Voters don’t understand what ESG means in practice. Here’s why killing the term may be the only way to save it

With ESG constantly in the headlines, many companies struggle with how to talk about it with their stakeholders. Our latest RESEARCH REVEALS with Penn State showing Republican and Democratic voters both believe that certain ESG components, such as climate mitigation, are tied to their financial wealth. Based on our findings, companies should consider moving away from the broad term, ESG, and focus on specific areas that voters and policymakers care about.

ESG is an investment framework that evaluates corporate action to eliminate material risk related to the Environmental, Social, and business areas. Research has long shown that voters do not understand ESG. However, surveying Americans on its components, especially related to investments and the government’s role in them, turns out that ESG can be misunderstood.

Our latest study found a supportive majority for some types of long-term de-risking. For starters, both Republican and Democratic voters believe that corporate climate mitigation is important for their financial well-being. For Republicans, this belief grows when we ask about specific topics such as resource management and biodiversity. It falls apart when we ask about net-zero targets. This likely stems from these voters’ desire for visible results and accountability–something they have shown to be important to them.

Differences have emerged between Republicans and Democrats when it comes to social issues. While voters often support fundamental issues like access to education or equal pay, other issues–gun control, LGBTQ rights, voting rights, and DEI–see MATTERS diversity across typical party lines. Interestingly, businesses tend to invest most in efforts aimed at solving social issues, which may contribute to the explosion against companies this year.

We also examine the appetite for political efforts to curb ESG investing. Despite the current political rhetoric, appetite is low. This can be blamed on failure of proposals to ban ESG investments in state pension funds, which in Texas resulted in a spike in interest. After all, nobody wants to lose money, and voters (even Democrats) see the market as a better driver of wealth than government.

So how can companies act on this data and mitigate the blow they face for being good corporate citizens? Businesses may consider abandoning the lightning term, “ESG.”

already, Fortune 500 companies returns to Corporate Responsibility (CSR) as a way to distance themselves from the political row. But this approach does little to improve stakeholders’ understanding of their efforts.

A tailored approach

A more strategic approach builds awareness of corporate actions that appeal to voters, customers, investors, and policy makers. Tailoring messaging to individual groups requires more effort, but it is essential to building stronger relationships based on shared values.

For example, communicating efforts about conservation and biodiversity to Republican voters can improve brand reputation among conservative voters, lawmakers, as well as their Democratic counterparts. If a company is primarily focused on social issues, communicating how its investment contributes to long-term value gains is critical to any engagement with Republicans.

The ‘say-do gap’

Being more specific in communication efforts does more than help win over stakeholders who lack understanding of ESG, it also builds trust based on transparency and accountability.

The last few years have been full of companies speaking out on any and all issues, or at least that’s what the voters have told us. From 2021, general support for companies that speak out on social issues unrelated to their business has fallen. Two potential reasons for this are the perception of a gap between corporate announcements and real-world action—and the overly broad topics covered. To reverse the skepticism of voters, corporations focus on the specifics of their message around the efforts they make within the various pillars of ESG.

Voter priorities

More concrete communications should also tap into voters’ beliefs about the boundaries of government responsibilities. The resounding bipartisan opposition to limits on corporate investments, support for investor management of financial decisions, and belief that business has a role in improving society should all inform the messaging.

Again, the adaptation of these points to specific audiences is important: Voters and legislators alike express conformity with the traditional view of their party in government. For Republicans, the focus on free markets and shareholder gains is still a winning argument. For Democrats, corporate responsibility to stakeholders and government oversight are priorities.

Beyond these accounts, our findings should give companies a strong mandate to focus on economic growth by de-risking their businesses and improving society, especially when it comes to the environment. Regardless of the name of their efforts, the label is less important than the details. This means talking more about concrete efforts to mitigate environmental risks, how programs reduce business risk, and how that progress aligns with policy priorities.

ESG certainly has its challenges–and it is not a silver bullet to solve all of humanity’s ills. But it is misunderstood, not terrible.

Lindsay Singleton is the chief development officer of the bipartisan public affairs firm ROKK Solutions. He is the co-author of Navigating ESG in the New Congress, annual research conducted with Penn State on voters’ views on corporate responsibility.

The opinions expressed in commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of luck.

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