By his own admission, Danny McCoy has been writing and talking about sustainable development for more than three decades. Back in 1992, he gave a lecture at Trinity College on the topic, and 30 years later, during his term as President of the Statistical & Social Inquiry Society of Ireland, McCoy presented an updated version of the paper to an audience in Áras an Uachtaráin for his presidential address. 

The terms may change – sustainable development has morphed into ESG – but the underlying principles remain the same, centring on the positive impact corporations and businesses can, and should, have on the world they operate in.  

According to McCoy, sustainability was coming into vogue when he joined Ibec 18 years ago, particularly around environmental sustainability. The Stern Report had examined the economics of climate change, while McKinsey was doing a lot of work on marginal abatement costs. And then, the financial crisis arrived and the pendulum shifted back to shareholder capitalism. 

Five years ago, however, McCoy began to see a renewed focus on ESG, and within that, a particular focus on the S.

“Within ESG, you are starting to see the social piece become much more significant,” said McCoy, an economist who has led the business lobby group since 2009. 

“And from the Ibec house, having dealt with social partnership and the collective activities of business and trade unions, it was something we are very alert to, and felt that the S in our view is much more significant than the E.” 

The way McCoy sees it, companies can navigate the environmental and governance pillars if they have the right will and the right structures “in the S part”. 

“I think the S is the pivotal piece in the ESG debate,” he says, later adding: “It might sound airy-fairy and to some corporates its naval gazing stuff, but the reality is that it is crucial.”

However, he accepts the social objective can be more contested, more complex, and potentially more controversial. Companies are increasingly cautious about slipping up or entering the wrong social debate. Cancel culture is on the rise. Politics is becoming more fractured.  

In many cases, McCoy says that companies are not fully aware of the promises that they are making and that they will struggle to keep them. 

“Businesses are often stuck in knowing what way to go,” he says. “They used to, psychologically, have a safe space when they were in business. That is not there anymore. They have let it in on one level and are afraid to push it out again.”

These are some of the issues that McCoy hopes will be addressed in the Ibec S in ESG Summit 2023, which takes place in Dublin later this month. 

Ahead of the event, The Currency sat down with the Ibec boss to tease through the issues facing businesses around the social pillar. 

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Ian Kehoe (IK): When you are talking to businesses – from SMEs to multinationals, how high is the social licence on their agenda? Plus at a base level, why should business leaders, from both a financial and ethical standpoint, take active leadership in addressing societal issues?

Danny McCoy (DMcC): There’s somewhat of an amorphous idea of a social licence – the idea that you lose the social licence, that you get cancelled. I think businesses are very conscious about getting cancelled. They would not have used that terminology, but they were always afraid. 

In order to get through a planning process, it was always a good idea to do corporate social responsibility and sponsor the youth club or the football team; to be seen to be connected to your community. And that’s not just altruism – and in fact, CSR is probably the essence of this particular summit we’re talking about. Corporate social responsibility used to be seen as additive – as in, you just hand it out. So, when you get the coffee, it’ll say, ‘well, we’re going to recycle that money back to the coffee growers’, in a kind of almsgiving.

What the Porter Kramer work was, instead of CSR, it was CSV – which is corporate social value. Not values, just value – which is the sharing of a joint production. So, you actually go to the coffee growers and make them part of the process – not just of the endpoint where you give back some money to them in a kind of alms. It is the classic ‘teach them how to fish, rather than give them a fish’ – where you actually give them more technology to make the coffee beans. And that they’re part of the actual joint production function, which embeds it, as opposed to seeing it as additive. 

And so, that idea of embedding this social responsibility into organisations, I think is where enlightened leaders are. But sometimes people make pledges where they don’t fully understand what they’re pledging – and we’ve seen that quite a lot on the environmental front. Everybody’s for decarbonisation, signing net zero, and outbidding people on what they’ll do.

IK: But not actually implementing or understanding the consequences of that pledge?

DMcC: Not implementing or understanding the circular economy, the systems approach that needs to be taken. 

So, being slightly ignorant is really problematic I think for business – businesses need to be careful to do the right thing, but do it incrementally. Don’t have any big leap forwards and big pronouncements that we will do something – some things are manageable, we won’t have plastic straws, right, or we’ll have cups that are recyclable. You can do small things, but it is important not to mix up projects with policy.

So, we’ve had great projects which would be going down to the townships in South Africa and building houses – that’s very much a corporate social responsibility, that’s an additive thing. Of course, you can say there were no houses, and now there are houses. But actually, that interferes with another system’s policy – you may not like it, but actually the gifting, the changing on the endowment point to a small group of people to get that house, and then people get shocked when they flip the houses or rent them out. 

And we see this in our society – you can’t just do what you want to do and expect the feedback to be the way you’d like it to be. 

We live in a society that changes, and so your reduction in emissions might allow your neighbour to say, that’s great, I can put a bigger Jacuzzi in now that the neighbour has gone green.

IK: Mark Kramer, a keynote speaker at the S in the ESG event has written in detail about the devastating impact on the bottom line and reputation when companies forget or ignore the social element – think Volkswagen and the emissions testing scandal. Is this understood enough, especially in this era of cancel culture?

DMcC: Particularly in this S part – so, people hear social, they hear some of the things I might say in public at the moment in the Irish context around the state getting too small, and higher taxes being required. And go, ‘Oh, that socialist’. This should not be mixed up. This is a genuine belief on record – I believe the greatest achievement of humankind is the corporation. Genuinely. Some people say penicillin – that’s an invention like a project – but to get it to the masses, it required distribution. It required a corporation. The same with vaccines recently. 

Look at the development of the joint stock company, the corporation, about 140 years ago. Before that, we had lived short, nasty, brutish lives as human beings. We couldn’t sustain our populations and so on. It starts to take off from one billion to eight billion today, living twice as long. This should be celebrated – because at an individual level, we always talk about our humanity, about our family, about what really matters – on your deathbed you don’t phone your enemy, generally, you tend to phone your loved one. This kind of stuff is to be celebrated. So, something caused it – and we could add to the debate, but I fundamentally believe in the corporation as being the source for good – positively anyway, good is more of a value judgement. 

However, in moving from shareholder to stakeholder capitalism, while it sounded like a nice thing to do, and we’re seeing the reaction back on it now, is that Friedman’s, ‘the business of business is business’, has been used as a pillory. His point was, that enlightened businesses know they need a social licence. They know they need to keep stakeholders on board – but what they’re not saying is that the primacy is being abandoned, that everybody is equal inside the corporation in terms of who you’re doing this for. The shareholders have a nasty habit of coming back and saying that’s my money. And I’m not leaving it there if you’re going to distribute it to whoever comes banging on your door. We get that we have to deliver that entity. So arguably, part of this S is also to define the boundaries of what corporations can do individually, what they may be able to do collectively, and what is actually best done at the level of the household and government.

Collectivism

IK: Capitalism at its purest is about equal opportunities for people. In the past, famously, we saw companies like Cadbury’s and Guinness build large-scale housing projects for staff; tangible, physical legacies. Are businesses doing enough at the moment?

DMcC: No, I think is the answer. I do think – and many of these would be all our members – that over the last couple of years with the glut of money, and particularly in the tech side we see that, we saw a change in the labour market. But the consequence in the labour market was that lots of people were given lots of money that their productivity couldn’t possibly justify. And in a tight labour market, they left more socially beneficial jobs; as in, being plucked out of the public service from being teachers or nurses or ambulance drivers – or planners or regulators, etcetera. And capitalism can get things wrong with the best of intentions, and when it makes mistakes – it’s a big one. 

A lot of people kind of glaze over conferences like this and go, that’s very academic – but actually, this S stuff is huge right now. Because, a lot of what we’re working on is collective bargaining rights and again you go – ‘oh, yawn, that’s back to the industrial and the social partnership and all that’. Well actually, no it isn’t – because, the thing about modern businesses with hashtag movements, is that’s collectivism. When people collectively come around with a narrative for your business, it can be very impactful – for better or for worse. 

IK: Again, that comes back to the cancel culture, where companies are afraid to take a stand one way or the other.

DMcC: But again, it’s not that people are bad-intended – they sometimes don’t appreciate the subtleties of the dynamic. I don’t mean it in a benign sense. The dynamic of a corporation can actually get completely muddled by where they are. And genuinely, a lot of business leaders are suffering from this, they don’t know which way to move lest they set off a chain of events.

And in some sense, that’s because it’s being brought into the business. And it would be kind of refreshing – it sounds like a Luddite to say this – but it would be refreshing to actually find some boundaries where things are genuinely not best done in the corporation – because it just clouds it. 

Greenwashing

IK: Greenwashing is a well-established concern in the E of ESG. But there are also concerns that companies are artificially boosting social metrics by, for example, increasing board diversity. Such moves have seen several tobacco firms, for example, bypass companies like Tesla in mainstream ESG ratings. What can be done to ensure that the public can be confident that the S element of ESG is not being gamed by big business? 

DMcC: Sometimes, it’s very difficult to tell the dance from the dancer. There definitely is greenwashing out there – what we need to find out is, do some people end up being stupid in their promise to start it because they don’t understand it, and end up being greenwashed. That they’re kind of negligent. And that they can be, if not forgiven, or at least be punished, but not completely cancelled. Or, are we talking about strict liability here where you find out somebody knew full well what they were doing, and dressed it up, and was egregious greenwashing. I think people can easily end up greenwashing from a negligent point of view, by not knowing, running with the hare, making big promises and then having to renege. 

The Currency is media partner of the Ibec S in ESG Summit, which is taking place on Thursday, 30 November. Ibec is gathering business leaders to discuss social sustainability and the future of corporate leadership, the leadership role business must play in social and political issues and the stake for Ireland’s competitiveness and prosperity. Styled as a half-day, think-in event, delegates will examine these emergent issues through a series of keynote addresses, panel discussions, delegate roundtables and peer-to-peer conversations.  

To register to attend click the link https://www.ibec.ie/connect-and-learn/events/upcoming-events/2023/the-s-in-esg-summit/general-details