By Roy Snell
There are many similarities between the evolution of the compliance profession and the Environmental, Social, and Governance (ESG) profession. One of the most important lessons we could take away from the compliance profession is what we learned about who we hired to work in and lead the compliance and ethics department. We had some epic failures, and many very successful people entered the profession. Recent events at Coke have highlighted the need to consider the differences between the skill set required to get us to this point in the evolution of ESG versus what we need going into the future. More on that in a moment.
There is a continuum of people to select from. On one extreme, there are people who are not bold enough to address serious wrongdoing. At the other end of the continuum, we have people who run up and down the hall screaming like Chicken Little every time there is a minor problem. In the middle are people, like Page Motes from Dell, who has a marvelous balance of business maturity and patience. Yet, they know what issues require them to inform leadership to take corrective action immediately. If you are an ESG professional looking for a role model, I suggest you follow Page.
The attribute I would avoid the most is the “me against the world” world approach, AKA Chicken Little. For those of you who are unfamiliar with Chicken Little, it is a European folk tale about a chicken who repeatedly believes that the world is coming to an end and runs through the town screaming “The sky is falling”. We had people in the compliance profession that would light their hair on fire and run up and down the hall screaming every time they saw even the slightest little problem. Leadership could not easily determine which were the most important issues requiring action because all the problems were presented as if “The sky was falling.” It is ironic that Europeans gave us this folklore and have led the way in sustainability and ESG.
Essentially Chicken Little had no clue what the concept of materiality was. Chicken Little did not know how to gauge the importance of problems or opportunities. Chicken Little thought that everyone should do everything that Chicken Little could think of no matter how much time and effort it took. One of the things ESG professionals do is help their company determine what sustainability issues are most likely to impact financial condition or operating performance. Rather spending money to react to perceptions, ESG professionals spend money in a way that that produces actionable information that is decision useful to the company, investors, creditors, and other key stakeholders.
Compliance hired many people into the profession who made minimal effort to solve a problem, and if they didn’t get immediate action by everyone, they would throw their hands up into the air, and complain to everyone except the person who could do something about the problem. The successful people were masters of interpersonal skills such as motivation, communication, negotiation, compromise, and collaboration.
The best and brightest knew how to prioritize the problems to determine which ones required immediate attention and effectively convince the right people to act. They also had the strength to let the little things go. Before we had compliance programs, we had people one might call “extreme ethicists” who occasionally ran up and down the hall screaming “The sky is falling” and their action resulted in the massive adoption of effective compliance and ethics programs. Unfortunately, what it took to build awareness of the need to implement a compliance and ethics department, was not the same skill set needed to run a compliance program.
Sustainability and ESG professionals have been aggressively calling for action for years. The result is ESG departments are being implemented and hiring people at a breakneck pace. Naturally, companies are hiring people from sustainability and ESG. In many cases it works marvelously. However, in some cases, the people we hire cannot navigate through the challenges of implementing an ESG program because they take the same hyper aggressive approach they took to get ESG on the map in the first place. Two recent events highlight this potential problem.
If I had been in the room when Coke leadership first met to deal with the aftermath of their ESG professional using the phrase, “Be less white” in their employee training, I would have suggested that we revisit how we hire ESG professionals.
We should consider hiring people who have the courage to solve significant problems and have experience navigating significant business process change with a systematic approach that brings people along at a reasonable pace. We need people in the ESG department that have experience surgically working through occasionally hypersensitive issues, implementing business process changes with a scalpel and yet know when to, occasionally, use a bull horn.