The Fortune CEO Initiative aims to help business leaders find ways to advance social progress as part of their core strategies. This op-ed is based on a discussion among CEO members at this year’s CEO Initiative Annual Meeting, held on October 3, 2023 in Washington, DC. The authors are CEOI members.
ESG is having a moment. CEOs are facing backlash for their efforts to support environmental, social and governance initiatives in their companies. Opponents are demanding that management teams refocus their ESG and diversity and inclusion efforts and focus more on margins and balance sheets.
Despite this – perhaps even because of this – ESG is increasingly coming to the fore in conversations with managers. And it’s not just about talking. CEOs are taking concrete actions to make progress on ESG, drive positive societal change for all their stakeholders, and create diverse and inclusive cultures for their employees.
Although ESG feels like it is under attack, we as leaders are still accountable and must put action behind our words. Measuring the success of social impact is critical. We know there is a strong business case for ESG, diversity and inclusion; they benefit the bottom line and pave the way to business growth and better results. Empirical data and research support this, which is why we implore CEOs and leaders to stand firm on ESG.
Here’s our advice on how leaders can demonstrate the power of ESG and diversity and inclusion initiatives.
Must-have, not nice-to-have
First, recognize that ESG and diversity, equity, and inclusion (DEI) programs are must-have, not nice-to-have, efforts. From the world’s largest companies to smaller enterprises, CEOs put their passion and reputation behind these programs. These leaders know that ESG cannot be viewed in isolation, but must be integrated into an organization’s broader business strategy and plan. Treat ESG as an ‘either-or’ and it is doomed to failure.
Being an ESG champion is not always easy. Leaders must go beyond declaring that ESG is the right thing to do by backing their goals with action. Senior management must be involved, accountable, and provide a mandate to get it right when it comes to ESG. A failure can affect the future of the organization for many years to come.
As leaders, we are responsible – not just to provide answers, but to move things forward. In addition to driving shareholder value around revenue, CEOs create a value system that holds management accountable and guides business strategies with structure, understanding, intention and transparency. This helps align the entire organization so that front-line managers are clear about the company’s goals and expectations, no matter the size of the organization.
Building a talent pipeline
Leaders must also ensure that talent is developed and work to recruit and retain employees to fill a pipeline that creates a stream of diverse talent that not only joins the company, but rises through the ranks. While training employees in technical and operational responsibility, managers must also create pathways for advancement. Ensuring diversity among senior leaders in positions of power – often defined as profit and loss, legal, marketing and strategy – is critical because it sends a visible signal that inclusion matters. Too often, diversity decreases not only in the top positions, but also in these positions of power. That has to change, because talent must see themselves not only within the company, but also at the top.
The biggest challenge is what culture our diverse employees encounter every day when they come in. Organizations must implement an acculturation strategy that makes employees feel included, rather than expecting people of color to integrate into an existing culture where they do not feel they belong. Employee Resource Groups (ERGs) can create a safe space where employees can share and offer programs tailored to their needs. ERGs must have access to senior leadership so members can see the future pipeline and feel like their voices are heard.
Shifting the culture is a top responsibility of the CEO and not something left to the Chief Diversity Officer. Think of the CEO as the coach who leads the diversity and inclusion strategy, after which the Chief Diversity Officer can execute it. And since a CEO won’t stay in this role forever, make sure the culture is strong enough so that the good work can continue even after a leadership transition.
Diversify your board
Every CEO reports to a board, so the composition of that board remains a critical factor for success. The current statistics are disappointing. According to a recent Deloitte study, women represent 30% of board seats at Fortune 500 companies, with women of color significantly underrepresented. For both genders, African Americans account for about 12% of board positions, while Hispanics/Latinos lag behind at about 5%.
CEOs must educate the board and shareholders about the importance of ESG and diversity, equality and inclusion. Talk about ESG and DEI in the quarterly earnings calls to get real buy-in from the investment community and other stakeholders.
Some may argue that we are in a post-ESG world, but this is wrong. We can change the verbiage and acronyms, but the principles are still the same. Barriers to diversity, inclusion and ESG objectives remain an existential threat to our businesses, and even to civilization.
Anton Vincentius is the president of Mars Wrigley North America. Cid Wilson is president and CEO of the Hispanic Association on Corporate Responsibility.