In elementary school, I learned to be nice to others. Name-calling and bullying weren’t allowed. We were expected to include others in our games, and play nice and cheating wasn’t permitted. We had to wash our hands, clean our desks and pick up garbage and throw it away.

There were rules around much of this. But rules didn’t prevent anyone from being jerks, hanging out in cliques, and leaving messes for others to clean up. Not that the rules had no place. But rules couldn’t transform a bunch of snot-nosed, narcissistic juveniles into civilized and productive members of society.

What did help was the examples set by teachers and older students that we looked up to. What mattered, even more, was the family environments we came from. To the degree that the rules worked at all, they merely clarified and articulated expectations already shared by our families and school leaders

DEI and ESG: Improving the World through Rules

It’s become the trend for governments and businesses to heavily prioritize and even mandate Diversity, Equity, and Inclusion (DEI) and Environmental, Social, and Governance (ESG) initiatives. These started quite a while ago but have moved to the forefront in the last few years. These initiatives are intended to increase equality in the workforce and hold companies accountable for their social and environmental impact.

Sounds fine so far. There is an intuitive logic behind DEI and ESG efforts. It can be stated as: “Require companies to be more responsible then society will become more just.”

DEI and ESG initiatives are broad reaching across Europe as well as North America. These initiatives are also enforced, by governments and corporate power brokers. Some organizations now risk not qualifying for contracts, being excluded from funding, and even being denied services unless they are DEI or ESG-compliant. ESG scores are starting to be utilized in the valuation of companies.

Doing the Right Thing Matters

In any organizational setting, people should be treated with integrity and respect. That’s a core principle that I’ve always held. Integrity and respect form the foundation of all successful human relationships. They drive productivity and nurture a healthy work culture.

When this principle is violated, relationships are broken.

Healthy organizations are led by people who act in ways that engender trust and cultivate respect. This is a well-understood and researched principle. Whether you are talking about leadership credibility, performance, employee retention, or any number of workplace-related topics – integrity and respect keep bubbling to the top.

Do DEI and ESG Efforts Work?

They do. Sort of. Well…

DEI and ESG efforts are showing results. At least, in companies where the leadership and culture of organizations support the overall goals and practices of these initiatives.

In other words, companies that are already responsible and fair are scoring well. That’s not an outcome. More of a confirmation. They were doing it anyways.

The evidence seems to show that DEI and ESG efforts don’t take unresponsible and unfair companies and transform them into companies that produce positive social change. Even when they have good DEI and ESG scores. Why?

The Right Thing Only Matters When It Actually Matters

A study published in the American Sociological Review analyzed the efficacy of affirmative action (the pre-DEI approach) and found that it had a minimal impact on improving job prospects for minorities and women over 30 years

Similar to DEI, the effectiveness of ESG metrics is challenged. A report by the global consulting firm, McKinsey, discusses some common concerns around ESG efforts. One is that the desired outcomes are poorly defined and can’t be measured.

In other words, these movements want a “better world.” But they aren’t sure (or don’t have agreement around) what a better world looks like or how to know if we’re getting there. One reason for this is that there are polarizing differences between how people define “better.”

As a result, in the rush to meet DEI and ESG goals, governments and organizations often fall into the trap of symbolism over substance. A paper in the American Journal of Sociology indicates that, for many firms, the desire to show compliance is greater than a focus on results.

Squishy Solutions to Legitimate Concerns

If I could set responsible and fair rules for my kids and they simply complied – I’d be ecstatic. Parenting would be easy. But that’s not how it works. As every parent knows, they copy us more than listen to us.

I am a fan of leaders who care about people and their communities. That has always been a centering philosophy of my work and writing in leadership.

But I’m not a fan of posturing or virtue signaling. In my opinion, those are worse than apathy. They divert good attention and resources away from usefulness. They claim a “win” while the problem continues and possibly even grows.

Also, the prevailing winds of what is deemed responsible or fair shift. They are open to interpretation. There is enormous political jockeying to control the definition of responsible and fair. It becomes a power game.

So, What Do We Do? 

When you step back from trying to keep up with what all the cool kids are doing, I believe DEI and ESG efforts reflect a desire for Servant Leadership. This may not always be well articulated. And special interests keep attempting to hijack the conversation along the way.

But, at the core, people want good leaders and good organizations.

People increasingly can choose where they work, shop and invest. It is now important for leaders to answer this question: “Why would anyone follow, buy from, or invest with you? Especially when they have a choice?” 

This question is asked and answered in the philosophy of Servant Leadership. This was articulated by Robert Greenleaf, who coined the term. The premise of servant leadership is this: Leaders and companies are only seen as legitimate to the degree that they meet the interests of their employees, customers, and the community. 

Here are my points:

1. Do the right thing for its own sake.

2. Work to ensure that your efforts produce results.

If you are required to comply with DEI and ESG initiatives ensure that they are supported and valued at the highest levels in your organization. Don’t delegate this to HR or just start a DEI/ESG office. This shouldn’t be an initiative. This should be a natural reflection of your values. Define the change you want to create, plan to create it, and track your progress.

If you aren’t required to comply, keep being responsible and fair. Keep exploring ways to increase this and express it. If you want to take it further – put effort into defining the outcomes you’d like to accomplish and build a plan for getting there. But avoid externally driven initiatives. Those can be powerful tails that can wag your dog. Don’t let your already good intentions get pulled off track by someone else’s checklist.

Take good care,

Christian

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