Every week we talk to, learn from, and are inspired by amazing people doing innovative things in the world of social value and we are excited to share some of those conversations with you.
Today we're talking to Alison Taylor, Executive Director of Ethical Systems and Professor at NYU Stern School of Business. Her work spans both academia and corporate consultancy, and we discuss business culture, key strategies for initiating ethical changes in business, and what the solution is when a win-win for business and sustainability is hard to identify.
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Five minutes with…Alison Taylor, Ethical Systems
Firstly, could you tell us who you are and what you do?
I’m the Executive Director of Ethical Systems, a research collaboration at NYU Stern School of Business that focuses on ethical culture, with a mission to harness the research of leading academics to transform ethical practice in the corporate world. I’m also a Senior Advisor at Business for Social Responsibility (BSI) and a professor at the Stern School of Business.
What is the common thread running through all the work that you do?
I think underlying all of it is an interest in human beings and how they behave, the relationship between business and politics, and how companies can impact society and vice versa.
I'm particularly interested in is how siloed the world has become in its thinking, and how limiting this is when we try to find solutions to large, complex problems – so many good ideas are never applied outside of their usual context because we’ve become so accustomed to where we think they belong. There are countless great areas of research going on within academia that are ignored by business, for example, simply because those paths rarely cross.
What does your work involve on a daily basis?
At Ethical Systems, we embark on large research projects with businesses, leading on the undertaking of culture experiments and assessments, followed by a lot of advisory work in ESG to help companies practically implement what we discover. There is a lot of unfamiliar terminology and confusion surrounding ESG and what we as an industry are actually trying to achieve, so clarifying that becomes a large part of what I do.
Can you tell us more about what it’s like working in ESG between both real-life corporations as well as academia?
Before focusing on sustainability, I spent a lot of time investigating corruption, political risk, and fraud, helping companies set themselves up in parts of Africa and the Middle East. Due to this element of my background, I am accustomed to the mess, so to speak, of what can happen in ‘real life’.
The clash between this so-called ‘real life’ and academic research is actually one of the reasons I do the work that I do. Within the corporate world, I think behavioural science is hugely under-regarded - why human beings make the decisions they do, and how we can best use that to our advantage. You see this particularly within the responsible business community; there are an overwhelming number of initiatives, but hand in hand with those comes a tendency for people to lecture others about what’s being done wrong, losing sight of realistic expectations. This creates missed opportunities to get people to change their minds and drive the change we want to see.
I’m interested in using strategy to stop this from happening - changing people’s minds without lecturing them or clinging to an idealised view of how the world should work. Activists often point out how badly businesses treat human rights, and I agree with a lot of them, but if we want organisations to actually pay attention and care about those issues, there are more productive ways to tackle the problem.
You’ve written a lot about culture within ethical businesses - can you talk a little about why it’s important, and how companies know if they’ve got it right or not?
It's a challenging thing to get right, and I often advise companies to view it as an ongoing project rather than a one-off goal. Just think about the impact of the pandemic – even if your organisation had perfected culture beforehand, remote working has brought a whole new selection of issues to the table. Even if you had a good culture before, you’re going to have to keep working on it.
There has also been a huge shift in how companies actually create value. It used to be that the majority of corporate value sat in things like buildings, machinery, and assets - now an estimated 85% of the S&P 500 is in intangible factors like culture, data, reputation, and public trust. These are all abstract elements that are challenging to measure, but one of the reasons ESG is growing so fast is that a much tighter connection between financial results, the approaches businesses take to those things, and how the public sees you, has emerged.
Social media can help us to see this more clearly. It used to be that a company could project a message about who they were and what they stood for, and it would be passively absorbed by the consumer. Now consumers are armed with Twitter they can intercept that messaging, and thus the way businesses interact with society has fundamentally changed. Culture is the most visible expression of that, but it’s not the only one.
What trends in the landscape do you think are likely to become more urgent over the next few years?
The most obvious ones are the tragedies of the commons; climate change being the most obvious example, followed by inequality and public health, these large social crises that are becoming increasingly prevalent. These have happened to occur alongside a general loss of faith in the government’s ability to address societal problems, and I think that is in part why people are turning to business – it's a result of government failure.
The next question that will arise is what businesses have also done to contribute to that failure. One huge issue is tax avoidance and lobbying, seemingly a ticking time bomb that will inevitably gain a lot more traction. Glossy brochures describing all the excellent things people are doing for corporate responsibility will no longer be enough when tax avoidance and lobbying are pushed to the forefront.
The very way we approach this stuff will become an emerging trend. Interestingly, in terms of ESG ratings, there is an almost perfect inverse correlation with companies that score highly and companies that don’t pay any tax; even the way we are measuring corporate responsibility at the moment fails to reflect what is most important.
What would your advice be for clients on what they measure and how they measure it? Could you tell us a little about how companies might communicate what they’re doing?
People often compare ESG at the moment to accounting in the 1930s, the idea that ‘we haven’t decided on a standard, but when we do everything will be okay’ - I’m afraid ESG is significantly more complicated than financial accounting, and I’m not sure how close we are to getting it right.I understand why people think this type of performance needs to be quantified, but it often has the unintended consequence of companies becoming obsessed with a score, and subsequently missing the point.
The other issue is that even if metrics are your starting point - let’s say SASB - there will still be thirty issues that your industry has to deal with. Given the constant spotlight on hypocrisy, it’s not realistic to think anyone can take substantial and effective measures to address every single one of them. Business is business, and that will always be the priority.
I wrote about this in the Wall Street Journal - the list of issues relevant to your industry will be huge, and you do need to be prepared with a reaction to all of them, but I always advise companies to pick a maximum of three to really working on. For those, make sure you are able to tell a consistent story about your metrics, political financing across the business, and where you are taking things next. You cannot do that for thirty plus issues – of course be prepared for Twitter blow-ups, but figure out what things are actually relevant to your business, and where you can make real impact. Pile your energy into the issues that stake holders, employers, and managers all agree on.
Where do you think the ultimate motivation is coming for this new interest in ESG?
The real change over the last few years is investor interest. I’ve spoken to many companies – most often the sustainability team who agree on this stuff already – that have said since 2018 there’s been a dramatic increase in CEOs and investor relation teams wanting evidence of ESG.
Ironically, the metrics indicate that they don’t actually want to do the hard work on getting to know the company. They just want to see the data in their preferred format, be able to score you, and quickly decide whether or not to hand over their money. It's just not that easy. In an ideal world, there would be more investors engaging with the idea that business can drive real change, as opposed to regarding scoring systems as the be all and end all.
The general message at the moment is that consumers want sustainable products, particularly amongst young generations – do you think this is the case? And if so, what are the implications of the cost of that aspiration?
I think it’s accurate to say that consumers want sustainability, but whether or not they’re prepared to pay for it, I’m not so sure. There was a great article in HBR called Actually Consumers Do Buy Sustainable Products written by a colleague at NYU and it proved that it’s not just talk, sustainable products are growing faster.
That said, if you speak to the undergraduates in the classes I teach, they ask why sustainable brands such as Everlane are so expensive. They care about sustainability, but they can’t afford it. So perhaps there is an opportunity for something that meets both those aspirations. The issue is that the fashion industry’s business model itself isn’t sustainable - fashion is one of the worst for this, and it’s not possible to green yourself out of something if the structure is fundamentally exploitative.
The interesting questions come when there has to be a trade-off – what do you do when you can’t do the right thing and make money? We spend a lot of time trying to prove the case for a win-win scenario, but rarely make a point of asking what we do if it’s just not plausible. And if we’re saying that everything is tied to the profit motive, then we are yet to realise a good answer to this.
A lot of our readers talk about feeling ‘siloed’ within their organisation – they know what needs to be done, but don’t know how to go about it. If you were talking to somebody working within an organisation where the senior management seem enthusiastic, but internally things aren’t moving, what would be your advice?
The thing I’m always asked about over and over again is what is the business case for doing this stuff? I’ve written extensively about this. Certainly, companies need that to be convinced, and strategy has as much to do with this as the unique reasons that ESG can benefit your workplace specifically. The following starting points are a great way to start the process.
The first thing I would say is to try to find allies on the senior leadership team, and to find more than one. Think very strategically about power and influence – by building good connections, nobody can become isolated whilst trying to make a difference, and the foundations of your case stand a much stronger chance of being taken seriously and remaining resilient.
2. Think about the messenger, as well as the message
This is where strategy can be really vital. I would be extremely thoughtful about who is making the case for change. If the responsibility has been delegated to you, a junior of the sustainability team, it won’t be as convincing as if they were hearing it from the CFO. Larry Fink promoting sustainability is going to make far greater waves than a junior from the sustainability department.
3. Frame it positively
Nobody likes being lectured or told they’re wrong. Frame your argument in terms of the world changing, and how it would benefit the company to grow with it – it wants to appear as adaptable and resilient, rather than having been wrong for 20 years. The polarised environment society is in is partly down to people’s discomfort towards being corrected, even when the opposition is factually accurate, so it’s important to think very carefully about how you present your ideas, as well as what you’re presenting. You need to do it in a way that is consistent with that person’s ego and self-image.
Find out more about Alison's work at Ethical Systems.