The contrast between the activists outside, and the decision-makers inside, the Glasgow SEC is revealing. Each group has very different things to lose - and to gain. Only by recognising the differences can we grasp the entrepreneurial opportunity that ESG presents us with.

The two faces of COP 26

Business Ethics

Outside the COP are the next generation; predominantly women, Black and Indigenous people with very little to lose economically and everything to gain socially and environmentally. Inside, are the decision-makers; predominantly middle-aged men with a great deal to lose economically and quite a lot of status and power to lose socially. Any potential gain to them is primarily indirect – perhaps benefitting their grandchildren and their legacy. The age difference between the two groups is pivotal – the ‘outsiders’ are fighting for their future 50-90 years from now. The ‘insiders’ are fighting to protect their interests for the next 10-20 years. Meanwhile, the clock on the crises of climate and inequality continues to run down…

The position of each group is what economists call ‘irrational discounting’. We humans generally value short-term gain over and above the prospects of a larger gain in the longer term (in traditional economics such behaviour is ‘rational’). The ‘irrational’ bit comes in when we continue to favour short-term gain despite evidence of long-term catastrophic loss. Faced with the IPCC’s (and others’) evidence of climate change that’s exactly what we are doing. I believe that ESG has the potential to turn the ‘irrational’ back into ‘rational’ behaviour.

ESG opens the possibility of a different view of business. A rational view in which the enormous new business opportunity of mitigating, preventing and recovering from the worst effects of climate and social crises can be grasped by companies of all sizes, the world over. It’s also part of a rational view that some of the negative impacts companies have on people and the planet (while pursuing the opportunity) can be reduced and compensation paid for damage caused or harm done. That’s the opportunity we have with ESG. What could be more rational than a re-invigorated economic model in which Government, society-at-large and companies all gain?

marc lepereMarc Lepere

Founder & Chief Science Officer at ESGgen