Disability Inclusion: ESG Still Matters
By Robert Ludke, Skytop Contributor / November 3rd, 2022
Over his career Bob Ludke has advised policymakers in the U.S. Senate and House of Representatives, taught at the United States International University in Nairobi, Kenya, and provided counsel on sustainability, corporate governance, supply chain management, and environment, social, and governance (ESG) strategies for companies in the retail, oil and gas, transportation, and finance sectors.
He is the author of Transformative Markets, a book about the role of markets in fostering a more sustainable society (published in April 2020 through the Creator Institute of Georgetown University), and the creator of the Voices of Nature podcast in partnership with Global Conservation Corps.
Bob is a Senior Fellow at The Harkin Institute for Public Policy & Citizen Engagement. His work at The Harkin Institute focuses on research and engagement with the disability community, investors, and the private sector to facilitate ESG investment practices being used as a catalyst for achieving competitive, integrated employment of persons with disabilities.
ESG and Persons with Disabilities
Over the last two years a premise of my work at The Harkin Institute is that environment, social, and governance (ESG) strategies represent a powerful tool by which we can foster better employment across the private sector for persons with disabilities.
In a December 2020 paper I argued that the “S in ESG is quickly becoming ‘Ground Zero’ for making the connection between human capital and business performance”. It represents an opportunity to “permanently change the dynamic around the hiring, training, and retention of people with disabilities and to foster a complete reimagining of how people with disabilities work and advance their careers.”
Innovative Potential
In a more recent paper, I asserted that using an ESG mindset was critical to unlocking the innovative potential of persons with disabilities in every sector of the economy. Companies able to seize upon that opportunity stand to benefit by increased access to the global disability population – an estimated 3.4 billion people with a spending power roughly the size of the European Union’s GDP.
The Changing Perception of ESG
Since commencing my research with The Harkin Institute in 2020, the perception of ESG has been on a trajectory somewhat akin to a 5 year old child on a trampoline – up, down, and all over the place.
In the turbulence of 2020, ESG was hailed as the solution to ensure corporations – once and for all – operate in a manner that benefits both shareholders and stakeholders. By 2021 the luster of ESG began to wear off. ESG often was panned as a flawed management concept, an esoteric concept unable to foster socio-economic value creation in society, and a misguided, underperforming investment strategy.
In 2022, ESG has become a hot button political issue in the United States, an area of greater regulatory scrutiny, and a topic of intense debate by economists, corporate executives, investors, and even the editorial pages of major newspapers. Supporters of ESG are often left asking – “How can something so right be so wrong?”.
The Failure to Appreciate the Benefits of ESG
To be fair, some criticism of ESG is well deserved. Many organizations have taken “greenwashing” to the extreme through glossy, superficial “Annual ESG Reports”. Billions – if not trillions – of dollars have been invested in funds marketed as ESG focused. Yet those same funds often contain significant investments in extractive, polluting companies with questionable human rights commitments. Proponents of ESG also have not done a good job establishing clear, decision-useful metrics to track performance on ESG indicators – which adds to ESG skepticism and fatigue.
I believe the shortcomings of ESG are not driven by the concept of ESG. Rather, they are driven by a failure to understand and appreciate the value of adopting an ESG strategy. ESG is not a marketing schtick, charity, or a proclamation to do good for the planet – although far too many people treat it as such.
A Leadership-centric Approach
Rather, ESG is a leadership-centric approach designed to mitigate risk, assess market opportunities, and future-proof an organization. Climate change, resource scarcity, and extreme weather are “E” factors every organization must address and manage if it is to thrive – let alone survive – in the coming years.
Recruiting and retaining top talent through opportunities for career advancement, mentoring, and inclusive workplaces is now the mission critical aspect of “S” for companies around the world.
Good Governance and Survival
Without good governance – a commitment to ethics, transparency, and a focus on long-term value creation for shareholders and stakeholders – organizations have no chance to survive in a world beset with risks and growing public skepticism.
As Martin Lipton, one of the world’s foremost experts on corporate strategy and governance recently wrote, “ESG encapsulates the range of risks that all corporations must carefully balance, taking into account their specific circumstances, in seeking to achieve long-term, sustainable value…doing so is associated with superior financial results, and consistent with long-accepted norms as to the place of business in society.”
ESG Drives Disability Inclusion, and Vice Versa
When considered in the context of strategies that are mission critical for the long-term success of companies, disability inclusion and ESG are interconnected. A company cannot be successful without fostering an inclusive culture that maximizes the talents of every employee and all levels of the organization. Therefore, excluding disability inclusion from ESG strategy leaves the company open to risk and creates “blind spots” that prevent it from driving long-term value creation.
Disability inclusion is a competitive differentiator in the global marketplace. Steve Foresti, the Chief Investment Officer of Wilshire Associates, a global investment advisory and asset management firm, told me about the value proposition that persons with disabilities bring to the workforce, “The company that taps into that talent removes a constraint that a lot of other companies are operating under. And usually what happens when you remove constraints is that the results get better. That’s a competitive advantage.”
A Massive Opportunity
Consider cruise control in vehicles, the phonograph, the ever-popular text function or touch features on your phone, the electric toothbrush, and the internet. All were innovated by people with disabilities as part of designing themselves into a culture and society that did not center on their needs. Yet each innovation quickly found its way to mainstream acceptance, enjoyed widespread market success, generated a collective billions (if not trillions) of dollars in profits, all while fostering a positive change in how billions of people work and live.
Put simply, disability inclusion is not a form of “tokenism”. Rather it represents a massive opportunity to access a dynamic, growing global population with trillions of dollars of income. The innovative potential of disability inclusion goes far beyond the 3.4 billion people around the world who identify as disabled.
Gains at Every Level
Companies that embrace disability inclusion stand to gain at every level of the organization – from innovation in the research labs to skilled and dedicated front-line employees to executives who have a unique perspective on global markets.
The benefits of disability inclusion are aligned with the practices that underpin the value proposition of ESG – risk mitigation, market opportunity, constant innovation, and sustained profitability, to name just a few.