Corporate redemption is no sign of true moral fibre

Supporters of the upcoming Voice to Parliament referendum gather for a rally at Trades Hall in Melbourne. Picture: NCA NewsWire / Andrew Henshaw

In medieval times, it was common practice for the wealthy to buy indulgences from the church to atone for their sins. These payments, the church assured, meant the person paying would not remain in purgatory for too long and would later ascend into heaven.

A wealthy person could even buy indulgences for their family members or ancestors who were long dead. Today we think of ourselves as far more enlightened than our medieval forebears. We secular folk would never pay a class of clerics large sums of money to atone for our sins. Or would we?

In recent years, billions of dollars have flowed into investment funds that market themselves as providing “environmental, social and governance” impacts. In Australia, industry super funds lead this trend, with money pouring into funds that then invest in companies that promote green, social justice, equity, diversity and inclusion causes.

The basic idea behind ESG, which has been promoted by organisations such as the World Economic Forum, is that one can make a profit and “do good” at the same time. Investors argue they can contribute to a net-zero future while making solid returns, or contribute to social justice alongside their fiduciary duty.

Rating agencies and research firms issue ESG “scores” to companies that are then used by bodies who advise institutional and retail investors which organisations they should invest in. Because ESG has no standardised metrics or even standardised definitions, such scores can be massaged by those companies that have enough money to play the game.

An entire industry of consulting agencies and non-profits exists today to implement cosmetic changes within companies to boost their ESG scores. Such cosmetic changes may include sponsoring a float at the Gay and Lesbian Mardi Gras or offering paid leave for staff who wish to change their gender.

As I commented in these pages last year, “gender affirmation leave” is offered by our two biggest supermarkets, Coles and Woolworths, and contributes to these companies earning “gold- and platinum-tier” status by the Australian Workplace Equality Index – despite the fact both companies are simultaneously implicated in wage theft scandals.

Rio Tinto chairman Dominic Barton speaking at the company's 2023 annual shareholder meeting in Perth.

Sometimes called “wokewashing”, the practice of buying virtue through ESG allows corporate entities to deflect attention away from their PR embarrassments, like Henry VIII’s Indulgences allowed him to go on indulging.

Such practices are called wokewashing because these changes usually do not go deep enough to really cause change within a large organisation. By sheer virtue of their size, our largest corporations often make mistakes that only a complete overhaul of management practices could possibly address.

Take BHP, for example. The biggest company in Australia, and largest mining company in the world, is now embroiled in one of the biggest wage theft scandals in history. Accused of underpaying 28,500 workers $430m in wages for deducting public holidays from leave entitlements, BHP is now supporting the Yes vote in the voice referendum and has pledged a $2m donation to the campaign. This pledge is likely to boost its ESG score, but whether it satisfies the workers who have been underpaid is yet to be seen.

(L-R) Rio Tinto Managing Director Joanne Farrell, Pro Vice-Chancellor Indigenous, UNSW Sydney Professor Megan Davis and BHP Chief Executive Officer Andrew Mackenzie pose next to the original Uluru Statement during a CEDA event in Perth. Picture: AAP.

It is not just the mining industry that seeks ESG redemption. The banking industry wants to buy its way into heaven as well. Following on the heels of the disastrous royal commission into the sector, the Big Four are all doubling down on ESG. NAB faced criminal charges in 2021 for failing to pay casual employees long-service leave entitlements, but this is offset by its sponsorship of Midsumma – Melbourne’s queer arts and cultural festival. Last year ANZ was fined $25m for misleading consumer practices, but it also announced it was offering its staff paid leave for a sex change.

Commonwealth Bank has been in hot water in recent years for breaching money-laundering laws and Westpac was required to pay a $1.3bn fine after 250 customers made transfers that were linked to child exploitation. Both organisations are atoning for these sins by campaigning for the Yes vote.

Wesfarmers chair Michael Chaney

Almost every large corporation that has signed on to the Yes campaign for the voice referendum is embroiled in some kind of scandal that involves their core business. Whether Coles is underpaying its staff, or Rio Tinto is dealing with dozens of accusations of sexual harassment, each company has significant work to do internally.

And this is why ESG is so popular among our corporate class. Symbolic gestures that can be outsourced to consultants and NGOs are an easy box-ticking exercise. Systemic changes to management habits, or making sure business practices are fair, is much more costly and time-consuming than simply waving a rainbow flag.

In the medieval period, wealthy elites would pay indulgences in order to curry favour with the church because the institution was incredibly powerful.

It is not surprising then that our biggest corporations are pledging their support for ESG goals that are also supported by the government, unions, the majority of our media, academia and non-profit sectors.

While commitment to ESG is not necessarily a sign of true moral fibre, if it can assist in washing away the stain of sin, then every dollar pledged will be money well spent.

Claire Lehmann is founding editor of online magazine Quillette.