ESG Is Simply Not Enough To Drive Needed Change

In recent years, the concept of Environmental, Social and Governance (ESG) investing has taken the business world by storm. With rising concerns over climate change, social inequality, and corporate ethics, the ESG framework has emerged as a way for companies to assess and report on their sustainability and societal impacts.

At first glance, the widespread adoption of ESG seems like a positive step toward a more responsible and sustainable future. After all, by considering environmental, social, and governance factors alongside traditional financial metrics, companies are acknowledging the importance of being good corporate citizens.

However, a closer examination reveals that ESG, in its current form, is simply not enough to drive the transformative change needed to tackle the existential challenges we face as a global society. While well-intentioned, the ESG model suffers from several critical flaws that undermine its effectiveness as a force for meaningful progress.

First and foremost, the overreliance on formulaic measurements and ratings can incentivize bad behavior, such as greenwashing, or the practice of misleading the public about a company’s environmental efforts or achievements. When a company’s success is judged primarily by meeting arbitrary ESG criteria, there is a temptation to prioritize box-ticking over genuine, substantive action.

Furthermore, regulation alone cannot spur the level of innovation required to defeat climate change, socioeconomic inequality, and other pressing issues. While rules and standards may prevent further harm, they do not inherently foster the creative solutions and bold thinking needed to turn the tide on these complex, multifaceted challenges.

At its core, the ESG framework operates within the confines of a system that still prioritizes shareholder returns and profit maximization above all else. While well-intentioned, it is ultimately a Band-Aid solution—a way for companies to appear socially and environmentally responsible without fundamentally altering their underlying business models or mindsets.

To truly address the existential threats facing our planet and society, we need a shift that goes beyond the limitations of the ESG paradigm. We need a values-based revolution that redefines the very purpose of business and the role of leaders within it.

This is where the concept of “steward leadership” comes into play.

Steward leadership is rooted in the belief that the pursuit of profit and the imperative of contributing positively to society and the environment are not mutually exclusive–in fact, they are inextricably intertwined. It envisions a future where corporate success is interwoven with global well-being, where leaders commit to sustainable and equitable practices not out of obligation or public relations, but out of a genuine sense of purpose and responsibility.

At its core, steward leadership is about taking ownership and embracing the role of a caretaker—not just for one’s own company or shareholders, but for the planet and humanity. It is a call to action for leaders to see themselves as stewards of our collective future, harnessing their energy, resources and influence to create lasting, positive change.

This shift in mindset has the potential to unlock a wellspring of innovation and creative problem-solving. By aligning their efforts with the greater good, steward leaders can tap into a deeper sense of purpose and motivation, fueling the kind of bold, transformative thinking required to tackle the world’s most pressing challenges.

Moreover, steward leadership presents a compelling business case in and of itself. According to the World Economic Forum, climate change alone represents a $10.1 trillion annual opportunity in new business ventures and job creation by 2030. By embracing steward leadership as a core framework, companies can position themselves at the forefront of this burgeoning market, driving sustainable growth while simultaneously contributing to a better world.

To fully embody the principles of steward leadership, organizations must activate what is known as the “steward leadership compass.” This framework consists of four core values: interdependence, long-term thinking, an ownership mentality, and creative resilience.

Interdependence recognizes that the success of any one entity is inextricably linked to the success of others—that we are all part of an interconnected web of stakeholders, communities, and ecosystems. Long-term thinking means being willing to forgo short-term gains in favor of enduring, sustainable returns that benefit current and future generations.

An ownership mentality involves taking personal responsibility for creating a better future, rather than waiting for others to take the lead. And creative resilience is the fuel that keeps the journey going—the ability to find innovative solutions while persevering through setbacks and failures along the way.

By integrating these values into their organizational DNA, companies can transcend the limitations of the ESG model and truly embed sustainability and social responsibility into the core of their operations and decision-making processes.

It is important to note that steward leadership is not anti-shareholder or anti-profit. Quite the contrary, it recognizes that addressing the world’s most pressing challenges represents a vast and largely untapped market opportunity. By aligning their efforts with the greater good, companies can drive superior shareholder returns while simultaneously contributing to a better world.

Ultimately, the shift towards steward leadership is not just a matter of corporate responsibility—it is a matter of survival. The challenges we face as a global society are too vast, too complex, and too interconnected to be solved through incremental changes or half-measures. We need a fundamental reframing of our priorities, our values, and our collective purpose.

ESG was a step in the right direction, but it is time to take the next leap forward. By embracing the principles of steward leadership, companies can unleash a wave of innovation, creativity, and positive impact that will shape a brighter future for us all. The time for a values-based revolution is now, and the business world has the power – and the responsibility – to lead the charge.