The Mishcon Academy Digital Sessions
Alex Rhodes
Welcome everyone. I’m Alex Rhodes, Head of Mishcon Purpose and I’ll be your host today. Thank you for joining this Mishcon Academy Digital Session, which is a series of online events, videos and podcasts looking at the biggest issues faced by businesses and individuals. This is the third in a collection of conversations that we have called ‘Purpose Matters’. In each conversation, I bring together specialist lawyers from across our firm with leaders in sustainability and responsible business. This afternoon, we’re going to discuss greenwashing, which is where businesses use PR and marketing to hold themselves out as having higher environmental and social standards in their values, policies and products than they really do in practice. I’m really excited today to be joined by Alexandra Mousavizadeh who is a partner at Tortoise Media and a creator of the Responsibility100 Index, which is a ranking of the FTSE 100 companies on their commitment to key social, environmental and ethical objectives inspired by the UN Sustainable Development Goals. Joining Alexandra and me is our very own Emma Woollcott, Head of Mishcon’s Reputation Protection Practice and a Partner here. Alexandra, perhaps I can pass over to you and I’m going to ask you to tell us a bit about the Responsibility100 Index.
Alexandra Mousavizadeh
Well, thank you Alex. As a way of background I’ve been in the index-building business my entire career and have over the years mainly focused on nations and looking at you know, national performance. When we started Tortoise, James Harding who’s the Co-founder of Tortoise Media and I had a big think about when we’re looking at companies and how they are pulling the weight and reaching the sustainable development goals by 2030, we decided that we were going to put together an index that really looked at what companies were saying they were doing versus what they were actually doing. Hence came this framework of the talk versus walk. On the screen you can see just the top level here of the index from our website. If you are a big company you should be able to tick most of these boxes and should as a responsible company really be thinking about how you’re ticking these boxes and how you’re feeding in and pulling your weight to reach the sustainable development goals by 2030. We drilled very deeply into the talk side and look at what companies are actually setting up as targets and then we draw that line to the walk side and look at the performance behind the targets that are being set. The ranking itself is just based on the walk because we want to see what’s actually being done. And this is to actually leave room for a third pillar which is about the run, which is about the impact and how much do we think is going to impact and affect what we all need to be focusing on which is reaching this sustainable development goals by 2030. And what we’re trying to encourage with this index is a race up the ranks, as with any index. Create some behavioural change through viewing this in the starkness of what an index does with a ranking from one to one hundred and looking at how we can encourage and inspire the companies that don’t do much or feel that they should be doing much on this agenda and trying to push companies to start setting some targets and starting that journey.
Alex Rhodes
What is it about these factors, these sort of the ESG factors, these responsible business factors in particular, that make companies’ reputations so sensitive?
Emma Woollcott
ESG factors are enormously wide-ranging but ultimately they all point to a company’s culture and the way that it chooses to behave. So, whether you’re looking at how a business contributes to climate change or how it fosters diversity and gender equality or how it deals with remuneration and tax and the risk around corruption and bribery. These factors ultimately all come down to choice and it’s clear that the public and the media and indeed, investors, employers, employees, regulators, they are increasingly focused on the onus being put on companies choosing to be good corporate citizens and doing the right thing and it’s clear that Covid has only accelerated that movement. The global health pandemic has put into sharp focus the health of the natural world and the fragility of our engagement with it. So big businesses with big profits are being called upon to put their money where their mouth is and to make real change. This charge of greenwashing, it’s so dangerous and so pernicious because to pick up on what’s current and in-vogue now and to promote yourself as being very conscious and sustainable and socially aware but not to follow through and to actually walk the talk, really goes to the heart of the integrity of the business and it undermines the trust that people feel they can have in management. The public and shareholders and investors just don’t want to hear that anything is outside the control of the business particularly when that business is associated with a crisis situation. And so the only way to manage that risk is to be really disciplined about horizon scanning, to be looking across the entire business regularly. inside and out and to be identifying and diffusing the underlying risks.
Alex Rhodes
Alexandra, I wanted to come across to you with this, particularly around ESG ratings. We’ve heard throughout the pandemic about ESG funds outperforming their competitors and the fact that investors are focusing now on ESG criteria in deciding how to allocate capital. But there isn’t really any standardisation between the ratings agencies. How do you see these metrics developing?
Alexandra Mousavizadeh
All of the platforms MSCI, FTSE Russell, Arabesque, Sustainalytics and ours you know, we have you know, the differing frameworks. At the core probably quite similar but in terms of what indicators we use and there is all kinds of things at the fringes that mean that in some indices you’re going to do well and in some you’re not. It seems that we are sort of moving towards some… a common ground, there’s still some things on the margins that differ and I think over the years we’ll probably see that there’s going to be someone who’s going to adopt and take the lead on that. I know it’s frustrating for companies to have to jump through the hoops of responding to these mini-surveys and to these mini-datasets but I do think it’s a very important task. You can see what recycle there is you know, companies are getting better at reporting, getting better at surfacing the data, understanding that there is sort of a common denominator out there now on climate and equality etcetera which wasn’t there five years ago, in my mind.
Alex Rhodes
Emma, if I come across to you. We all will have seen the coverage relating to the UK online fashion retailer Boohoo this year. Boohoo was rated in the top 29% – tying in the point we were just discussing with Alexandra – of it’s fashion peers for ESG. So, it had a very high ESG rating as a company before allegations of modern slavery in its factories came out in July this year, in Leicester. That led within a week to its share price nearly being cut in half and what I wanted to ask you was whether we could use this perhaps as a way of putting monetary value on reputation and to ask you whether that’s the wrong way of looking at it?
Emma Woollcott
I think it’s exactly the right way to look at it because even if the share price falls and then bounces back, reputational crises leave a really lasting legacy. The internet has a very long memory and to my mind reputation and trust are everything when it comes not just to share price but also to client engagement and associations and employee retention and satisfaction and of course, to investor confidence. But Boohoo is an example I think of the need to continually challenge yourself as a business and not just rely on one mark or one rating or one accolade or one award as a signaller of success. I imagine that Boohoo scored quite highly because it was manufacturing in the UK. The businesses that are most resilient to reputational risk are those that have established procedures in place to regularly audit the known and the unknown and to address them.
Alex Rhodes
In terms of the behaviour change that you’re seeing or not seeing, Alexandra, how are companies approaching that?
Alexandra Mousavizadeh
Look lots of change, lots of things have changed on account of us producing our index and all of the other measurements and platforms being there, but also Covid. You know, I was wondering how this was going to affect how companies were going to behave back in March in terms of reporting and performance but actually there’s been a much more… the debate has intensified about what does a responsible company do? A lot of the companies that we sort of talk to on a very regular basis are seeing the value in really focusing on the entire agenda, a sustainability agenda and really thinking about what it is to be responsible. What we’ve seen practically speaking from a year ago, is Emma mentioned the living wage, I mean, we saw a handful of companies actually becoming accredited living wage providers in this last round. And that is a longer process and of course it must have been underway but may have been accelerated by Covid because of the spotlight put on companies to whether they’re good you know, are you a good employer? Are you paying your people enough? Are you doing right by them? Is there a mental health policy? Is there provision for pensions? Are you addressing things that people are, your employers, your employees are concerned about? And that is very much at the front and centre and top of the list for most companies right now to really do right by your employees and the community that you’re operating in and your operating environment locally as well as globally. We’ve just also seen things that haven’t moved at all such as the ethnicity pay gap, the ethnicity representation. Questions around disability reporting and inclusiveness on that front is also something that we just haven’t seen change. It’s still two companies of the FTSEs that report on the ethnicity pay gap and zero that report on disability. We know there’s a lot of issues around gathering that data. A lot of companies do gather but don’t report it. Our point would be well, if you don’t report it we can’t measure your performance and it sort of remains hidden in the black box.
Emma Woollcott
I just wanted to follow up on how this relates to smaller companies i.e. non-FTSE 100 companies. I think these issues relate to all businesses because at worst listed companies have an obligation to report and put information out there. Most businesses want to put information out there. They want to talk about the progress they are making. As soon as any business puts out a positive or negative statement about a current issue that relates to ESG or in fact anything then they open themselves up to the charge of hypocrisy or greenwashing. So, it’s relevant to businesses of all sizes and I think that journalists are really interested in this and the media and society is interested and they will follow progress. So, when we’re… Alexandra was talking about tracking change, this index is quite young in its development but when people set ambitions and set targets, you can bet that industry-focused journalists will look at who’s faring best and how they’re moving the dial. I think often comms teams and PR strategy are very keen to join a conversation, talk about what’s topical, jump on a bandwagon and actually if you do that without the preparation, you can do that prematurely and open yourself up to charges of greenwashing and charges of lacking integrity and putting out messaging which doesn’t really hold up and that’s where the real danger lies, I think.
Alex Rhodes
Alexandra, I just wondered in the way you’re tackling that on the index whether you had a view?
Alexandra Mousavizadeh
You know, there are people out there that are supporting people like us in trying to you know, make sure what targets are solid and not and there’s something called the science-based targets. Those are targets that we actually give extra weight in our index because those have been vetted. You know, to reach a climate goal or 2 or 1.5, you know, one thing is to state it but if you’ve got the science-based target group that has actually looked at whether that target is do-able for you and the things that you’ve put, the resources you’ve put behind that target are enough to reach it, then it’s pretty solid and we then count it and we weight it more because it’s actually been vetted. So, I think that we’re seeing more sophistication in the way that the targets are being set and the thinking around how they get met.
Alex Rhodes
Emma, maybe just to change, change tack a little, I wondered whether you’d had some thoughts you could share particularly in relation to ESG, as to the steps that companies can take to build their reputations in a way that can withstand allegations of irresponsible behaviour? Whether those allegations are responsible, are legitimate or not.
Emma Woollcott
To me, it’s all about planning but also about authenticity. It’s a lot easier to speak credibly and to have the answers to your fingertips in a crisis situation or when a journalist asks questions if these matters are in the pipeline and they are being dealt with. And that’s why it comes back to this kind of you know, making sure you do a proper diagnostic exercise, making sure that you’ve got a route map to change, making sure that the common issues and even the less-likely issues are mapped out that there is a plan in place. But I think the key thing is to avoid the gap. To make sure that you are talking and walking at the same pace. So, I think the only way to prepare for a crisis is to be well-prepared. So that you know where you are, what you’re vulnerable on, what you’re strong on and when sometimes you do need to be a bit humble.
Alex Rhodes
So, the best preparation is to do it properly?
Emma Woollcott
Yep. No shortcuts or an answer if you have.
Alex Rhodes
Or an answer if you have. Okay. So, look, we’ve chewed through our time. I think I’ll just draw it to a close and say, Alexandra and Emma thank you very, very much. I think you’ve given us a great deal to think about and thank you all for joining us.
The Mishcon Academy Digital Sessions
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