ESG in the shadow of war, inflation and energy worries

By Carsten Boehme, CEO Instinctif Partners, Germany

Despite pressure from all sides, companies should stick to ESG strategy

War, recession, inflation and an unexpected energy crisis – a harsh winter seems to be just around the corner for the people of Europe. First and foremost, of course, in Ukraine, but not only. Alarm bells are also ringing in Germany, France, Italy or the UK. How bad it will ultimately be, the experts disagree. Politicians are desperately looking for ways out and to appease; lobbyists are warning and demanding financial aid for their respective clientele. And what do those responsible in the companies do? You just have to keep making decisions in an extremely volatile, opaque environment. Every day.

Against this background, changes in companies are no longer a special situation: so-called change management has become part of everyday life. The complexity for companies has been increasing for some time. In addition to recent concerns, they are challenged by major technological leaps, supply chain problems or a pronounced shortage of skilled workers. With the Green Deal almost three years ago, Brussels had also given the go-ahead for future capital allocations with regard to the European climate targets. There is hardly an investor presentation today without a more or less detailed ESG chapter.

What is important for companies now?

Of course, companies have always had to make strategically and operationally difficult decisions under time pressure: on product developments, production processor location planning with a correspondingly high capital investment. However, against the background of extreme uncertainty, costly wrong decisions have become more likely. But even the supposedly right decisions cannot be completely successful in the implementation, especially if the associated changes are not properly accompanied.

In order for changes in the current crisis situation to be supported by the companies themselves and beyond by the other stakeholders, clear, convincing communication is required. The need to change previous behaviour and attitudes must also be explained against the background of the complex economic situation. New accompanying processes and communication platforms or forums pave the way for change – which can then also be understood and accepted. If there is a lack of understanding or skills in the team, appropriate information campaigns, including entire training modules, must be used quickly. And finally, the top management must clearly exemplify any change as role models. The bigger the change, the more visible it must be.

Don’t lose sight of sustainability goals

What role does ESG play in this environment? All surveys of consumers and investors show that the associated topics remain of great importance in the long term (war, inflation). If companies on the cost side are now under enormous pressure (e.g.in the energy sector where technically their backs are against the wall and senior management is on the verge of a nervous breakdown) then the topic of ESG should not be dealt with thoughtlessly. If KPIs that have already been achieved are torn down, explanations are required. Sticking to long-term guidance provides additional security. An unavoidable, temporary change in priorities can be explained – an emotional swan song to the energy transition and climate change, on the other hand, is likely to catch up with companies quickly.

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