Ideological employee groups, ESG requirements and staff activism have nothing to do with business, writes Baroness Joanne Cash
The British economy is flatlining. We are faced with stagnant economic growth, low productivity and no compelling economic strategy offered by the current government to tackle our underlying problems.
Yet instead of freeing business to thrive and grow, we burden them with costly obligations. Environmental, social and governance reporting, better known as ESG and its offshoots such as B Corp certification, have grown into a vast moral bureaucracy.
A report by Policy Exchange today clearly sets out just how wasteful the ESG regime is. It is a conversation we urgently need to have.
Expensive ESG policies are distracting businesses
Compliance with ESG frameworks and the expensive, private, voluntary B Corp certification now costs vast sums. The global market for ESG consulting and auditing has quadrupled in six years to £1.54bn. Deloitte estimates that large firms spend over £500,000 a year on ESG systems and verification alone. Other studies suggest that up to a fifth of senior management time is absorbed by compliance work. That is time not spent innovating, hiring or serving customers.
For a country already battling weak productivity, this is a tax on enterprise. The burden falls hardest on mid-sized firms – the backbone of employment and innovation – who lack the compliance departments of multinationals. The result is a two-tier economy: big firms hire consultants; small firms have to divert valuable resources.
There is also a human cost. Political activism in the workplace has increased in proportion to the need to meet the requirements of ESG. Unnecessary or ill-judged DEI programmes have driven polarisation and cancel culture. Employees walk on egg shells and managers spend evenings rewriting policies to please auditors. It is a painful and expensive irony that frameworks that preach wellbeing have become a source of workplace stress. We are yet to understand fully the huge cost of all of this but, for example, the recent Mayfield Report estimates that poor workplace health costs employers around £85bn per year.
Activism doesn’t belong in the workplace
And there have been wider societal and global costs. Defence companies have been treated as unworthy of investment under these rules, despite the fact that we have Putin waging a major land war on our doorstep. How is a western democracy being able to defend itself unethical? Under the B Corp certification programme, one business, a global marketing company, had its certificate withdrawn for doing business with Shell. At a time when energy security is a vital issue for western nations, how is that appropriate?
We urgently need to change our strategy to make sure we are focusing on growth, rather than gestural politics. Within businesses, we should abolish staff networks and special interest groups, both of which are exclusionary and unproductive.
Diversity targets should be scrapped and replaced with skills training and development. Where individuals are more qualified and more talented, they should always be given the opportunity to grow within their careers. Ideological employee groups need to be disbanded. Unless the business itself is a lobby group, activism should be a weekend hobby not a work day hijack.
The solution is not to abandon transparency altogether but to rediscover proportion.
Companies should have to disclose only what is material – information relevant to financial performance, risk and genuine environmental impact – in clear English. Everything else should be voluntary. Regulators should focus on accuracy, not ideology. And ministers should remember that every hour spent compiling a sustainability index is an hour not spent creating wealth.
Joanne Cash is a media barrister and life peer