Edelman UK has appointed Chuka Umunna as Executive Director and Head of its Environmental, Social, Governance (ESG) consultancy offer. Hugh Taggart, Global Crisis Chair, Edelman UK speaks to Chuka about his new role at Edelman and what we can expect to see from Edelman Smithfield’s ESG Consultancy offer in the future.

Why are you excited to join Edelman?

Edelman’s reputation as a truly global, pre-eminent strategy and communications firm is clear. For years, I have been a passionate advocate of stakeholder capitalism, where environment, social and governance factors are integrated into corporate decision making. I wanted to join a team that was serious about facilitating this change by building a strong and vibrant ESG practice, working with clients to help transform society for the common good. Edelman is that team and a big family run business with great values. So I’m delighted to be on board!

Why do you think the ESG market presents so much opportunity for Edelman?

Edelman has spent the last twenty years measuring ESG through our flagship Trust Barometer, the leading global trust and credibility survey relied on by governments, institutions and corporations across the world.

We have a strong track record of carrying out extensive ESG consultancy work for companies and asset managers in the UK and internationally on their management of ESG factors. Indeed, the fact that our London team is recognised as a market leader in advising asset managers with more than $5 trillion of assets under management, means we have unparalleled access to the ESG investment community, as well as an in-depth understanding of the latest investor trends and money flows.

How have you seen the ESG agenda evolve in recent years and where do you think it’s going?

The first major speech I gave as Shadow Business Secretary was at Bloomberg’s London HQ in the autumn of 2011 and it was all about the merits of businesses taking account of other stakeholders, in addition to shareholders, not just because it is the right thing to do but because it adds to shareholder value in the long term.

Harvard University’s Mark Kramer and Michael Porter had written a seminal piece in the Harvard Business Review that year setting out the core argument, which I championed. They said that “at a very basic level, the competitiveness of a company and the health of the communities around it are closely intertwined. A business needs a successful community, not only to create demand for its products but also to provide critical public assets and a supportive environment. A community needs successful businesses to provide jobs and wealth creation opportunities for its citizens.”

This core proposition is uncontroversial now but we were denounced at the time by political opponents and a significant number of business figures for engaging in “anti-business” rhetoric simply for making this stakeholder argument, despite the fact many of those making the case for it were other business people! I remember speaking to a private dinner of senior business folk who headed up companies and financial institutions who were household names at that time. The general attitude was to ignore the flaws in the current model of doing business, which had only recently been exposed in awful technicolour by the global financial crash of 2008/09.

It was only when the 2016 EU referendum came along that I think real momentum built behind the need for a new approach in the UK. The referendum served as a wake-up call for so many business leaders – a lot of them told me it brought them face to face for the first time with the growing public anger there was and still is, towards a form of capitalism that many had come to believe was and is broken. Unless you build a better, more responsible capitalism, support for it will drain away down more populist and extreme avenues.

There has been a welcome sea change since then with very public declarations of support for the whole stakeholder agenda, for example, with BlackRock CEO Larry Fink’s last two annual letters to CEOs on the subject and the statement signed last summer by more than 180 CEOs released by the Business Roundtable (the association of the leaders of the US’ biggest companies).

Do you think business or government will be in the driving seat when it comes to driving through environmental, social and governance reforms?

The truth is it should be both, working in partnership. It would be preferable in the first instance for business to take the initiative rather than government having to regulate all the time, which can often lead to unintended consequences and strategies driven by the need to comply with tick box legislative requirements, rather than activities and practices that genuinely advance positive ESG outcomes. Sometimes, though, it will be necessary for government to act.

How do you think Covid-19 will impact the ESG agenda?

There will be a lot of scrutiny of business, which has an important role to play, not least because it is now operating alongside a bigger and more active state as a result of the pandemic (which has necessitated an expanded state).

Firms making layoffs or salary cuts which subsequently announce big dividend payments, share buy-backs or generous executive compensation should expect to be given a very rough ride in this environment. Those taking state or central bank support face not only added scrutiny but restrictions on what they can do on executive pay and dividends.

The pandemic and the aftermath of the tragic murder of George Floyd has also brought greater attention to equality issues which companies cannot ignore. Added to this are the clear data emerging that show ESG funds and investments have been outperforming the market during the Covid-19 economic downturn. This all combines to bring even more attention to the ESG agenda.

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