Fri. Jan 21st, 2022


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As the head of sustainability-oriented consulting firm BSR, Aron Cramer is one of the top advisors to large global companies looking to improve their environmental and social impacts. When we spoke this week, he had a few warning words for executives with a narrow view of what it means to be a responsible business. The conventional corporate approach to controversial political issues – to stay a mile away from it – is becoming increasingly untenable, Cramer believes.

With concerns about civil liberties and democratic integrity increasing in many parts of the world, “it will increasingly be a ‘on which side are you?’ moment, “he said.” Businesses will be expected to weigh in – and many CEOs and boards are uncomfortable doing so. “

A striking sign of the changing times came in the US last year when companies ranging from Amazon to General Motors challenged “discriminatory” voting laws proposed by Republican lawmakers in several state legislatures. Businesses should expect further pressure to intervene on such issues, Cramer said – not least from a new generation of employees who want to see their values ​​reflected in the organizations where they work.

The latest example of the trend comes from the UK, where 200 companies have condemned a parliamentary bill that would impose severe new restrictions on public protests. Keep reading for more on that – as well as on the intersection of ESG and M&A, and the environmental threats that have taken the best accounts in the World Economic Forum’s new global risk report. Simon Mundy

‘Dangerous’ UK policing bill causes business backlash

The Body Shop in Amsterdam

© Bloomberg

A recent surge in environmental and social protests in the UK has provoked a strong reaction from Boris Johnson’s government, which is trying to push through difficult new curbs and punishments around protests. The proposed new policing law unleashed resistance among fighters for civil liberties. Now many businesses are adding their voices to the chorus of disapproval.

“This bill is dangerous. It’s authoritarian. These are draconian, ”reads a statement from Unilever subsidiary Ben & Jerry’s, the Vermont-based ice cream brand. It is one of 200 businesses that have joined a public campaign to oppose the bill, with others including clothing brand Patagonia and cosmetics company The Body Shop. The intervention raises some interesting questions about companies’ responsibility to speak out on matters of legislation and public policy, even where there is no clear direct impact on their operations.

The bill is being debated today in the House of Lords, the upper chamber of the British Parliament, before a vote on Monday. If enacted into law, protesters who have received news over the past few years – from Extinction Rebellion to Black Lives Matter to isolate Britain – will face a sharply increased risk of prosecution and jail time. To disfigure a statue – like that of the slave trader Edward Colston overthrown by anti-racism protesters in 2020 – would now carry a maximum prison sentence of 10 years. If protesters make enough noise to cause “serious disruption” to nearby organizations, they could face up to 51 weeks in prison. Other sections of the bill will “significantly expand the police’s ability to impose conditions on the right to public marches and rallies and. . . leave completely open what those conditions may be ”, so this useful analysis by the attorney-managed, nonprofit Good Law Project.

Definitions of corporate social responsibility have generally focused on how companies manage their operations, rather than how they use their voice to influence legislation. But companies that oppose the new policing bill – many of which have social and environmental responsibilities at the core of their public brands – have told me that they felt they had to take this stand to fulfill their stated mission.

“It’s about intrinsic key values ​​within our business,” Alex Beasley, head of Patagonia’s UK, told me. “It is about being consistent and living out our values. It’s not about increasing sales. ”

Yet there is a business logic to the intervention, said Chris Davis, head of sustainability at The Body Shop, a subsidiary of Brazil’s Natura. For many Body Shop employees, the company’s glorious commitment to social justice is a key reason to work there, he pointed out. Many consumers are also attracted by those credentials.

This puts people like The Body Shop and Patagonia – whose consumers are skewed towards the liberal side of the spectrum – in a different situation than large listed UK companies, none of which have publicly condemned the bill. A larger consumer-oriented business like Tesco, for example, would run the risk of alienating large numbers of conservative-minded buyers if it did. “You can understand their hesitation,” Davis said, noting that where political involvement is involved, “there is still a line that many companies will not cross”. Simon Mundy

ESG is ready to be a key component in M&A space

When entrepreneurs created ESG-friendly start-ups over the past decade, they usually did so because they were so passionate about an issue – or so frustrated with the mainstream market – that they were willing to stand out on their own, even if the strategy was risky alike.

How times change. In recent years, there has been a frenzy of mergers and acquisitions in the ESG world, as established companies rush to buy ESG-friendly timers to build some green credentials to their existing operations and divert criticism from investors. again.

In the first half of 2021, 140 low-carbon energy M&A transactions was completed worldwide, each worth more than $ 50m. In addition, two flagship transactions included Goldman Sachs obtain ESG-focused asset manager NN Investment Partners for € 1.6 billion and Blackstone buy Sphera, a $ 1.4 billion ESG data and consulting group, both intended to promote sustainability credibility.

And if this survey of EY is any guide, the insane transaction closure is likely to continue into 2022, making some of the founders of those ESG start-ups very happy (i.e. rich).

The numbers are striking. According to the survey, nearly two-thirds of global CEOs expect their companies to pursue acquisitions in the next 12 months – up from 48 percent at the start of 2021.

What is even more striking is that 99 percent of the CEOs surveyed said they took ESG issues into account when making these acquisitions. which makes us wonder who those 1 percent opponents are, but that’s a different matter).

Only 6 percent say they have actually walked away from an agreement due to ESG concerns, EY found – either indicating that these ESG concerns are only skin deep, or that the companies they are looking at are already complying.

Either way, it is becoming clear that corporate boards are no longer willing to ignore the need to uphold ESG values. Moreover, financiers say that when companies do get involved in these transactions, they are more picky.

ESG is maturing, but is now being held to a higher standard, Joyce Chang, chair of global research at JPMorgan, told Moral Money, arguing that investors are waving a flag of caution before agreeing to by seeking sustainability claims, especially in the M&A space.

Joyce Chang, chair of global research at JPMorgan

Joyce Chang, Chair of Global Research at JPMorgan © Bloomberg

It’s easy to see why investors are becoming more cautious. Last year, there was a wave of hype surrounding the idea that ESG strategies are good for investors. Morgan Stanley economists, for example, released two widely read reports arguing that ESG strategies investors increase returns – and reduce the disadvantage instability.

This week, however, a team of economists affiliated with Columbia exempt their own research, which aimed at the Morgan Stanley claims: it argues that ESG strategies usually forces investors to make modest sacrifices in their returns.

Columbia researchers are not alone in their hesitation – 65 percent of CEOs admit that they encountered investor resistance when driving ESG-focused M&A transactions, which created tension against risk reduction.

However, remarks like these are unlikely to deter corporate boards. Nor the myriad of entrepreneurs hoping to ride the green wave. Take Trevor Neilson. He used to work in the VC world, but last year he left to start a partnership with WasteFuel, a waste-to-energy company.

It once looked like a risky career move. But Neilson is so confident that his company will be acquired by one of their investors (who have already become their top clients), or will grow into the next “climate unicorn”, that he claims to be an entrepreneur is now the “safe” option – compared to the VC world. Kristen Talman

Chart of the day

GM130114_22X Identify the most serious risks on a global scale over the next 10 years

Environmental threats dominate the list of world’s most critical long-term risks, according to a recent poll among nearly 1,000 experts and officials.

In the World Economic Forum’s annual report on global risks, respondents to the survey pointed to “climate action failure” as the biggest long-term threat over the next decade. The report predicted that the “disorderly climate transition” would continue – and warned that a transition that did not take into account “societal implications” runs the risk of exacerbating existing inequalities and fueling greater geopolitical tensions.

Smart reading

  • Beyond Meat, one of the leading players in alternative proteins, may soon need an alternative strategy. In this slim piece, Emiko Terazono explains how the plant-based meat company has become one of the companies with the most shortages in the US market.

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