With corporate stances on issues such as diversity and the environment under fire as “woke capitalism,” about 375 professionals gathered in Denver for a conference focused in part on continuing their companies’ efforts without becoming casualties in the current culture conflicts.
The Association of Corporate Citizenship Professionals held its annual gathering in downtown Denver this week in the midst of politicians and right-leaning activists taking aim at using social and environmental considerations to help guide business decisions and investments. On the eve of the conference, the group released a survey showing that 65% of the respondents worry about the future of companies’ commitment to diversity and inclusion efforts and 60% are changing how they talk about the work to the public.
Efforts to advance “justice, inclusion, and sustainability are being politicized and even demonized,” the association’s CEO Carolyn Berkowitz said in written opening remarks at the conference.
“It’s really important that companies stay the course and that they do so in a way that doesn’t draw the ire of the politics and the division of today,” Berkowitz said in an interview with The Denver Post.
The backdrop against which company officials are striving to stay on track includes an escalating feud between Florida Gov. Ron DeSantis, a Republican presidential candidate, and Disney, Florida’s largest taxpayer. The fight started after the company criticized an education law limiting what Florida teachers can say about sexual orientation or gender identity.
Bud Light beer and Target both suffered backlash earlier this year from customers for supporting LGBTQ+ issues: Bud Light for partnering with transgender influencer Dylan Mulvaney and Target for its LGBTQ+-themed merchandise leading up to Pride month.
And looming large for corporations are the implications of the U.S. Supreme Court’s decision in June that struck down affirmative action in college admissions, ruling that race can’t be a factor. A combined 65% of the 112 respondents to the association’s survey are concerned the ruling will hinder companies’ goals for more diverse workplaces.
Colorado Attorney General Phil Weiser issued an opinion in early October saying that workplace diversity, equity and inclusion programs, or DEI, are legal under federal law. The Supreme Court ruling was limited to college admissions and didn’t address employment law, Weiser said.
Stirring the alphabet stew
For the past several years, investors who want their spending to match their values have been able to review a company’s stated set of standards and goals. Businesses have implemented DEI programs to promote a more diverse workplace and recruited more women and people of color to their boards.
Another area of focus is ESG: environmental, social and governance. The standards can cover a company’s policies on climate change and safeguarding the environment; how it deals with employees and the communities where it operates; and policies governing how a company conducts its business.
And then there’s CSR: corporate social responsibility. Berkowitz, with the Association of Corporate Citizenship Professionals, said ESG uses investments to some extent and compliance with regulations to measure a company’s performance.
“Corporate social responsibility is not required, but it’s very often an expression of ESG, a way companies engage employees,” Berkowitz said. “One of them is about the hard numbers and one of them is about societal problems addressed in partnership with communities.”
While corporate ESG and diversity programs have riled critics who see them as pushing liberal agendas, the programs have also caught flak from those who question if companies’ words actually turn into action. Charges of “greenwashing,” misrepresenting a company’s environmental bona fides, have come up.
The resulting turmoil has been what’s been called “green-hushing,” a growing tendency of corporations to publicly play down their environmental and social programs.
The Wall Street Journal reported that executives at public companies listed in the U.S. mentioned ESG, DEI or “sustainability” on 575 earnings calls from April 1 to June 5, a 31% decline from the same period in 2022, according to data from financial-research platform AlphaSense.
Tony Holder is an associate professor in accounting at the University of Denver who researches companies’ metrics for meeting their environmental and social standards and how to measure the impacts. He said as a layman, he believes companies are rethinking their ESG programs and aren’t as willing to publicize them as in the past.
“Maybe they’re just not talking about it as much but they’re continuing to do the same things. But it’s also possible they’re just not doing as much as they were,” Holder said.
He was surprised that the U.S. Security and Exchange Commission’s recently released set of priorities for 2024 didn’t include ESG. The SEC listed ESG as a priority 2021-2023, Holder said.
The SEC is expected to issue a rule requiring public companies to disclose the impact of their activities on the climate. Republican state officials have accused the agency of overreach.
Julian Friedland, whose expertise includes business ethics and corporate social responsibility, advises executives to help corporate leaders develop social goals that fit with and complement the company’s products or services.
“If a company is going to have a very strong social mission that goes beyond its traditional fiduciary duty toward shareholders, if you want to talk about a social mission, it’s very important to make sure the social mission is already very compatible with your brand and with the lion’s share of your customer base,” said Friedland, an associate professor in the College of Business at Metropolitan State University of Denver.
The push for companies to consider social and environmental good as well as profits largely came from employees and the public, Friedland said. Rising concerns about the effects of climate change and racial and social equity, galvanized by George Floyd’s murder in 2020, propelled ESG to the top of the agenda for corporations, investors and policy makers, according to an analysis by Reuters.
“There was a moment where there was intense pressure from the public and stakeholders. It was exhilarating because work was really being done on those issues,” Berkowitz said.
But companies began scaling back on a variety of functions as they faced an uncertain economic future, Berkowitz said. Political backlash is a factor, too, she said.
“Companies who really want to engage in these ways with society have to take a step back in some ways, not a step back in the work, but a step back in the way they are communicating it or a step back in the way they are working with their leadership,” Berkowitz said.
Friedland said what he calls the “culture warmongering” might be wearing thin.
“People want to talk about more bread-and-butter issues. They want to see what the government is actually doing,” Friedland said. “You can only surf on cultural-wedge issues for so long before people start seeing through it.”
“I’ll let others talk about the politics.”
Xcel Energy always considers how it is perceived and the way it communicates, but doesn’t believe the substance of its work on social and environmental issues has been affected by the public debate, said Frank Prager, senior vice president of strategy, planning and external affairs.
“What we are doing is basically the same kind of things that we’ve been doing for many, many years,” Prager said. “We’ve for many years been focused on these kinds of ESG strategies because they make sense for our customers. They make sense for our employees. They make sense for the environment.”
The public utility’s programs also make sense for shareholders, who expect Xcel to be a leader, Prager added.
Xcel Energy, with 1.5 million electric and 1.4 million natural gas customers in Colorado, announced in 2018 that it aims to be carbon-free by 2050. The Minneapolis-based company has pledged to cut its greenhouse-gas emissions 85% by 2030.
“We’ve seen that the energy we get out of renewable resources, like wind and solar, is actually below the cost of some of the fossil-fuel generation we get,” Prager said. “We’re saving our customers money and cleaning up the environment at the same time.”
Xcel works to recruit employees and corporate officials with different backgrounds and experiences. Prager said the company has several different employee groups to help people connect with others throughout the organization and grow in their jobs.
“It’s not about trying to create quotas or anything,” Prager added. “It’s about providing opportunities for employees to have the best chance for success within the organization and by doing that, they not only have value in their career, they create value for our customers.”
The company believes its diversity and ESG programs “create a stronger and better company,” Prager said. “I’ll let others talk about the politics.”
In the long run, Berkowitz said, ESG and diversity programs are good for companies’ bottom lines. A recent survey of CEOs by KPMG, a multinational professional services network, found that 70% said their ESG programs improved their financial performance.
Corporate responsibility and diversity are important to younger employees, Berkowitz said. A 2020 report by Citi said studies have shown that millennials are willing to forego an average of 14.4% of their expected compensation to work for socially responsible companies.
In addition, 66% of employees who participate in corporate social responsibility programs report a greater sense of loyalty to their companies, according to Citi.
“In essence, it gives companies a competitive advantage in sales, in recruiting and retaining talent and in building their reputation,” Berkowitz said.
