The concept of Environmental, Social and Governance (ESG) investing has taken the business world by storm in recent years. Amid growing concerns about climate change, social inequality and business ethics, ESG frameworks have emerged as a way for companies to assess and report on their sustainability and social impact.
At first glance, the widespread adoption of ESG seems like a positive step towards a more responsible and sustainable future – after all, by considering environmental, social and governance factors in addition to traditional financial metrics, companies are recognizing the importance of being good corporate citizens.
However, a closer look reveals that ESG as it stands is inadequate to drive the change necessary to address the existential challenges facing global society. Though well-intentioned, the ESG model suffers from several significant flaws that undermine its effectiveness as a driver of meaningful progress.
First, an over-reliance on cookie-cutter measurements and evaluations can encourage unscrupulous practices such as greenwashing, i.e. the practice of misleading the public about a company's environmental commitments and achievements. When a company's success is judged primarily by meeting arbitrary ESG criteria, there is a temptation to prioritize checking boxes over true, substantive action.
Moreover, regulation alone cannot spur the level of innovation needed to overcome climate change, socio-economic inequality, and other pressing issues. While rules and standards may prevent further damage, they do not inherently encourage the creative solutions and bold thinking needed to turn the tide on complex, multifaceted challenges.
ESG frameworks essentially operate within a system that prioritizes shareholder value and profit maximization above all else. While well-intentioned, ultimately it is a band-aid solution, a way for companies to appear socially and environmentally responsible without fundamentally changing their underlying business models and mindsets.
To truly address the existential threats facing the planet and society, we need a shift beyond the limitations of the ESG paradigm. We need a values-based revolution that redefines the very purpose of business and the role of leaders within it.
This is where the concept of “steward leadership” comes into play.
Steward Leadership is based on the belief that the pursuit of profit and the imperative to contribute to society and the environment are not mutually exclusive, but rather inextricably intertwined. Steward Leadership envisions a future where corporate success is linked to the well-being of the world, and where leaders approach sustainable and equitable practices out of a genuine sense of purpose and responsibility, not obligation or public relations.
The essence of steward leadership is about taking ownership and embracing the role of stewardship — not just for one's company or shareholders, but for the planet and humanity. It's a call for leaders to see themselves as stewards of our collective future, leveraging their energy, resources and influence to create lasting, positive change.
This shift in thinking has the potential to unlock a wellspring of innovation and creative problem-solving. By aligning their efforts with the greater good, steward leaders can tap into a deeper sense of purpose and motivation, inspiring the bold, transformative thinking needed to tackle the world's most pressing challenges.
What's more, steward leadership makes a compelling business case in itself: According to the World Economic Forum, climate change alone will create $10.1 trillion per year in new business and job creation opportunities by 2030. By adopting steward leadership as a core framework, companies can be at the forefront of this fast-growing market, driving sustainable growth while contributing to a better world.
To fully embody the principles of steward leadership, organizations need to activate what we call the “Steward Leadership Compass,” a framework made up of four core values: interdependence, long-term thinking, a spirit of ownership, and creative resilience.
Interdependence means recognizing that the success of one organization is inextricably linked to the success of others – that we are all part of an interconnected network of stakeholders, communities and ecosystems. Long-term thinking means giving up short-term gains in favor of lasting, sustainable revenue that benefits current and future generations.
Ownership is about taking responsibility for creating a better future instead of waiting for others to take the lead, and creative resilience is the drive to continue the journey and the ability to find innovative solutions despite setbacks and failures along the way.
By integrating these values into the DNA of an organization, companies can move beyond the limitations of the ESG model and truly embed sustainability and social responsibility into the core of their operations and decision-making processes.
It is important to note that steward leadership is not anti-shareholder or anti-profit. On the contrary, it recognizes that addressing the world's most pressing challenges represents a vast, largely untapped market opportunity. By aligning its efforts with the interests of society at large, companies can generate superior shareholder returns while simultaneously contributing to a better world.
Ultimately, the transition to steward leadership is not just a matter of corporate responsibility, it is a matter of survival. The challenges we face as a global society are too large, complex and interconnected to be solved by incremental changes or half-measures. We need a fundamental restructuring of our priorities, values and shared purpose.
ESG was a step in the right direction, but now it's time to take the next leap. By embracing steward leadership principles, companies can unleash a wave of innovation, creativity, and positive impact to build a brighter future for us all. Now is the time for a values-based revolution, and the business community has the power and responsibility to lead the way.
