What do Small Business Owners Think of ESG?

Business Brain, the show for entrepreneurs, episode 428 for Friday, March 3, 2023. Greetings, folks, and welcome to. Welcome back to Business Brain. Did I call it Business Brain or Small Business show in the intro?

I think you called it Business Brain, but, you know, it's a back and forth.

Yeah, I don't. I don't know why I paused at that. But anyway, we are Business Brain. We used to be the small business show. We changed it because we found what we were talking about was art using our business brains. And so that's what we call the show now because it makes so much sense to us anyway, and hopefully to you to apply your business brain logic and thought processes to lots of different things to maintain success, or at least a successful perspective. The perspective of success, I think, is key. And that's what we do here. And still here in Durham, New Hampshire, I'm Dave Hamilton.

And I'm Shannon Jean. I'm still in Lafayette, having a rare sunny day out here, which is odd to say in California, but we've had such a wet and snowy winter.

Yeah, it's been great.

Been fantastic. But what's on your mind today? Yeah, yeah, I have this. So I have a question about this esg, Environmental, social, governance. And it's kind of a concept of how to rate companies, typically large companies, and publicly traded things, in another way than just profits related to carbon and environment and also social causes, diversity, inclusiveness, all this kind of stuff. So my question to. To all the business owners that are listening out there, is how important is it for your business, for your success and your place in your community to embrace causes like this, whether it's social causes that you may feel strongly about or promoting your diversity parts of things or your environmental impact that. My, My question is that we certainly, in my business history here, we always talked about how we help the environment with our repairs and keeping stuff out of landfill because it's a good thing to do and it was good business. So that kind of thing's pretty basic. But I'm curious how important that has become to other companies out there. You know, is it. Do you have to focus or are you focusing on. How do I phrase this in a. In a careful way? Are you hiring the focus solely on hiring the best person for, like, a position? Or do you need to focus on we need to fill these kinds of roles with this type of person? Or is that just crazy and you're just always trying to hire the best person?

Yeah, you know, I do know.

Sincere question.

You know, it's a good question. I. I want to. I will answer it. I want to sort of address the first part of what you said first. Yep. I, I like to be able to sleep at night. I, I've. I've. And so I have always prioritized that over maximum profits, I could, I could, I could. I've always said I would be more profitable if I were a sociopath. Right. Like, if I didn't care about other people.

Maybe.

Maybe. Well, I mean. Right. You know, like, there's definitely decisions I've made because I, I like to be able to look people in the eye and know that at least in my opinion, I didn't screw them. They might feel different. Right. They might feel differently. But I know that I'm not actively trying to screw you. Certainly there are times when I've realized, you know, sort of almost retroactively, like, wow, I really screwed that person. Like, that sucks. But I don't, I don't. And I don't like those feelings. And so I like to sleep at night. So this idea in general that is sort of described with esg, the idea of putting value on things in addition to profits is a good thing, I think. And I say that as a business owner, not as someone sitting on the sidelines looking at businesses. I say it about my businesses. Maybe that's a better way of phrasing this. I don't find myself choosing to or not to do business with people based on these kinds of factors, though. Like, I choose the businesses that I relate with, and there is an asterisk to that. I always say, hopefully you don't get mad at me for saying this, but at Backbeat Media, we have a no assholes clause. Okay. And I love that. And if we wind up, it really, it's about. We don't. We rarely hire people that fall into that category. And if we do, like, it just, it doesn't happen. But we have found ourselves partnered up with shows who, whose hosts or publishers did fall into that category. And we, and we do pretty good job and a pretty swift job of extracting ourselves from that scenario. We like to, we like to like the people that we, that we work with. Yeah, and, but, but, but that's, that's. But, but see, that's also rooted in success of the business. Like, I know that if I'm distracted by some jackass, then I won't be as, as successful with the business. But other than that, I really don't choose. I don't use these criteria to choose whether I want to Work with a certain service provider or not? It's. Are they going to provide the right service for my business and do I think they're going to have the longevity I need for them to have? Like, I mean, if it's somebody that I plan on partnering with for the long term, well, then I want, I hope that they will also be in business for the long term. Right. Because it sucks to have to change, you know, certain things, like fundamental parts of your business infrastructure or whatever. But, but otherwise, if it's somebody that I, you know, I going to do a project for six months. Okay, well, I do. Do I think they're going to last for six months? Yeah. Okay, great. Let's go. But other than that, like, I don't, I don't put. I don't even think about these things. To your point about hiring the right people, regardless of anything else. Like, to me, I'm a small business owner, as I know you are. I can't afford to not hire the best person for the job. There's no way that I can pad my staff for stats and survive. Like, because every single person on my payroll is a huge expense to my business. And so they have to be the right person. Now, does that mean I only have ever hire, you know, white, Older, Older white males just like me? No. Have I hired, Have I. Have I hired plenty of older white males? Yes. Have I hired women? Yes. Have I hired women who happen to be like, you know, a part of some. What would be considered a minority group or something?

Yeah.

Yes. But all of that, I am, like, I've never thought about it actively before. I'm like, processing all the people that have worked for me and it's like, oh, yeah, okay. Well, yeah, Tony, she was Latina woman. Okay. So technically that box got checked, but that box wasn't there to be checked to begin with. We hired Toni because she was the best person for the job.

Yeah.

Right. And, but I mean, I also, I had no issue hiring her. That goes without saying.

You didn't start with that?

No, I didn't start with that. But it also, it never dawned on me during the process, though. Oh, well, exactly. Should I, Should I not hire her? Should I instead hire an old white male like that? No, that's ridiculous. I can't afford to think like that as a small business owner. Thankfully, I don't think like that. I think it's dangerous to think like that.

In both directions. I would agree. And I don't think any of us would be successful if we thought like that.

No, but a large company. I've. Because I've worked at large companies. I worked at Citibank, I worked at General Electric, and I worked at Deloitte and Touche. Lloyd and Touche is the smallest of those three. But they were certainly big enough to have useless people in middle management, which means there's a lot of fat in the middle of the budget. Right. That could be trimmed out. That's not. Those kinds of companies could afford to hire based on stats as opposed to only hiring based on skills. And I don't want to suggest that that's what they're doing, but it sure sounds like that might be happening. I don't know. Like, I never saw that while I was there. But this was decades ago, you know, before this stuff.

Yeah, I think a lot of it is to your point. The, the smaller businesses in number one, in many places, at least California, it's illegal to focus your hiring on a specific. Oh yeah, anything. Right. You just can't do it.

You.

You have to, you know, again, try to hire the best person without any sort of discrimination either way.

Correct.

Via age, Via all kinds of things.

Oh, yeah, yeah. All the things that people can't change about themselves. Correct.

Exactly. Exactly. So, of course, and I, and I guess like, I just noticed that like the esg, there's this big group that's running them and a lot of these mutual fund companies like Vanguard, they were all in blackrock and Alicia were all in on this ESG thing. But I've noticed lately they have started to drop out. So it's kind of an interesting thing and I'm curious and I'd like to. Let's talk a little bit more about it. How, if it's applicable for small to medium sized businesses that we typically talk about.

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Areas of the environmental part of things. One of the things that is, I think, a joke and what I was reading up about this esg is the petroleum company, like Exxon, whatever, had a higher ESG rating than Tesla, the electric car manufacturer. And it's like, well, wait, why is that it? And they have this number that they come up with, but it's skewed based on all kinds of different things that I think is a lot of virtue signaling. And it's easily manipulated by these large companies to get a better score. Like a petroleum company who you think would be like, wait, you know, why do they have a higher score than a, than a company like Tesla? And I have the same concerns as you do. I don't want anybody to force me to do anything. I want to do the right thing. And I have done it like you have, because again, like you, I want to sleep at night and I. You want to create a great organization. That's how you become successful. We've talked about it here ad nauseam, you know, about getting the right people and training them and moving them up the helping, pushing their career up the ladder, which lifts, you know, you lift everybody up, right?

Yep.

And so I often find that the folks making these rules and trying to make them more formal and enforceable, if you will, have had no experience in trying to meet payroll, you know, grow their, Grow a company from nothing. And so it's very easy for them to make these kinds of, of statements, rules, recommendations, because they've never had to, to live with them. And so that, that always gets my hackles up.

Yeah, I wonder, I wonder too though, if part of this, if you and I aren't. If instead of it being them missing something, it's us missing something. And I, and I don't mean that you and I are doing something wrong, but neither of us, and correct me if I'm wrong, neither of us has ever run a publicly traded company, nor have we run a VC financed company, Event Capital Finance. So neither one of us has ever been in the position as business owner to defend our financial decisions about the business to someone other than maybe our business partner or our spouse. Right. But, but to a, you know, the general public, we don't have to defend our decisions because perhaps, and again, I'm just, you know, I'm, I'm playing devil's advocate here. Perhaps that mindset has gotten a little too entrenched. The whole idea of just serving Wall street and profit, profit, profit. It's easy if, if you literally, your job, like the CEO's job of a publicly traded company is, is increase shareholder value. That's the CEO's job.

That's correct.

We could sit here and listen to arguments about how it shouldn't be that. But the fact is that is the job description. It starts and ends right there. So when that's your job description, it. I would presume that it could be easy to lose. To, to lose sight of the. Well, yeah, it's my business and I want to sleep at night, so I want to make different decisions about things. No, you don't get that luxury when you're the CEO of a publicly traded company.

You do not.

You are in that position with all guns aimed at you when the profits don't come through. So I can see where I mean. And now I'm going to throw a tinfoil hat theory out there. What if this whole ESG thing was created in secret by the CEOs of publicly traded companies saying we want people to judge us on more than just the profits?

Yeah, maybe.

I mean, like, yeah, could be. Right. I realize that's probably not possible and lots of people are laughing at me right now for my naivete. But think about it for a second. I always try to put myself in other people's shoes before I start hating them. And very quickly I find reason why I would not hate them when I try to put myself in their shoes. And so maybe that's what this is. Maybe this is a whole conspiracy theory cooked up by the CEOs of Exxon and, and, you know, everybody else that was sick and tired of being under the gun.

I don't know, I almost didn't even bring it up as a show topic because I was like, well, I don't know how applicable it is, but it got me thinking about, you know, mainly a question and a question for our listeners is, is this something you think about? Is it an important part of how you run your business, how you market your business? Are your customers requesting this type of thing? Right? Is it, is it more market driven than anything else? Because obviously to be successful, you want to adapt and you also want to reflect your community. Right? So those are questions I have. I don't have the answer.

No, I would ask those questions, I guess. I think it's important to add some clarity. Are you, as a business owner making different decisions than you otherwise would make because of these external definitions? There's nothing like if you were, like I said, I want to sleep at night. So I have my list of decisions and criteria that are important to me and I follow those. But when somebody else comes in and tells me what those criteria need to be, that's different. So that's my, that's. That. That would be my sort of clarifying question here is, are you doing these things, and are you doing them because other people say you have to, or are you doing them because it's just a natural thing for you to do?

Yeah, that's really good question.

Very different things. Yeah, yeah, yeah.

I. It's just a fascinating side, and I wonder, you know, I wonder how it's impacting other businesses. So that's one of the reasons why I do this show, is to learn as much as I can. So educate us at feedbackusinessbrain show.

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