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Case Study: Salesforce and ESG

Environmental, social, and governance (ESG) may be more of a theory for some, but what does it look like in practice? In this article, we look at how a large corporation attempted to adopt ESG and the practical consequences that resulted. Environmental, social, and governance (ESG) is a relatively young field, and most organizations are still attempting to figure out what it means for their growth plans and balance sheets.

ESG is facing a hard time in the US as right-wing conservatives try to discredit it and call it "woke capitalism" Others regard ESG as a watershed moment in the evolution of modern business, one day becoming the foundation of all corporate strategy.

Others regard ESG as a watershed moment in the evolution of modern business, one day becoming the foundation of all corporate strategy.

Despite the issue's polarisation, the world's largest corporations appear to be embracing the concept and, more recently, the practice of ESG.

Salesforce is an example of a company that will be relevant in 2022. The company consistently rates high in global ESG performance measures and has ambitious ESG ideas. Simultaneously, it has suffered some reputational setbacks in the same area, which is typical for a company of its size.

What exactly is Salesforce?

Salesforce is an American technology business that specializes in cloud computing. It is located in San Francisco and has developed rapidly since 1999 to become one of the world's top 100 firms by market value.

Salesforce's top executives have frequently proved their unshakable commitment to ESG. Whether it wins praise or not, the company has continued to push itself to achieve greater heights. The exact amount of achievement may take years or decades to determine, but for the time being, we cannot blame the corporation for a lack of enthusiasm.

Salesforce committed earlier this year that by 2026, 40% of its global workforce would be women-identifying and non-binary persons. "Our mission is straightforward: to be the most inclusive organisation," the corporation stated in a statement. "To accomplish this, we must speed representation and focus on the employee experience." According to the most recent Salesforce data, 35.7% of its employees are female, with a further 0.2% identifying as non-binary or not revealed.

The corporation also announced in February of this year that "four ESG indicators will determine a component of executive variable pay for executive vice president and above."

Every year, the priorities associated with this will shift. These are, for the time being, gender diversity and higher representation of "Black, Latinx, indigenous, and mixed staff." It will also increase spending with partners who have signed up for Salesforce's "Sustainability Exhibit," a procurement contract designed to lower the company's carbon impact.

"Our dedication to equity and sustainability enables us to be a better company — and to promote more inclusive, equitable, and resilient communities," the corporation states.

Is this important?

Both yes and no. When a corporation of this magnitude ties executive variable pay to ESG performance, it is always remarkable. In that sense, it is a huge move for the corporation and demonstrates to the corporate world what kinds of principles it regards as game-changing.

On the other hand, it is not a novel concept. Salesforce did not start the trend; rather, it has joined Apple, Intel, McDonald's, Starbucks, and Siemens in connecting variable pay to ESG.

In September 2021, the company announced that it had achieved its target of net-zero across its whole value chain, making it one of only a few countries in the world to do so.

So, how good is Salesforce at ESG?

Finally, yes. The company is a global ESG leader. It understands what stakeholders expect in this area and proceeds accordingly. Investor's Business Daily placed it sixth in the world for ESG in late 2021. A few months later, in January 2022, investment and research firm JUST Capital put it among the top ten in the world, citing its environmental commitment as a "fundamental strength."

Salesforce has ambition and is well-regarded in worldwide rankings, but neither acts as a barrier to controversy, which it also possesses in plenty.

For example, in 2021, the company lost senior management Cynthia Perry in a less-than-acrimonious split over equality - one of ESG's main principles. Perry's resignation letter was uploaded on LinkedIn, where she claimed she was the victim of "microaggressions and inequality." "I've been gaslit, manipulated, bullied, mistreated, and generally unsupported... the entire time I've been here," she wrote before criticising the company's dedication to black worker representation. In contrast to the more respectable female representation stats, Salesforce's black presence stands at 4.8% as of February 2022. It has been rising in recent years, although at a much slower rate than critics had predicted.

Another issue arose for the corporation in Japan at the same time as Perry's resignation. There, an employee with a disability alleged that the corporation disregarded her in terms of accommodations and subsequently fired her as a result. The lawsuit is still being heard in Japanese courts.

What can Salesforce teach us?

Leadership is important. If you follow Salesforce's ESG progress in the media, you will notice a high level of input from its senior management and board. These folks enjoy making comments, and what they say reflects their enthusiasm about ESG.

"I'm delighted that Salesforce is one of the few firms that has achieved Net Zero and 100% renewable energy," CEO and chair Marc Benioff said last September.

"But, we cannot stop until we have embraced every option and have every firm on board." Not only is he celebrating accomplishments, but he is also actively challenging his organisation.

Executive vice president and CEO of the corporation's U.K. and Ireland subsidiary also leaned in, claiming the company was "on a mission to push climate change at scale" in a Politico interview last October. This type of speech, when combined with visible actions such as being a partner at COP26, does wonders for the company's reputation among its stakeholders.

Salesforce has embraced ESG and worked hard to determine what it can accomplish in this area, but it does so realistically. Rather of adhering to broad concepts, it quantifies aims based on what is realistic. It lays out a strategy for achieving those goals. When it fails, it calculates the length of the delay, and when it succeeds, it instantly sets new goals.

Salesforce invests a lot of time and money in ESG goals, but its setbacks illustrate that problems can arise at any time and in any place, and they must be prepared. This is especially true in the case of Salesforce. This is a company that isn't afraid to show off its ESG targets and embraces media publicity when it hits or surpasses them. This type of publicity propels a company even more into the public eye, which may be fantastic... unless anything goes wrong.

If a reputational risk is not properly managed, or if stakeholders ever adopt a more right-wing, anti-ESG posture, the weight of attention might shift in an instant.

Salesforce's troubles don't appear to have slowed progress so far, but that doesn't guarantee it won't happen in the future.

You can learn more about the subject by opting for the ESG Expert Certification course from Directors’ Institute - World Council of Directors.

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