As companies increasingly face pressure to make their operations more environmentally sustainable and socially conscious, executives are also facing critics that argue that ESG policies don't put business interests first.
How can executives make sure they reach sustainability goals amid controversy around the term 'ESG'? Four business leaders at Fortune’s Impact Initiative Conference on Nov. 30th shared how they incentivize building more sustainable measures within their companies.
Laurie Schalow, Chief Corporate Affairs and Food Safety Officer at Chipotle, said that a key tactic for meeting ESG goals at Chipotle has been to tie the company’s sustainability goals to executive compensation. “If you want to get something done, tie it to exec comp, and it will get done in your organization,” said Schalow. “We started with a very qualitative goal, but then there was a lot of pressure to have quantitive goals for the second year, and it’s just working really well,” she added.
Another strategy that the executives highlighted was focusing on a handful of ESG initiatives that align with a company's purpose as opposed to setting goals in a huge range of areas that would be too difficult to achieve.
“When [Eli Lilly] set up our formal ESG function two-and-a-half years ago, we deliberately said we want to be stakeholder focused, not check-the-box focused,” explained Jim Greffet, Head of ESG Strategy at Eli Lilly. “Our narrative is grounded on the 13 things that matter to us as a pharma company in general… we’re not trying to check every do-gooder box there is.”
Tracking specific measurements over time and being transparent even when they fail to meet ESG goals is important, the executives agreed. Greffet explained that in the company’s first official ESG report, they decided to track what happened to the number of high risk allegations brought against the company as well as product recalls despite concerns that the disclosures could potentially hurt the company’s reputation. Yet, Greffet said investors were overwhelmingly supportive of disclosing the numbers because reporting progress showed the company was holding itself accountable.
“[That experience] made us more open minded internally in this space. When in doubt, maybe we should talk about it because it's furthering the narrative that we’re trying to do the right thing and we'll try to prove it with numbers,” he said.
Jeannette Ferran Astorga, Executive Vice President of Corporate Affairs and Communications and Chief Sustainability Officer at Zoetis agreed, explaining that Zoetis's shareholders valued transparency over a perfect record, even when it meant the company was the first to report measures in the animal health space. “We were definitely given way more credit for even just showing our first layer of reporting, even before we launched our strategy publicly, warts and all,” explained Astorga. “Get comfortable with that transparency, and you’ll see the rewards later."
The reverse is true too—a lack of transparency can do repetitional damage to a company. Schalow she was brought in to Chipotle was after the company mishandled public communication following food health poisoning incidents at a few locations in 2016. At the time, the company stopped communicating with the media and investors instead of being forthcoming and transparent.
The executives also emphasized that the culture within a company is just as important as the goals it's setting for its operations. Natalie Tran, Executive Director at Creative Artists Agency Foundation, explained that policies like limiting cell phone usage in office elevators go a long way in creating a friendly and inclusive company culture. "I always put myself in a position of where I think, 'What kind of company would I want my sister to work at? What kind of company would I want my son to work at or my mom or my dad be at?' Putting it through the lens of people has really allowed us to really inform what our version of ESG goals are," she said.
