the CCO Guide described the need to make it real: “It’s important to follow through so that the organization’s positions are not seen as superficial or just lip service.” And the guide also noted that there is significant evidence that thoughtful and effective “CEO activism can sway public opinion – and also increase interest in buying the company’s products.”
There are efforts by the anti-woke movement to go after financial institutions for weighing ESG issues along with financial considerations, including the attempt by Woke, Inc. author Vivek Ramaswamy to take on BlackRock. Ramaswamy has advocated for profit over societal interests and recently announced a campaign for the Republican nomination for president.
The most recent example of this is Gov. DeSantis’s announcement of proposed legislation to end “woke banking” in Florida. However, despite the rather dramatic claims on the official DeSantis website, it appears that the actual effect will be largely on the investment of Florida pension funds and local and state bond issues, but not much of a broader threat to ESG considerations in private investments by individuals and financial institutions.
As the relatively weak Florida anti-woke banking proposal suggests, states really don’t have the authority to significantly restrict corporate and financial services activity except those related to their own state investments. Of course, there is the chance that a DeSantis or a Ramaswamy could be elected president, and federal legislation or regulation could be more restrictive, but the idea that a majority of Americans would support such restrictions is unlikely. Although The Daily Caller reported that DeSantis said that following ESG standards in investing “[undermines] the democratic process” and that ESG policies imposed by unnamed elites “will never win favor” with the public, the reality is that there is incredibly strong evidence of public support for responsible ESG investing.
The problem with the criticism of ESG from the right is their assumption that purpose and profit can’t go together. They’re wrong. In fact, a long-term view suggests that the survivability of the planet and the enterprise require an ESG focus that builds societal value along with customer and shareholder value. Deloitte has reported that this works.
In his 2022 letter to CEOs, BlackRock CEO Larry Fink pushed back: “Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke,’” he asserted. “It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper.”
By the way, companies also have to watch out for ESG criticism from the left, which is prone to attack ESG commitments as greenwashing or purpose-washing – phony attempts to curry favor with the public.
So, what should CCOs guide their companies to do? The Page CCO Guide on Stakeholder Capitalism and ESG answer is, make it real: Take into account the multistakeholder view and the imperative to make long-term investments that lead to a better future for both the planet and the company. Eschew short-term thinking that panders to day-traders, and invest in products and policies that will stand the test of time.
Companies that are able to energize their employees, investors and the public behind their commitment to make responsible decisions for society and also build a sustainable future for their investors will triumph over politicians whose only agenda is to raise money based on division and hatred.
This is an excerpt from our CCO Guide on Stakeholder Capitalism and ESG, available here, a …
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