If ESG is here to stay, make it work to support employees and families

Washington Examiner, December 30, 2022

Last month, Elon Musk gave an ultimatum to his employees at Twitter — commit to working “long hours at high intensity” or leave. It wasn’t immediately clear how many hours he was asking people to work for, but burnout in tech is well documented, and overwork in the United States may be contributing to America’s continued decline in social capital decline.

In a report out this week, the Social Capital Campaign highlights stark findings. The share of children growing up without both parents in America today is three times the global average. The share of adults with no close friends has grown from 3% in 1990 to 12% in 2021. The number of prime-age working adults (18-54 years) who are unpartnered (neither married nor cohabiting) rose from 29% in 1990 to 38% in 2019. Despite record hours volunteered and money donated, the volunteering rate has also declined — in rural areas from 30.9% in 2003 to 25.2% in 2015 and in suburban communities from 30.1% to 25.3%.

Could it be that working long hours at high intensity is a part of the problem? While there are survey results that suggest so, without a clear measure, it is difficult to determine for sure.

A “social capital footprint” metric within existing environmental, social, and governance scoring could help fix that. The growing trend of ESG data to show the impact an organization has outside of its immediate business has proven influential — with more than 90% of S&P companies providing some form of ESG reporting.

Many on the Right have been concerned that ESG has been used to promote extreme left-wing ideologies. Even some board members are perplexed as to how the measure really drives key business growth.

If ESG is here to stay, the inclusion of a social capital metric would at least ground it in reality. For example, a 2007 study showed that the impact of divorce on the environment was substantial, causing demand for an extra eight nuclear reactor’s worth of energy to fuel new households. If companies can’t account for whether their operations are driving couples together or apart, how can they possibly account for their operation's activity on man-made climate change?

If investors want to see diversity on boards, they should back companies that boost social capital: stable families, and entire neighborhoods of stable families, are the single biggest indicator and mechanism by which low-income children are able to escape poverty and access all the opportunities available to them in this country.

Similarly, when 60% of the upper-middle class aged 18-55 are married, but only 20% of the poor are, there is clearly a huge social capital gap in America. Including social capital metrics in governance reporting as part of a fuller picture of executive compensation means not only can investors see if a company is driving wage polarization but whether social capital assets are a preserve of upper management or not.

ESG can be grounded in reality by considering additional measures that unobtrusively identify whether they are working to support the personal and private aspirations of employees to enjoy friends, marriage, parenting, family, and their wider community.

Boosting social capital increases trust in one another and our governing institutions. Building social capital builds a stable, growing, and solid free market of citizens able to maximize their freedom. Safe, engaged neighborhoods of the upwardly mobile are a boon for growing businesses and better than growing ghettos of despair where social capital collapse makes it harder to accumulate goods.

Elon Musk may well be right to see Twitter as a global public square in which ideas can be freely exchanged for the betterment of society and humankind. But no company should grow at the expense of employees' social capital aspirations. And if a tech company’s 20-somethings are to buck the trends for diminishing circles of friends, marriage rates, and volunteering, they would do well to ensure they have time and benefits from the private enjoyment of life and all it has to offer. The quality of the society as a whole, not just the public square, depends upon it.