Unpredictions: Insights into ESG
From geopolitics to cyberattacks to ESG, major trends are shaping our world. The Weber Shandwick Collective is excited to share perspectives on a variety of critical issues in our latest report, Unpredictions: Insights into policy, business, tech, media and culture around the world. The report is a compilation of expertise across branding, organizational design, sustainability, popular culture as well as perspectives from The Collective Senior Advisors.
This week on Issues Decoded we will share four key sections from the report, focusing on Geopolitical Risk, Technology, Environmental, Social, and Governance (ESG), and Public Trust in Institutions. You can read the full report here.
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ESG is becoming a flashpoint in the United States, reflecting political and geographic differences. But companies will continue to be accountable for their esg performance even as ESG advocates try to align around a set of common global standards.
Insights: Citizens consistently say companies must earn their license to operate by demonstrating ESG leadership. Having a 2050 carbon-neutral plan is no longer enough. Investors, employees, activists and consumers want specific actions and transparent results. A recession will not be an excuse to reduce climate and DEI actions. Greenwashing lawsuits are the rise. The ESG debate has moved beyond financial markets into politics and the corporate mainstream.
ESG has been criticized as an ineffective tool because it is hard to define, seeks to satisfy many stakeholders with different agendas, and creates confusion among both companies and investors. ESG ratings are often subjective and inconsistent, making it difficult for companies to demonstrate their ESG credentials and for investors and other stakeholders to assess them. A global standard would provide greater clarity, but there is not an agreement on who should write or enforce it.
Implications: In the United States, the Biden administration will implement the climate provisions in the Inflation Reduction Act for the remainder of its term. Republicans in Congress will push back against new funding. Several U.S. states have issued ESG-specific mandates to exclude asset managers, funds and banks from supporting ESG policies. The U.S. Securities & Exchange Commission (SEC) is expected to issue a new rule in 2023 mandating climate reporting for public companies, including Scope 3 emissions. The SEC rule will face a legal challenge, with several industry groups and states already signaling such intent. But companies should prepare now for heightened climate reporting mandates.
The EU will continue to enact ESG-related rules and regulations. Implementation of the European Green Deal will advance, including an effort to create a green hydrogen economy through a €3 billion investment in a European Hydrogen Bank. Two EU directives coming into force — the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive (CS3D) — will require additional ESG disclosures. The EU opposes U.S. incentives for electric vehicles, which favor domestic production over imports. If no accommodation is reached, the trade dispute could escalate.
Companies with global operations will have to comply with different ESG regulations and navigate a myriad of rules and reporting requirements that challenge even the largest organizations. Beyond Europe and the United States, this momentum is expanding to other markets. At the same time, concerns about greenwashing are on the rise, with activists filing thousands of lawsuits against companies and organizations around the world, claiming companies are not living up to their commitments.
ESG increasingly matters in Asia. The region accounts for 40% of the global economy, 60% of global carbon emissions, and 70% of global supply chains. While ESG is more fully engrained in companies headquartered in Europe and North America, Asia is poised to catch up fast in the years ahead, driven by the impact of regulatory changes and investor and societal demand.
Keep an Eye On: Climate-related disasters cost the global economy more than $250 billion in 2022. 2023 could be even more volatile if an equatorial Pacific El Niño fully develops this year. While governments agree on the urgent to act, developed economies and emerging markets are not aligned on how to finance the trillions of dollars needed to decarbonize the global economy. At the UN-led COP27 negotiations, countries agreed to establish a “loss and damage” fund to support countries impacted by climate-driven disasters. This was a political statement. There will be contentious negotiations, starting in 2023, to define how the fund is to be set up and operated. It’s unlikely an agreement will be reached before COP28 in Dubai in November.
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About Weber Shandwick Public Affairs
Weber Shandwick is a global in-culture communications agency built to make brave ideas connect with people. The agency is led by world-class strategic and creative thinkers and activators and has won some of the most prestigious awards in the industry. Weber Shandwick was named to Ad Age’s A-List in 2020 and Best Places to Work in 2019. Weber Shandwick was also awarded PR Agency of the Year by Campaign US in 2021, honored as PRovoke’s Global Agency of the Decade in 2020 and PRWeek’s Global Agency of the Year in 2015, 2016, 2017 and 2018. The firm has earned more than 135 Lions at the Cannes Lions International Festival of Creativity, including 36 Lions in 2021 to become the most-awarded PR agency. Weber Shandwick also received Honorable Mention (and the only PR agency) on the Gartner Magic Quadrant for Global Marketing Agencies in 2021.
Weber Shandwick is part of the Interpublic Group (NYSE: IPG) and is the anchor agency within The Weber Shandwick Collective — a communications and consulting network built for the convergence of society, media, policy and technology.
For more information, visit: https://www.webershandwick.com/expertise/public-affairs/
Powell Tate is the Public Affairs Unit of the Weber Shandwick Collective. For more information, visit: www.powelltate.com
