The Fortune CEO Initiative is dedicated to helping business leaders find ways to promote social progress as part of their core strategies. This opinion piece is based on a discussion among CEO members during this year’s CEO Initiative Annual Meeting, held Oct. 3, 2023, in Washington, D.C. The authors are CEOI members.
ESG is having a moment. CEOs face backlash to their efforts to support environmental, social, and governance initiatives in their companies. Detractors demand that management teams redirect their ESG and diversity and inclusion efforts to focus more on margins and balance sheets.
Despite that—maybe even because of it—ESG is increasingly at the forefront of executive conversations. And it’s not just talk. CEOs are taking concrete actions to move forward on ESG to drive positive societal change for all their stakeholders and create diverse and inclusive cultures for their employees.
While ESG may feel like it’s under assault, we are still accountable as leaders and must put actions behind our words. Measuring the success of social impact is most critical. We know there is a strong business case for ESG and diversity and inclusion–they benefit the bottom line and pave a path to business growth and better outcomes. Empirical data and research support this, which is why we implore CEOs and leaders to stand their ground on ESG.
Here is 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, endeavors. From the biggest companies in the world to smaller enterprises, CEOs are putting their passion, and reputation, behind these programs. These leaders know that ESG cannot be viewed as something separate but must be integrated into an organization’s broader business strategy and business plan. View ESG as an “either-or” and it is doomed to fail.
Being an ESG champion is not always easy. Leaders must go beyond declaring ESG is the right thing to do, by backing up their goals with action. Senior management must be involved and accountable, setting a mandate to get it right when it comes to ESG. Failure can impact the future of the organization for many years to come.
As leaders, we are accountable—not only to give answers, but to move things forward. Beyond driving shareholder value around revenue, CEOs create a values system that holds management accountable, and guides company strategies with structure, understanding, intentionality, and transparency. This helps align the entire organization so front-line managers are clear on the company’s goals and expectations, no matter how big the organization is.
Building a talent pipeline
Leaders must also ensure that talent is developed, working to recruit and retain employees to fill a pipeline that creates a flow of diverse talent that not only joins the company but ascends through the ranks. While training employees on technical and operational accountability, managers must also create pathways for advancement. Ensuring diversity among senior leaders in power positions—often defined as P&L, legal, marketing, and strategy—is crucial because it provides a visible cue that inclusion matters. Too often, diversity drops off not only in the C-suite but in these power positions. That must change because talent needs to see themselves not only inside the company but at the top of it.
The biggest challenge is what culture our diverse workforces encounter every day when they walk in the door. Organizations must instill an acculturation strategy that allows employees to feel understood, rather than expecting people of color to assimilate into an existing culture where they don’t feel a sense of belonging. Employee resource groups (ERGs) can create a safe space for staff to share and provide programming tailored to their needs. ERGs should have access to senior leadership so members can see the future pipeline and feel that their voices are heard.
Moving the culture is a top responsibility of the CEO, not something left to the chief diversity officer. Think of the CEO as the coach leading the strategy on diversity and inclusion, which then allows the chief diversity officer to execute it. And since a CEO won’t remain in the position forever, ensure the culture is strong enough that the good work will continue after a leadership transition.
Diversifying your board
Every CEO reports to a board, so the composition of that governing body remains a crucial factor to success. The current stats are lackluster. Women comprise 30% of board seats at Fortune 500 companies, according to a recent study by Deloitte, with women of color significantly underrepresented. For both genders, African-Americans account for about 12% of board positions, with Hispanics/Latinos lagging at about 5%.
CEOs must communicate to the board and shareholders the importance of ESG and diversity, equity, and inclusion. Talk about ESG and DEI in quarterly earning calls to get true buy-in from the investor community and other stakeholders.
Some may declare 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. Impediments to diversity and inclusion and ESG goals remain an existential threat to our businesses, and even to civilization.
Anton Vincent is the president of Mars Wrigley North America. Cid Wilson is president and CEO of the Hispanic Association on Corporate Responsibility.