In our current political climate, it’s critical for your business to align its environmental, social, and governance (ESG) strategy with its political influence activities. All-too-common misalignment creates real business risk such as inconsistency in brand reputation, employee dissatisfaction, and inability to meet stated goals.

Many corporations have made bold statements in response to some of the most critical issues we face — climate change, racial equity, and the protection of voting rights — but their political contributions and influence strategy can tell a different story.

Misalignment between company business imperatives and political influence can come in a number of forms. Take climate as an example. Many public corporations are making commitments to reduce their climate footprint, but their political contributions frequently work counter to their climate objectives.

At Leadership Now, we evaluated 80 of the top S&P 100 companies by market cap. Thirty-seven of these corporations indicated they are taking direct action toward net-zero targets as part of their sustainability strategy. Yet, 78% of these same organizations gave more political funding to climate deniers than environmental supporters or neutral members of Congress.

This misalignment creates significant risk to a company’s brand, internally and externally.

We recommend businesses consider their political influence efforts as part of the ESG efforts.

ESG is more than a buzz term. Today, ESG considerations are an increasingly integral part of risk and ethics assessments used by companies, investors, and other stakeholders.

In recent years, ESG specialists have focused on a core set of issues, including environmental degradation, diversity and racial equity, human rights, board structure, and executive compensation. However, one of the critical drivers of impact has been overlooked: corporate political influence.

Corporate political influence intersects with ESG as a mechanism for corporations to support legislation and policymakers who can institute (or inhibit) bills that advance (or impede) environmental, social, and governance initiatives.

So, what is corporate political influence? Broadly defined, it is any action your business takes to influence governmental policy or process. These tactics include lobbying to strengthen relationships with policymakers; voicing opinions to influence a specific piece of legislation; partnering with coalitions to shape government agendas; and providing campaign funding through political action committees (PACs) to support specific candidates.

These initiatives can have a material impact across multiple ESG dimensions, as well as affect the economic business environment in which you operate.

Throughout history, businesses have engaged in democratic processes. But in our current political climate, more stakeholders are paying attention to the role business leaders play. And rightfully so.

Let’s look at the 2020 election. Seventy-six of the candidates who later voted against certifying the results received more than 25 percent of their funding from corporate PACs, and 25 of those received more than 50 percent from corporate PACs.

The health and stability of U.S. democracy has become a rising concern for many in the business community. Threats to election integrity can put the business environment at risk, making it imperative that business leaders consider the impact of their business practices in this broader context. Business leaders are also becoming aware that long-term shareholders are concerned about corporate political spending that may be used to undermine U.S. democratic institutions.

Practical Action Plan Takeaways

3 Steps to Reduce Risk and Align Your Political influence to Your ESG Strategy

At Leadership Now, we recommend leaders of U.S. public companies take a few critical actions to ensure your corporate political spending is transparent, aligned with your ESG goals, and contributes to a stable political and economic environment. Highlights are below and you can download the full report for details.

• No. 01 — Provide Transparency

• No. 02 — Align Political Contributions with Company Values

• No. 03 — Support a Stable and Healthy U.S. Democracy

Leadership Now Project ESG Task Force Chairs

Paige Warren
Harvard Senior Fellow

Additional Resources

Corporate Civic Engagement Case Studies

Overview: Business & Democracy