There Is No ESG Without the S

The consideration of worker treatment must be as significant as environmental policies when assessing a company’s ESG performance.

A recent research note by Vincent Deluard of INTL FCStone is gathering mentions from major financial media outlets like Bloomberg and the Financial Times by claiming that ESG leaders tend to employ significantly fewer people than ESG laggards. His central argument seems to be that companies with few employees can more easily check off policies that make them look good to ESG rating providers than companies with many employees can.

We took a look at our own rankings and could not confirm his findings. In contrast, the top performing companies in each industry are employing more workers than their less just peers.


(Steffen Bixby/JUST Capital)

There are a few possible explanations for this discrepancy: ESG traditionally had a focus on the E, environmental, and the G, governance. As a result, many of the large ESG ETFs that Deluard looked at tend to be based on older approaches to ESG that effectively exclude the S, social, or addresses it in very rudimentary ways.

Deluard also looks at the Russell 3000, which includes many small companies in industries like biotech that contain no more than a few dozen employees. Our rankings, in contrast, focus on the medium- and large-scale companies included in the Russell 1000, which represent over 90% of the investable equity in the United States.

Generally speaking, we do things here at JUST Capital differently from other ESG research organizations. We start off with polling the American public on the issues that really matter to them when it comes to just business behavior. Every year, our polling team finds that the S matters most: The American public wants companies to treat their workers well, to do right by their customers, and to engage with their communities.

That’s not to say the E does not matter – the environment is one of the five key stakeholders to which we hold companies accountable. It’s just that when we ask Americans to name their priorities, social issues, and especially worker treatment, always rise to the top. As a result, we have very detailed and wide-ranging data on the S that allows us to promote leadership and just business behavior across all industries.

We believe that the S is on the rise. Putting workers, customers, and communities at the center of a company is becoming a major driver for value creation given the COVID-19 pandemic and accompanying economic crisis. Our analysis is showing that companies that do right by their stakeholders are those that outperform their peers in the current downturn. All this is changing the ESG landscape before our very eyes.  In short: There is no ESG without the S.

Have questions about our research and rankings?  We want to hear from you!