While the RSW/US Agency New Business Report found that in 2023 it has been tougher for public relations agencies to land a new account, closing takes longer and the dollar value is often less than previous years, that state of affairs could easily turn around as public relations firms pounce on the opportunities of the post-ESG era.
Hard to Soft to Hard Again
A confluence of factors, ranging from the global financial crash to Covid, triggered a look at capitalism in terms of the “right thing to do.” What took hold was ESG (Environmental Social Governance), that is a softening focus on the purpose of the corporation. According to this view, corporations should take responsibility for employees, communities and planet earth.
Then abruptly, with the global slowdown, increasing uncertainty and artificial intelligence, came the hardening. In so many circles, the right thing to do was to circle back from multiple stakeholders to the one-dimensional focus on shareholders. In 1970, economist Milton Friedman systemized that doctrine. This shift from soft to hard has major implications for business development for public relations. The 2024 political campaigns will increase those opportunities exponentially.
Follow the Money
When it comes to capitalism the right thing to do essentially pertains to matters of money. Even former Archbishop of Canterbury Williams Rowan Williams views capitalism in terms of monetary value.
Recently that money is no longer rolling in quickly for ESG investing, that is for corporations whose activities serve a broad range of stakeholders. During the last 12 months Morningstar reports that $11.4 billion has flowed out of ESG funds. Blackrock explained reducing the number of ESG investments because they didn’t “promise long-term shareholder value.” Note that references the Friedman doctrine. A lot of the pull-back is the result of conservatives contending financial firms and corporations with progressive values are shaping public policy instead of voters through the ballot box.
Just playing in the ESG investment sandbox, including energy, can open financial firms and corporations to government investigation. Conservative attorneys general from a growing number of states have conjured up pressure and actual lawsuits about ESG matters. Informally they classify that involvement as being against “woke.”
It is in the ESG subcategory of diversity that money issues have become most visible in the hardening. Yahoo Finance chronicles the corporate flight from even being associated with what used to be a virtue-signaler. Obviously that opens opportunities for public relations to help business, government and conservative players navigate the transition.
The estimate is that the supposed right-thing-to-do diversity promotions “cost” Target $9.25 billion in market value and AB InBev $16.36 billion since the boycott over the Dylan Mulvaney video.
Add on those cost earnings lost for workers no longer needed when the diversity movement fades. Some of those C-Suite level positions in diversity, equity and inclusion are going poof. Disney, Warner Bros. Discovery and Netflix are among those doing the axing.
There are also the costs of proxy fights against diversity. Most of the conservative concern is the governance part of ESG. So far so good for them. This year at annual meetings, shareholder support of ESG proposals dropped to about 22 percent, down from about 33 percent in 2021. Only eight out of 40 ESG proposals received majority votes. It requires plenty of messaging to communicate the myriad points of view.
Churn and Branding
Maybe never to be accurately calculated is the loss of business here and there by clients and customers turned off by what social networks blare about the supposed diversity orientation of a business. Morning Consult Pro found that the majority of Americans do not want business involved in societal issues. Blackrock’s Larry Fink also cites the negative aspects of politics as among what is driving the firm away from issues embedded with social consciousness. Public relations input, please.
Expensive legal battles are on the uptick. Well-known are the lawsuits created by the Disney – Florida Governor Ron DeSantis diversity fallouts. But the June 2023 ruling of US Supreme Court against affirmative action in higher education (“SFFA v Harvard,” “SFFA v UNC”) essentially emboldened conservatives. Clearly this is a pot of gold for those in messaging. It is recognized the what goes on in the court of public opinion can shape legal outcomes more than what transpires amid the legalities. Dentons law firm launched consulting unit Global Advisor which includes public affairs services.
Among the most provocative legal developments has been litigation by The American Alliance for Equal Rights against law firms Morrison & Foerster and Perkins Coie for their diversity fellowships. So serious is this for the progressive legal sector that the New York State Bar, along with law firms Ropes & Gray and Paul Weiss created a task force to combat what could be a trend. The team did not consider it an overreaction to compile a 93-page report. Perhaps even lawyers, whom many tend to fear, are becoming fearful about the extent of the pushback against the triple bottom line. Interestingly, in a 2021 Bloomberg Law interview Paul Weiss chair Brad Karp essentially said the ESG could set law firms themselves in upheaval. They are ideal public relations’ deep-pocketed clients
2024 Political Campaigns
Of course, the high-stakes 2024 general election could intensify the struggle to return capitalism to a laser-like focus on shareholders and away from accommodating other stakeholders. Essentially that can configure into progressivism versus conservatism at the national, state and local levels.
At the campaign get-go, DeSantis singled out ESG as villain. Another campaigner, Donald Trump, sizes up ESG as “radical left garbage.” How can a vulnerable Joe Biden and other liberals not sound defensive about reducing the harshness of capitalism? Will conservatives come across as heartless in opposing the residue of ESG? Parachute in public relations.
No slouches when it comes to developing new business, law firms have been on the front end of guiding business about ESG and more recently establishing practices to deal with the pushback. Public relations can be equally opportunistic. Given the turbulence of the post-ESG era, the way to go is to be proactive in launching insights, specializations, strategies and tactics.
Jane Genova is a results-driven content-creator/editor and intuitive career coach. Complimentary consultations (Text 203-468-8579 or [email protected]).