Answer ... Stakeholders have played and will continue to play a critical role in shaping ESG in the United States. As noted in question 1, the Business Roundtable Statement on the Purpose of a Corporation reflects a commitment by participating CEOs to lead their organisations for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.
Among these stakeholders, employee stakeholders have exercised the most influence on ESG-related practices during the COVID-19 pandemic. According to the US Bureau of Labor Statistics, an average of 3.95 million workers quit their jobs each month during 2021 – the highest average on record. The reasons behind the phenomenon known as ‘The Great Resignation’ are varied – vaccine mandates, lagging sales, and low wages in hospitality and retail, as well as school and childcare closures. The Great Resignation has created a candidates’ market, giving workers leverage to seek better opportunities and work/life balance. The competitive labour market has led employers to revisit their human capital management practices in an effort to attract and retain talent, including through organisation-led ESG-related initiatives focused on:
- enhanced diversity and inclusion;
- clear paths for advancement;
- workplace safety;
- pay equity; and
- greater flexibility (eg, remote work or a four-day week).
Customer stakeholders influence ESG by supporting businesses (eg, through purchase decisions) based on alignment with their ESG values, such as environmentally sensitive manufacturing processes and public commitments to equity. Supplier stakeholders are focused on labour practices and supply chain resilience, adopting the ESG practices of their customers.
Pensioner stakeholders exert pressure on organisations by adopting investment strategies based on ESG goals and investing or divesting accordingly. This approach influences organisations to implement ESG-aligned strategies themselves to remain (or become) viable investments.
Indigenous communities have objected to project development and decision making within their territories, both publicly and in court. By exerting pressure on organisations to, for example, reduce the impact of infrastructure and other projects on indigenous people and the resources on which they depend, indigenous communities are also shaping how businesses respond to climate change and how they impact diverse sets of stakeholders.
All of these stakeholders have effectively influenced the growth of ESG practices via:
- regulatory complaints;
- social media campaigns;
- investments;
- purchase decisions; and
- for employees, job changes.
Further, organisations are increasingly driven to seek stakeholders’ input to ensure they remain engaged and identify early on the ESG issues that are material to their stakeholders to mitigate legal, reputational, operational and political risks.