The News: ESG transparency from CEOs took a substantial hit during Covid. A recent opinion piece in Bloomberg dissects the hesitance to report 2020 ESG metrics and its implications for progress surrounding diversity, pay gaps, and supply chain management. Read the OpEd by Chris Hughes here.
ESG Transparency from CEOs Dropped Conspicuously During Covid
Analyst Take: ESG transparency was on the rise in 2019 as CEOs appeared to embrace reporting their progress in increasing diversity, creating equality, and closing pay gaps. The 2020 metrics revealed by ShareAction’s most recent Workforce Disclosure Initiative survey, however, demonstrate a backward trend with discouraging implications. Did ESG transparency simply take a back burner during the pandemic, or do some organizations have something to hide?
ShareAction’s Workforce Disclosure Initiative
Some background: ShareAction is an organization focused on working to define the highest standards of responsible investment and helping drive change until those standards are adopted worldwide. A world where the financial system serves the planet and its people is no small goal. The Workforce Disclosure Initiative survey is designed to focus on issues identified as most crucial to work and human rights in the workplace. The WDI survey is partly funded by the UK Government’s Foreign, Commonwealth, and Development Office and run by ShareAction. The platform provides organizations with a mechanism by which to demonstrate to clients, investors, employees, and stakeholders what their approach to workforce management is, how it is aligned with their overall corporate strategy, and how they manage both their staff and their supply chain workers in equitable ways. All that to say that a close look at how corporate ESG efforts are faring during the course of ‘the Covid years’ is both timely and relevant.
What Happened with ESG Transparency Initiatives?
In all fairness, business leaders had a lot on their minds in 2020 and it’s completely understandable that ESG transparency may have fallen by the wayside, at least temporarily. However, 2020 also marked the zenith of the Black Lives Matter movement and saw increased attention given to workplace safety and fairness issues prompted by the emerging pandemic. While some might say the timing was ripe for organizations to lean in to ESG transparency and differentiate themselves through their progress, reporting instead dropped. I’m going to come down on the side of the fact that there were myriad concerns equally as important as corporate ESG efforts that business leaders were dealing with in 2020 and 2021, shifting to a distributed workforce and accelerating digital transformation efforts at a more rapid pace than ever before.
ESG Transparency by the Numbers
The metrics contained in ShareAction’s Workforce Disclosure Initiative survey for 2020 paint a clear picture of regression for ESG transparency. A record 173 companies submitted data, but only 65% of those elected to make that information public — a marked decrease from the 85% who reported publicly in 2019. Diversity and inclusion data dropped even more precipitously, from 88% in 2019 to 59% in 2020. Likewise, wage and pay gap information fell from 76% to 50%, and supply chain transparency from 80% to 50%. While I’m willing to overlook some slacking in ESG transparency, some of the data from the WDI survey was disappointing, especially for technology companies who largely have thrived during the course of the pandemic.
From the data made publicly available, it is disheartening to see that information-technology companies are among the worst performing in terms of pay inequality, with a gender pay gap of 32% and ethnicity pay gap of 59%. These figures are nearly twice and 2.5 times the reported average, respectively.
While lack of ESG transparency doesn’t always indicate lack of ESG progress, I find the downward trend important to note, and worth a broader public discussion. Fortunately, while the full results of ShareAction’s Workforce Disclosure Initiative survey may not be publicly available, they are still shared with the organization’s investors and shareholders. The conversations these metrics provoke are vital to the positive impact and growth of participating corporations.
So I’m hoping we can collectively get back on track here. ESG transparency should be encouraged and incentivized, and I hope to see this regression corrected in future reporting. As organizations “build back better” in the wake of the pandemic, leadership should ensure that their ESG transparency metrics from 2020 are a blip rather than a worsening trend. Otherwise, their accountability to and reputation with shareholders, consumers, and the public at large may be at stake.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.
The original version of this article was first published on Futurum Research.
Image Credit: Bloomberg