10 ESG Mistakes Made by the Anti-ESG Movement

Published on:
by Eric Burdon,

Exxon Mobil

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Even though Anti-ESG is largely an American problem, it still captures a lot of attention on a national stage. After all, in America, several states have passed anti-ESG bills that restrict one thing or another. This is on top of the growth of several funds backed with millions of dollars too.

The movement has grown its largest yet, proving to be a sizable blockade to the ESG movement, however there are several flaws in the movement itself that are good to keep in mind. These flaws are massive mistakes that the anti-ESG movement has created for themselves and any could result in their eventual downfall.

Related: What Is Anti-ESG?

Misunderstanding ESG

To start, even though the movement is anti-ESG, the proponents speaking for the movement don’t have a grasp on what ESG even means or represents. Today, a lot of the critics slam companies for trying to be more energy efficient or invest in alternative fuel sources beyond fossil fuel. They lose their minds over M&M mascots wearing sneakers over more feminine footwear or Lego being more inclusive.

But ESG is a lot more than just reducing carbon emissions or inclusivity. There is the whole governance aspect of it too along with other points revolving around environmentalism and social issues. And those particular issues as well affect the long-term viability and performance of a company, presenting themselves as legitimate risks. And not because mobs of people are boycotting businesses if they’re not ESG enough.

Viewing ESG As A Monolith

To expand on the first point, critics really don’t understand it from the start based on how they view ESG to begin with. We all know ESG has diverse issues, but also the way to solve these issues are quite diverse too.

There are a lot of approaches you can take, a ton of different metrics to consider, and investors and organisations have their own differing criteria for what is good enough. The fact that companies like ExxonMobil have average ratings despite their massive contribution to global warming isn’t a discredit to the movement. Rather it reflects the diverse considerations that are being made about the company and what it is doing moving forward.

The fact anti-ESG can’t see that and considers the movement to be this one massive entity is a major drawback. After all, ESG is clearly more diverse and continues to change.

It Ignores Materiality

At its core anti-ESG is all about climate denialism and so the movement claims that ESG issues are irrelevant or secondary to financial performance. But the reality is these issues are not. Not paying workers enough to make ends meet results in more employee turnover or strikes.

If a company needs lumber to do business and that section of forest they paid for is burned down from raging wildfires in the area, that delays projects and profits. Those wildfires are becoming increasingly more common too.

What this means for several industries is these concerns do matter since it affects their bottom line directly. If a resource is diminished due to some environmental impact, it would be bad business to disregard it or think that’s a secondary issue.

Read: What Is The SASB Materiality Map?

It Neglects Stakeholder Interests

The stock market for years has largely been focused on shareholders and making them happy. One of the cornerstones of the ESG movement is simply for businesses and investors to begin considering the sentiments of other people around them. And there are some compelling arguments for that.

What anti-ESG proposes is going back to the “good times'' where the focus is more on the company and the people who are investing in the company. And the issue is that it’s an old way of thinking and it’s caused a wider range of issues. If companies neglect employees, workers may some day not show up to work and that hemorrhages profits. If customers are not making as much money, they might struggle to afford the products the company is putting out.

And when a movement focuses on just the shareholders being the only party that matters, the financial performance struggles if employees, customers, and communities decide to simply stop engaging with that brand.

Mischaracterising Divestments

Naturally, when a company is caught greenwashing or has certain practices that are frowned upon, ESG divestment campaigns are started. And while campaigns are criticized by the anti-ESG movements as ineffective or misguided, it is hypocritical of them to be saying that.

After all, anti-ESG did require a lot of funds to divest from companies that even considered ESG factors in the slightest. And what anti-ESG has to show for it is low performance scores.

At least when ESG performs this, it’s often seen as a signal of concern over practices or industries and focuses on a much broader change rather than a specific company practice or policy.

Related: The Anti-ESG Movement Explained

Downplaying Climate Risks

Stemming from the materiality mistake, anti-ESG leans in hard on anti-environmentalism. They deny climate change is a thing and go as far as to say what goes on in the environment has no impact on a business’s performance (even though it does).

But the reality is that it does. If a farmer’s crop fails due to heavy rainfall or extreme heat, that reduces the amount of food that a farmer can supply. They do raise prices to cover costs, but that also leads to consumers not being able to afford it as often or be willing to buy them in the first place.

All in all, weather impacts the availability of resources. And if those resources get diminished that does affect the price of products and how many people will buy - effectively affecting the bottom line of a business.

Ignores Regulatory Trends

While these laws are being passed and are technically regulations, a lot of the anti-ESG criticism and legislation disregards the ESG reporting and disclosure mandates that are being put in place. Federal governments and regulatory bodies around the world are ramping up efforts to disclose ESG-related information.

What this will result in is America lagging behind the more these anti-ESG bills get passed in individual states.

It Overlooks Competitive Advantages

The other appeal to ESG is that even though it focuses on core issues, there are still a lot of competitive advantages that companies can embrace. As mentioned before, there are all kinds of approaches to several ESG issues and that in of itself creates distinct advantages for companies.

Anti-ESG arguments fail to even consider just how good ESG can be for businesses in this regard.

It Doesn’t Look Long-Term

A lot of the anti-ESG rhetoric is all short-term thinking based entirely on its reactionary nature. Whenever there is something ESG happening, anti-ESG critics are the first to bash and criticise companies for the decisions that they are making. But even in terms of profits, anti-ESG focuses on the immediate profits rather than the long-term sustainability of a business strategy.

As a result, we do see anti-ESG funds doing well at this point in time. But those investments will begin to dip more as large sweeping changes are being made. We know we can’t depend on fossil fuel forever and have to come up with another alternative source. As a result there is a natural push for cleaner energy and an entirely new system.

Disregards Ethical Considerations

Ethical considerations all boil down to morality and ideology. It hinges on values. But when it comes to business it also adds a financial aspect to the mix that further complicates what is ethical and unethical.

Anti-ESG embraces unethical practices since it focuses so much on regressive tactics and maintaining the status quo. In the face of mounting evidence on so many particular issues, keeping the status quo would only bring more pain, misery, and exploitation. Disregarding a lot of the problems with the current system is simply foolish and bad business.

Read: What Are 3 Issues That Impact Sustainability?

Anti-ESG Is A Foil

Like an antagonist in a book, Anti-ESG serves as a bit of a foil for the ESG movement. While it’s not as threatening to be considered a rival, since there are so many flaws to the movement itself, anti-ESG still serves as a reminder and a check for the ESG movement.

We know that ESG practices and concerns are all over the place and that it’s a work in progress. But it’s for this reason why ESG discussions should be had in the first place rather than grounds to dismiss it or call it “woke”. ESG clearly can offer a lot of benefits to people, companies and the world, it’s just a matter of showing it.

Want to know which companies are making real progress and which are greenwashing? Bookmark our ESG Ratings page for the latest performance scores from thousands of global firms.


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