Dame Alison Rose cheerfully greeted NatWest employees and shareholders in April.
Speaking at the annual meeting in a large bank headquarters on the outskirts of Edinburgh, the chief executive recently received one of the highest awards on the King's list of first honors.
She was also the first NatWest boss to receive an annual bonus since the financial crisis.
< p>Since Dame Alison was promoted to the top job in 2019, she has been honored not only for her banking mind, but for championing corporate “values” and “goals.” fellow blue chip executives.
“Our values are at the heart of how we deliver our purposeful strategy,” she told the audience.
Under her leadership, NatWest has come to refer to itself as the “relationship bank for the digital world.” Its values are “inclusiveness, curiosity, reliability, sustainability and ambition”.
These are laudable goals. However, those same values would be Dame Alison's undoing, as they were applied in ways she could never have imagined.
In a highly publicized dossier first released by The Telegraph, overzealous employees of Coutts, a private bank and subsidiary of NatWest, detailed why they believe the group's inclusion policy, or “ESG” (environmental, social and governance) policy, means they don't should no longer provide services to Nigel Farage.
Dame Alison Rose declared NatWest the “relationship bank” after becoming Credit's chief executive in 2019. : Andrew Lloyd/Alamy Stock Photo
His crime? The cocky former leader of the Brexit party made a number of public remarks that were “not in line with the bank's goals and values.”
These included comments in support of Donald Trump, his tweeting of a “transphobic” sketch by comedian Ricky Gervais, and what Coutts felt were his “xenophobic, chauvinistic and racist views.”
Farage's ensuing scandal became public when his “debanking” turned into a media firestorm that NatWest struggled to contain.
Dame Alison was forced to resign after she admitted to leaking details Farage's banking situation to a BBC reporter.< /p>
This fiasco drew attention to corporate values and so-called “awakened capitalism”, highlighting the risks that companies can take when getting involved in politics and social affairs.
Search for meaning not money
NatWest is by no means alone.
The mantra of “goals” and ESG (environmental, social and governance) has been enthusiastically embraced by the jet setting class in recent years, with proponents claiming it helps increase customer confidence and employee motivation.
In 2021, Alan Jope stood up and declared that Hellmann's mayonnaise, the best-selling product since its invention in a New York deli 108 years ago, has finally found its purpose.
It wasn't just being a product. condiment that people used in sandwiches, salads and other meals, the then Unilever chief executive insisted.
“Fighting food waste is Hellmann’s goal,” Jope said when the company unveiled a campaign dedicated to that how the product can be combined with leftovers in the refrigerator.
“Hellmann's believes food is too good to waste and food waste should be socially unacceptable,” the company's website says. “We want to help people make any food taste good so they don't have to throw anything away.”
There was only one problem. As Jope and Unilever concocted targets for Domestos disinfectant (“win the war on unsafe sanitation”) and Knorr stock cubes (“reinvent food for humanity”), investors grew increasingly frustrated with a stock price that was going nowhere.
This drew sharp criticism from Terry Smith, manager of the star fund, who said Unilever's “ridiculous” project was a distraction from her day-to-day activities.
“A company that believes it must define a goal. Hellmann's mayonnaise has clearly lost its plot,” the entrepreneur wrote.
“The Hellmann’s brand has existed since 1913, so it can be assumed that by now consumers have figured out its purpose (spoiler – salads and sandwiches) .”
This scandal is one of many examples of companies getting more involved in social causes, but not always with success.
Food and drink giant Mars was ridiculed last year for “waking up” when it redesigned iconic M&M characters.
Replaced M&M's knee high boots with a more “progressive” design
Gone are M&M's green boots to the knees, which were replaced with a pair of sneakers. The heel of the brown M&M stilettos was also cropped, reflecting what Mars said was “a more dynamic and progressive world.”
The company later backed off after a resounding backlash, giving its so-called “knitting stationery” another redesign.
In some cases, companies have come under fire for what critics have called performative gestures, leading to accusations of “greenwashing” and “rainbow laundering” — where corporations support gay rights or environmental issues in Western countries but take little real action or remain silent. on this occasion. them in other markets.
This encourages businesses and their shareholders to question the wisdom of politicizing everything, while conservative politicians see an opportunity to attack leftist groupthink in the boardrooms.
Luke Thrill is the UK director of More In Common, a charity that tracks debate on controversial issues in the UK. says: “People welcome meaningful examples of corporate social responsibility, but do not want them to demonstrate virtue.”
“But there is a real gray area in which such integration initiatives turn into political it's just about being a good corporate citizen, and that's a really hard line for business.”
Go woke or go broke
Despite the jargon, ESG principles are far from new.
From the Cadbury family's decision to build homes, parks and libraries for chocolate factory workers to Lord Leverhulme's model village for his employees in Port Sunlight, Merseyside, there is a long tradition of companies supporting their employees and championing the social cause.
But The birth of the modern ESG movement is credited to an article published by the United Nations in 2004. The article “Who Cares, Wins” argued that companies that apply these principles not only do the right thing, but also increase their competitiveness.< /p>
These ideas have since gained support from senior management as major companies seek to downplay the 'greed is good' culture that critics blame for the financial crisis.
Perhaps no UK bank has embodied this transformation to such an extent . like NatWest, formerly known as Royal Bank of Scotland.
Under former chief executive Fred Goodwin, described as “Britain's most infamous banker”, RBS embarked on global acquisitions, briefly making it the world's largest bank before it collapsed in spectacular fashion. With a £46bn taxpayer bailout in 2008, Goodwin became a lightning rod of public anger.
On the contrary, Dame Alison's public image couldn't be further than Goodwin's. Working at the bank as an intern, she spent years patiently climbing the corporate ladder and then cleaning up the disgraced investment banking arm of RBS.
When she took over from Ross McEwan as CEO a year later, she immediately set about replacing the RBS brand with the less dangerous NatWest brand, as well as launching a company-wide process to define a lender's “target”.
Alison Rose Natwest Promo in article
“I truly believe that if you're going to lead an organization and create an organization that has value in the long run, it has to be focused,” she told Blueprint for the Better Business Podcast last month.
“No organization deserves to exist. We have no right to exist tomorrow if we do not create value for all of our stakeholders, that is, our customers, our communities, our colleagues and our shareholders.”
In 2021, NatWest was one of several major UK companies – along with National Grid, food maker Unilever, outsourcer Capita, rival lender Barclays, pension manager Fidelity International, law firm Hogan Lovells and water provider Severn Trent – that have vowed to meet the needs of employees, local communities and society as a whole are on the agenda.
This comes after a tipping point a year earlier, when BlackRock chief executive Larry Fink announced that the fund management giant, which manages $9 trillion in assets, is now considering sustainability as “the new standard for investment”.
Guy Jubb, Emeritus Professor at the University of Edinburgh and former Head of Management and Management at Standard Life Investments, says that well-managed companies that comply with ESG standards will have “the ingredients to ensure the long-term prosperity of their shareholders and society.”
“If you look at companies that have had serious problems with ESG, you can get cost reductions that actually undermine wealth creation,” he adds.
There is also evidence that, on the face of it, consumers are applauding companies' efforts to act more responsibly, whether it's reducing carbon emissions or hiring employees of all backgrounds.
“People are very supportive. Skepticism tends to arise when it’s seen as symbolic,” says More In Common’s Tril.
But as the ESG movement has grown and an entire industry of consultants, advertisers and auditors has sprung up around it, so and the risk that companies are wrong.
An example of hypocrisy
Perhaps one of them is Nike. one of the best-known companies in terms of their blunt approach to brand revitalization.
The sportswear giant created an ad attacking “patriarchy” and featuring American football star Colin Kaepernick, who famously began “taking the knee on games in protest against racism and was fired – with the words: “Believe in something. Even if it means sacrificing everything.”
A Nike ad campaign featuring Colin Kaepernick caused controversy. Credit: AP Photo/Marcio Jose Sanchez
The campaign earned Nike applause from some campaigners and accusations of “laundering the awakening” from others who pointed out that less than 10% of the company's own VPs worldwide are black.Meanwhile, ice cream maker Ben & Jerry's, owned by Unilever, has been criticized for accusing Joe Biden of “fanning the flames of war” by supporting Ukraine, and for calling on the UK government to drop its plans to deport illegal immigrants to Rwanda.
Brands are sometimes criticized for even what seems like a harmless gesture of support.
United Airlines found itself at the center of a storm last month over its sponsorship of London Pride when Just Stop Oil activists warned that they will try to disrupt the event if the company does not withdraw.
And while many UK companies have rushed to join Stonewall's Diversity Champions program, which advises on creating inclusive jobs, their decision to embrace the charity's gender ideology has put them at the forefront as the debate rages on how society should adapt to growing usage. non-traditional pronouns and genders.
Amid growing backlash against corporate campaigns, US Republicans have attacked pro-ESG companies as “awakened capitalists” and have taken drastic action, such as seizing public funds from money managers like BlackRock.
Disney has been in hard situation. feud with Florida governor and potential Republican presidential candidate Ron DeSantis, critics dubbed the bill “don't say you're gay” after opposing laws that would ban discussion of sexual orientation in schools.
Florida Republican Gov. Ron DeSantis is embroiled in a feud with Disney over the so-called “Don't Tell Gay” law. Photo: Nathan J. Fish/Oklahoma via AP are open to accusations of hypocrisy when their “purposeful” values only seem to apply in countries where they are easy to uphold.
Some, such as Unilever, have been accused by the Ukrainian government of effectively helping finance Vladimir Putin's invasion by refusing to stop operating in Russia and continuing to pay taxes there.
The backlash against ESG in the US has been so furious, that Fink, BlackRock's boss, stopped mentioning the term in his annual letters to investors. He recently complained that he was being used as a “weapon” by critics.
This new caveat is also reflected in ESG mentions during earnings reports for ace companies, which peaked at 156 in the last quarter of 2021, but dropped to 74 in the first quarter of 2023, according to Factset.
Meanwhile, in the UK, Rishi Sunak last year vowed to crack down on “woken-up bullshit and left-wing agitators” in public life, while ministers mulled relaxing net-zero commitments in a bid to win votes.
Amid the conflict at NatWest, the government took a hard line, issuing a stern report after meeting with bank executives (with the exception of the recently expelled Alison Rose), warning them not to infringe on clients' freedom of speech.
that a person could face their account being deleted for expressing their political views [is] completely unacceptable,” the statement said.
Board of Directors note
Even within ESG’s boards of directors, it has been criticized for mountains of documents and sometimes staggering the results it gives.
Elon Musk branded ESG the “devil” earlier this year when his electric vehicle company Tesla scored lower than a number of tobacco companies.
Oil giant Chevron scored higher in the assessment, which was founded on a variety of factors, including environmental reputation, corporate governance and diversity.
Just Stop Oil activists often warn that they will strive derail events that are inconsistent with climate issues. Photo: VCG/VCG via Getty. Images
However, the stakes for companies are very real: pension funds and other leading investors are increasingly using ESG indices to place their funds. This is despite the many different standards applied by various asset managers and audit firms.
A report released in November by Tulchan, a financial PR firm, said UK companies were disappointed with investors' approach to ESG policies with ” ticked”, warning that it was “overly prescriptive and formulaic”.
Some felt things were getting so bad that they were “stuck fighting” with investors over how to run their own business.
Romi Savova, CEO and founder of fintech provider PensionBee, supports ESG's goals, but believes that companies should be wary of straying too far from their field of activity.
“Consumers really expect companies to behave like corporate citizens and the implications of that will be specific to each business,” she says. “But as a general rule, it should cover matters that are material to the business, not all matters.”
For example, she says that PensionBee's customers are diverse, and so the London-based company aims to reflect this in composition of its own workforce.
It also campaigns on issues such as the “caregiver pension gap” affecting people who have to take time off to care for a loved one.
However, Sir Martin Sorrell, the advertising guru who built WPP into a global titan who now runs digital advertising agency S4 Capital, warns that the current nature of flagged ESG requirements may hinder rather than help businesses.
“We are a tiny company, we produce a 200 year report and a separate ESG report,” he explains. “It's just crackers.”
Different regulatory bodies also require different standards. “So we have about 10 different sets of standards to meet, and yesterday we had a board meeting where half the agenda was about ESG policy approval.”
But Sorrell says, which does not mean that these policies are not needed in one form or another – he just thinks that the ESG industry has become overly complex.
“If you are going to maximize long-term profitability, you must have gender equality, you must have fair representation of the communities in which you operate, you must consider the interests of all stakeholders – this is stakeholder capitalism.
“But in business school, everything is too complicated, although in fact everything is very simple. If you are trying to build a business for the long term, you will naturally involve all stakeholders.
“So the goal is to maximize profitability in the long term. That's all. Everything else will fall into place.”
He points out that in the NatWest example, if employees really thought long term, they wouldn't have given up on Nigel Farage's bank.
“It puts you in a stalemate. Because now you're going to go through each of your clients? It just doesn't make sense.”
Right to vote
As public attitudes become more skeptical of “awakened” corporate values, one question is being debated in political circles: how much, if anything, the Tories can benefit from these problems.< /p>
Pollers Public opinion is saying that the Uxbridge by-election, in which the Conservatives fended off a challenge from Labor and narrowly retained their seat, is a sign that problems affecting voters' wallets could have serious consequences.
Sadiq Khan's expansion into Ulez became a contentious political issue. Credit: Chris J. Ratcliffe/Getty Images
Many in the borough were unhappy with the introduction of an Ultra Low Emissions Zone (Ulez) by London Mayor Sadiq Khan of the Labor Party, Sadiq Khan, and voted accordingly.
Some Tories believe it is a sign of broader opposition. to a policy of zero net income among households.
“I think the entire population recognizes that we need an accessible transition, especially for working families, people who are struggling to make ends meet,” says Danny Krueger, Tori on the back bench.
Thirds fear that it could backfire. Among those who voted Conservative in 2019 and plan to vote Labor next year, more than half believe that Rishi Sunak “hasn't gone far enough” in the fight against climate change, a recent Opinium poll for The Times showed.“It would be wrong for Conservatives or Labor to conclude that Uxbridge was a rejection of environmental policy,” says Sir Alok Sharma, a former cabinet minister and ex-president of the Cop26 climate conference, pointing to polls like this one. p>
“Of course, the cost of living is number one right now, so we need to help people make the transition.
“Ultimately, the cost of “not zero” will be much higher than the cost of “pure zero” without any benefits in the form of economic growth, jobs and a cleaner environment.”
2907 popularity in the UK
Tryl, of More In Common says debates on topics like gender are unlikely to be a good “wedge issue” for Tories because most voters will simply ask why politicians aren't prioritizing issues like the economy, the National Health Service and immigration.
He recalls participating in a focus group shortly after Oxford College students voted to remove a portrait of Queen Elizabeth II from their living room in 2021.
Gavin Williamson, who was Secretary of Education at the time, called the move “simply absurd.”
Bye Thrill says politicians should not jump on the anti-revival bandwagon. “Someone asked: “Why is the Minister of Education commenting on this? Doesn't he have better things to do?” And everyone in the group agreed.
“The next election, given the state of the economy, will be through an economic lens, and I think the danger of focusing on social issues is that you start to look like you don't notice public sentiment.”
Similar attitudes prevail with companies, he adds, as most consumers prefer companies to focus on providing quality service and treating their own staff well.
“Before you do any other things and push and try to convince others, in fact, you have to put your own house in order,” Tril adds.
“There is a big difference between demonstrating your values, say sponsoring something at a gay zero and using these principles to effectively drive people out is where people go: “Business shouldn’t be doing this.”
Before leaving NatWest, Alison Rose was fond of saying that “being ambitious means making tough decisions, but difficult.”
As she will now certainly testify, the consequences of these decisions can also be very difficult.
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