Firstly, could you tell us who you are and what you do? 

I’m the Executive Director of Ethical Systems. A research collaboration at NYU Stern School of Business focuses on ethical culture, with a mission to harness the research of leading academics to transform ethical practice in the corporate world. I’m also a Senior Advisor at Business for Social Responsibility (BSI) and a Stern School of Business professor. 

What is the common thread running through all the work that you do?  

I think underlying all of it is an interest in human beings and how they behave, the relationship between business and politics, and how companies can impact society and vice versa.

I’m particularly interested in how siloed the world has become in its thinking. And how limiting this is when we try to find solutions to significant, complex problems. So many good ideas are never applied outside their usual context because we’ve become accustomed to where we think they belong. Numerous important research areas going on within academia are ignored by business, for example, simply because those paths rarely cross. 

​What does your work involve daily? 

​At Ethical Systems, we embark on large research projects with businesses. First, leading on undertaking culture experiments and assessments, followed by much advisory work in ESG to help companies practically implement what we discover. There are a lot of unfamiliar terminologies and confusion surrounding ESG and what we as an industry are trying to achieve, so clarifying that has become a large part of what I do.  

Can you tell us more about what it’s like working in ESG between real-life corporations and academia?  

Before focusing on sustainability, I spent much time investigating corruption, political risk, and fraud, helping companies set themselves up in parts of Africa and the Middle East. Due to this element of my background. I am accustomed to the mess, so to speak, of what can happen in ‘real life’.  

The clash between this so-called ‘real life’ and academic research is one of the reasons I do the work I do. Within the corporate world, I think behavioural science is hugely under-regarded. Why human beings make the decisions they do, and how we can best use that to our advantage. You see this, particularly within the responsible business community. There are an overwhelming number of initiatives, but hand in hand with those comes a tendency for people to lecture others about what’s wrong, losing sight of realistic expectations. This creates missed opportunities to get people to change their minds and drive the change we want to see. 

I’m interested in using strategy to stop this from happening - changing people’s minds without lecturing them or clinging to an idealised view of how the world should work. For example, activists often point out how badly businesses treat human rights. I agree with many of them, but if we want organisations to pay attention and care about those issues, there are more productive ways to tackle the problem.  

You’ve written a lot about the culture within ethical businesses - can you talk a little about why it’s important and how companies know if they’ve got it right or not? 

It’s challenging to get right, and I often advise companies to view it as an ongoing project rather than a one-off goal. Just think about the impact of the pandemic – even if your organisation had perfected culture beforehand, remote working has brought a whole new selection of issues to the table. So even if you had a good culture before, you’ll have to keep working on it. 

There has also been an enormous shift in how companies create value. It used to be that the majority of corporate value sat in things like buildings, machinery, and assets. Instead, an estimated 85% of the S&P 500 is in intangible factors like culture, data, reputation, and public trust. Of course, these are all abstract elements that are challenging to measure, but one of the reasons ESG is growing so fast is that a much tighter connection between financial results, the approaches businesses take to those things, and how the public sees you have emerged. 

Social media can help us to see this more clearly. It used to be that a company could project a message about who they were and what they stood for, and the consumer would passively absorb it. Now that consumers are armed with Twitter, they can intercept that message. Thus the way businesses interact with society has fundamentally changed. Culture is the most visible expression, but it’s not the only one.  

What trends in the landscape are likely to become more urgent over the next few years? 

The most obvious ones are the tragedies of the commons; climate change is the most obvious example. Followed by inequality and public health, these giant social crises are becoming increasingly prevalent. But unfortunately, these have occurred alongside a general loss of faith in the government’s ability to address societal problems. I think that is partly why people turn to business – it results from government failure. 

The next question that will arise is what businesses have also done to contribute to that failure. One huge issue is tax avoidance and lobbying, seemingly a ticking time bomb that will inevitably gain much more traction. Glossy brochures describing all the marvellous things people are doing for corporate responsibility will no longer be enough when tax avoidance and lobbying are pushed to the forefront.

The same way we approach this stuff will become an emerging trend. Interestingly, in terms of ESG ratings, there is an almost perfect inverse correlation between companies that score highly and companies that don’t pay any tax. Even the way we measure corporate responsibility at the moment fails to reflect what is most important.

What would your advice be for clients on what they measure and how they measure it? Could you tell us a little about how companies might communicate what they’re doing? 

People often compare ESG at the moment to accounting in the 1930s, with the idea that ‘we haven’t decided on a standard, but when we do, everything will be okay. Unfortunately, I’m afraid ESG is significantly more complicated than financial accounting, and I’m not sure how close we are to getting it right. I understand why people think this type of performance needs to be quantified. However, it often has the unintended consequence of companies becoming obsessed with a score and missing the point. 

The other issue is that even if metrics are your starting point - say SASB - there will still be thirty issues that your industry has to deal with. Given the constant spotlight on hypocrisy, it’s unrealistic to think anyone can take substantial and effective measures to address every single one. Nevertheless, business is business, and that will always be the priority. 

I wrote about this in the Wall Street Journal - the list of issues relevant to your industry will be huge. It would help if you prepared a reaction to them, but I always advise companies to pick a maximum of three to work on. First, tell a consistent story about your metrics, political financing across the business, and where you are taking things next. You cannot do that for thirty-plus issues – of course, prepare for Twitter blow-ups, but figure out what things are relevant to your business and where you can make a real impact. Then, pile your energy into the issues that stakeholders, employers, and managers agree on. 

Where do you think the ultimate motivation comes from this new interest in ESG?  

The real change over the last few years is investor interest. I’ve spoken to many companies, most often the sustainability team, who agree on this. Since 2018 there’s been a dramatic increase in CEOs and investor relation teams wanting evidence of ESG. 

Ironically, the metrics indicate that they don’t want to work hard to get to know the company. Instead, they want to see the data in their preferred format, be able to score you, and quickly decide whether or not to hand over their money. Unfortunately, it’s just not that easy. In an ideal world, more investors would engage with the idea that business can drive real change instead of scoring systems as the be-all and end-all.  

The general message is that consumers want sustainable products, particularly among young generations – do you think this is the case? And if so, what are the implications of the cost of that aspiration? 

I think it’s accurate to say that consumers want sustainability, but whether or not they’re prepared to pay for it, I’m not so sure. A colleague wrote a great article in HBR called Actually Consumers Do Buy Sustainable Products at NYU. Which proved that it’s not just talking; sustainable products are growing faster.  

That said, if you speak to the undergraduates in my classes, they ask why sustainable brands such as Everlane are so expensive. They care about sustainability, but they can’t afford it. So perhaps there is an opportunity for something that meets both those aspirations. The issue is that the fashion industry’s business model itself isn’t sustainable. Fashion is one of the worst for this, and it’s impossible to green yourself out of something if the structure is fundamentally exploitative.  

The interesting questions come when there has to be a trade-off – what do you do when you can’t do the right thing and make money? We spend much time trying to prove the case for a win-win scenario but rarely ask what we do if it’s just not plausible. And if we’re saying everything ties to the profit motive, then we have yet to realise a good answer. 

Many of our followers talk about feeling ‘siloed’ within their organisation. They know what needs doing but don’t know how to do it. What would be your advice if you were talking to somebody working within an organisation where the senior management seems enthusiastic, but things aren’t moving internally?  

I’m asked repeatedly what the business case for doing this stuff is. I’ve written extensively about this. Indeed, companies need that to be convinced, and strategy has as much to do with this as the unique reasons ESG can benefit your workplace specifically. The following starting points are a great way to start the process. 

• Find allies on the senior leadership team

The first thing I would say is to try to find allies on the senior leadership team and to find more than one. Think strategically about power and influence – by building good connections; nobody can become isolated whilst trying to make a difference. The foundations of your case stand a much stronger chance of being taken seriously and remaining resilient. 

• Think about the messenger, as well as the message

This is where strategy can be vital. I would be incredibly thoughtful about who is making a case for change. Suppose the responsibility has been delegated to you, a junior of the sustainability team. In that case, it won’t be as convincing as if they heard from the CFO. Larry Fink promoting sustainability will make far greater waves than a junior from the sustainability department. 

• Frame it positively 

Nobody likes being lectured or told they’re wrong. Frame your argument in terms of the world changing. How it would benefit the company to grow with it – it wants to appear adaptable and resilient, rather than having been wrong for 20 years. The polarised environment society is in is partly down to people’s discomfort towards being corrected, even when the opposition is factually accurate, so it’s essential to think very carefully about how you present your ideas and what you’re presenting. You need to do it in a way that is consistent with that person’s ego and self-image. 

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