Part 1 of this series outlined the increasing importance of ESG issues for all enterprises. However, the buck does not stop here, because “two out of three ain’t bad” is not good enough. Organisations need to demonstrate commitment to ESG goals in everything they do. ESG is no longer a box ticking exercise or a few paragraphs in the annual report, rather it is central to not only what organisations do, but how they do it.
The recent sacking of some high-profile CEOs on the basis of the toxic culture they had allegedly created, demonstrates that a focus on performance alone is not enough. Governance issues go to the heart of organisational culture and the associated brand value. And the net spreads both far into the past and wide due to the reach of social media. The chairman of an international bank was forced to resign over personal quarantine issues in both Switzerland and the United Kingdom.
In Australia the pervasive presence of social media was central to the resignation of the Australian Cricket Captain and the deportation of the number 1 tennis player, Novak Djokovic. Similarly, Boris Johnson appears to have exhausted his political capital, not through bad policies, but the but a succession of parties at Downing Street in breach of Covid protocols.
One of the issues facing negotiators in ESG is complexity of issues from the global (climate change) to the local (pollution of watercourses by firefighting foam residues) and the sheer number of potential negotiating parties. An Australian company with an interest in a Canadian gas pipeline was sued by no less than ninety-four (94) concerned environmental and indigenous organisations.
Managing ESG issues and the associated conflicts will place conflict resolution and therefore, negotiation skills at a premium for all levels of management. The Juukan Gorge destruction is one example of the significant damage a chain of errors can cause.
It should be stated that the conflict of ideas is not necessarily bad. Conflict requires us to be at our best, to be creative, innovative and empathic in our dealings with those whose views and values differ to ours. For this constructive conflict to take place, it is necessary to establish psychological safety, so disagreements are not taken personally, and that sarcasm and criticism are seen as unacceptable behaviours. (It is the art of disagreeing without being disagreeable.)
When considering the psychological safety of the parties during conflict, respect for the other party is central. The following guide is a summary of the major conflict resolution strategies and the safety they engender.
- Imposing your will– high respect for self, low respect for others
- Mutual Gain Negotiating– high respect for self, high respect for others
- Compromise– medium respect for self, medium respect for others
- Giving in low respect for self, high respect for others
- Avoidance (Postponing) – low respect for self, low respect for others.
One of the essential elements of negotiating is the development of trust between the parties. One of the recurring themes in ESG is transparency, and it is no surprise that transparency builds trust. Trust is a virtuous circle: being trusting builds confidence in the other party that you can be trusted, which, in turn, will lead to greater confidence in the process and greater disclosure.
A further benefit is the ability to add value through creativity. In many negotiations parties are reluctant to disclose key information early. This information asymmetry means that half the people in the room have 50% of the information and the other party has 65% of the information. The effect of this non-disclosure is to unnecessarily handicap the ability of the group to come up with the best solution.
So, one thing we can be confident about, is that ESG issues will continue to demand more and more management attention during 2022.