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To ESG or Not ESG, that is the question
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I talked about ESG (Environmental, Social, Governance) issues last month using the example of the oil industry and the results they have had with various strategies. I wanted to come back to this again this month with another set of considerations.

I'll posit that most ESG issues, or at least the E and S parts, are by and large, of concern to younger generations. Governance, at least internal governance, is likely more of a concern to your investors. By and large, investors skew to older generations.

Herein lies the dilemma for boards of directors and senior management. Your customers, the source of all operating income, may be perfectly happy to know part of their expenditure with you goes toward your ES objectives--they are young and have new ideas about how things should work. Your investors, again, likely older generations, could care less about this except when it reflects their return on investment.

Striking the right balance, keeping sales growing and returns on investment as high as possible, becomes a challenge like it has never been before.

As I think about it, this is not much different than keeping your company's assets neat and orderly, maintaining an excellent safety record, or any of the other issues that are simply part of being a well run business. In other words, these matters just become routine, like keeping the lawns mowed around your facilities. And, like keeping the lawns mowed, you don't spend a great deal of effort providing granularity on the cost of doing the business the right way, but you may publicize to a certain extent, your actions in these areas.

After all, I have never seen lawn mowing itemized on a major company's P & L. Many of these issues of today should not be, either. In shareholder meetings, the answer is, "of course, we follow the latest practices in top tier business management." In your product messaging, these issues are highlighted.

It is hard being a CEO today.

Jim Thompson is CEO of Paperitalo Publications.


Get Jim Thompson's "Monograph on Purchasing." Available here.


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