In recent years, we have seen the evolution of corporate sustainability practices, with reservations, of course. The acronym ESG (environmental, social, and governance) has taken over the agenda of investors, consumers, and corporate employees, but the current moment seems to be one of regression with the return of profit-seeking at any cost. With Donald Trump’s return to the U.S. presidency, we have seen major corporations like Meta Group and the fast-food chain McDonald’s retreat from their social practices. And the expectation is that all priority areas of the ESG Agenda will be harmed.
There is no denying that the primary purpose of a company is value generation and that its longevity is tied to economic performance. Thus, the acronym ESG should be EESG, where the economic comes first. After all, without cash flow or returns, there is no way to invest in social and environmental practices. The problem is that the sole objective cannot be to ensure profit at any cost, as the company ends up risking its image and brand. And with the growth of social media, being distant from the anxieties and demands of the population is a significant issue and can lead to the cancellation and boycott, even if temporary, of the brand. That hits the pocket.
About 10 years ago, more specifically in August 2015, negotiations were concluded that culminated in the adoption of the Sustainable Development Goals (SDGs) in September during the United Nations Summit for Sustainable Development. At that time, an agreement was reached that includes 17 Goals and 169 targets, covering diverse sustainability themes ranging from poverty eradication and inequality reduction to inclusive economic growth. The agenda is to be fulfilled by 2030.
Since the SDGs were launched, large corporations have adhered to the agenda and improved their processes to meet the targets. Notable examples include initiatives seeking diversity, equity, and inclusion that became part of the hiring policies of companies of all sizes. Such policies have allowed people of various genders, races, disabilities, or neurodiverse backgrounds to have opportunities in the job market, even though access to higher positions remains limited.
For companies, hiring people with diverse profiles allows the organization to understand the particularities of its consumers, expanding the service network, sales, and consequently, profits. After all, a brand for everyone generates more value and more long-term returns.
However, this fact has begun to be questioned, and a wave of companies and institutions. A recent survey released by the Conference Board, an American business entity with over a thousand members, shows that half of the companies have already adjusted their terminology for diversity programs, and another 20% are considering similar changes.
The fast-food chain McDonald’s is among the companies that abandoned commitments to the so-called diversity, equity, and inclusion (DEI) objectives, discontinuing requirements for suppliers to adopt such practices. The decision comes after the U.S. Supreme Court ended the use of affirmative action in college admissions.
Meta also retreated from a series of policies in these areas and informed employees that they will no longer be required to interview candidates from underrepresented groups for open positions or to seek business with diverse suppliers. Walmart, Nissan Motors, Boeing, Ford, Toyota, and Harley Davidson have already followed the same path. Walmart announced it will no longer use race and gender parameters to select supply contracts and reduced training on racial equity. Other companies like Johnson & Johnson, Coca-Cola, and Uber removed or softened mentions of diversity criteria in their compensation policies in their corporate reports.
Here we take DEI programs as an example, but the regression to the 70s and 80s, when the vision was profit-seeking without scruples, is evident in various areas of sustainability, whether social or environmental. Initially, the view is that such objectives generate expenses and not profit. A clear mistake when reputation is at stake. Rejecting sustainability is shooting society and the companies themselves in the foot. Profit at any cost costs a lot.
