Companies may be shifting how they frame their social responsibility efforts to the outside world. Around the world, the use of the term “ESG” — the acronym for environmental, social and corporate governance — has declined on corporate earnings calls, according to RBC Capital Markets analyst Sara Mahaffy. But Mahaffy’s research found that it is not necessarily because companies have leaned away from socially conscious strategies. Instead, she pointed a growing use of the term “sustainability,” as well as other words like “climate” or “decarbonization” that fall under the ESG umbrella. It comes at a time when ESG has become increasingly fraught in the political sphere. Mahaffry noted that areas like the U.S. where ESG has received the most scrutiny have seen the biggest drops in use of the term on earnings calls. These companies are also trying to connect socially conscious themes with the broader business model in a way that investors will see value in, she said. In the last quarter alone, multiple companies spanning market-cap castes and industries have tried to pitch this work as two-fold: Yes, it’s good to advance causes around ESG, they say. But it’s also just good for business — and share prices. “To us, sustainability means running our business in a way that will create value for the perpetual shareholder,” said Williams CEO Alan Armstrong on the energy company’s earnings call earlier this month. A week before the call, the company released its 2022 sustainability report and finished its climate questionnaire. Chemical producer LyondellBasell Industries said it found there’s a $1.4 million annual value for a $50,000 cost to implement systems that will improve yield and decrease energy consumption. The project will reduce carbon dioxide emissions by more than 9 kilotons, according to CEO Peter Vanacker. Sustained growth and the continued robust backlog can be tied to Carrier Global’s decision to “lean into” sustainability and healthy building trends, CEO David Gitlin said on the company’s earnings call last month. Similarly, Lowe’s CEO Marvin Ellison said on the retailer’s call earlier this week that productivity and sustainability “go hand-in-hand.” And part of what’s driving Constellation Energy ‘s pitch is its unparalleled network of clean energy generation facilities, CEO Joseph Dominguez said. “It all translates into a unique ability to give our customers the certainty of visibility they’d want on energy costs and sustainability solutions, and ultimately leads to margin expansion and better value for you,” Dominguez told analysts earlier this month. Business-to-business opportunities Some executives also pointed to the opportunity for more deals when their products have a sustainable tilt. Engineering company Jacobs Solutions ‘ CEO Robert Venkat Pragada said it has a portfolio driven by sustainability-focused themes such as water scarcity, reshoring and energy transition. Ansys , meanwhile, is providing engineering simulation software that can help aircraft engine maker Pratt & Whitney go from 50% to nearly 100% use of more sustainable fuel blends. The trend has made its way all the way up the market cap ladder to Microsoft , whose “Cloud for Sustainability” offering got a mention during the software giant’s earnings call last month. Microsoft’s sustainable offering uses its vast software ecosystem to help corporations make positive steps in their information technology, operations and value chains. It has been used by businesses such as Land O’Lakes and REI, according to CEO Satya Nadella . David Sewell, CEO of packaging company WestRock , said the company was approached by Costco to replace plastic handles on multipack beverages with fiber-based alternatives that are more environmentally friendly. This is part of a partnership with the wholesale giant that also involved helping to automate production lines and increase packaging speeds. On WestRock’s earnings call earlier this month, Sewell told listeners: “This is just one example of many of how WestRock’s unique capabilities position us for growth.” — CNBC’s Michael Bloom contributed to this report
ESG hasn’t gone away, but execs have changed how they talk about it