A Beacon Gainer article, written by Ally Goldberg, Ethical and Social Impact Business Manager for Beacon Gainer private client advisory services group.
At Beacon Gainer, some of the values underpinning our culture are grit, grace and good humour. These are values shared by our clients and independent advisers. Today I would like to discuss grit – a leading quality of any entrepreneur.
Grit looks like resilience, courage and determination. It doesn’t mean doing everything perfectly all the time, but instead being able to identify holes, bounce back from mistakes and constantly seek to improve, striving for better results than yesterday’s. This means sometimes having courage to change entirely an approach to a problem or resilience to determine a different solution, in recognition that the result of some disruption from decision making based on insights, will get the right impact.
Grit is particularly important when it comes to ethics and ESG, because the likelihood of doing things right the first time, especially without any help from a professional, is slim. The field of ESG is still relatively new – research is being developed, resources are being created and the business world as a whole is still experimenting and educating itself about the best practices.
For this reason, mistakes are inevitable, even for the largest companies – no matter how well-intentioned their aims are. But we can’t focus on making mistakes, it’s about how you bounce back. Don’t let yourself be afraid of making mistakes in ESG, as this should never be a reason not to try and improve. The road to a world of ethical business is a learning curve.
Just take a look at some of the major businesses who have made huge ESG errors, yet have managed to bounce back and learn from their mistakes.
Environmental: Volkswagen
As you may remember, Volkswagen (VW) were splashed across the headlines back in 2015 when the EPA charged them with cheating on emissions tests. They had to pay billions in fines for adjusting the performance of their vehicles to meet regulations, and this became one of the most expensive scandals in business history, and certainly in ESG history.
At the time, people speculated about whether VW would ever recover. They had to lay off thousands of employees, and lost millions of customers as people became mistrustful of them. Now, however, they have a €20bn plan for electric car manufacturing and are more profitable than they were before.
The emissions scandal forced VW to re-examine every single area of their business. In a way, they were given a unique opportunity to do something that most businesses never do: to look at every aspect of who they are and figure out how they could be better.
As a result, VW invested huge amounts into marketing campaigns to earn back the trust of their customers – and it’s working. Their new logo and ads are focused on making them a more ‘authentic’ and ‘human’ brand, which ultimately is what every customer wants.
The VW scandal teaches us two important lessons. Firstly, that trying to ‘cheat the system’ when it comes to ESG policies does not work and has severe consequences. Secondly, that mistakes can be reversible when you think of them as an opportunity to improve.
VW have not only surpassed what their share price was before the emissions scandal, but they are earning back their reputations too.
It’s arguable that people are most scared of making mistakes in the ‘S’ sphere of ESG. This is probably the space where many companies get boycotted or ‘cancelled’ for their errors, because these are personal and often emotional issues that affect people.
Again, this fear should never discourage you from trying to support social movements. As proved by this particular case study, it is possible to make mistakes and bounce back even stronger than before.
In 2017, Adidas made the rather tasteless decision to send an email to customers who ran the Boston Marathon with the heading ‘Congrats, you survived the Boston Marathon!’. This was just four years after the Boston Marathon was bombed in a terrorist attack that killed four people and seriously injured hundreds more.
Not only was Adidas’ email in poor taste, but must have been deeply upsetting and triggering for customers who had been at the 2013 marathon. Of course, customers instantly let Adidas know how deeply inappropriate this wording was.
In situations like this companies have three choices. They can double down, ignore the backlash or admit wrongdoing. Most companies double down or ignore the backlash. Adidas, however, made the wise choice to publicly apologise almost instantly.
By admitting their mistake, they managed to bounce back, even partnering with Boston Marathon in 2018. This case study demonstrates the importance of taking responsibility and doing so straight away.
Governance: Korean Air
Korean Air is a family business, owned by CEO Cho Yang-ho. His two daughters, Heather and Emily, both served as executives for the business, and both daughters caused scandals during their employment.
In 2014, Heather hit and abusively threatened a steward on a Korean Air flight for serving her macadamia nuts in a bag instead of a bowl. She reportedly forced the steward to kneel down before her, then demanding that the pilot turn the plane around and fly back to their departure point so the steward could be removed from the plane.
Then in 2018, Emily threw water in the face of an advertising executive during an argument, eliciting outrage from the general public.
These scandals were more than just an issue with Korean Air – they represented something bigger. In Korea, large conglomerate businesses owned by families like this are called chaebols, and they are known for being monopolistic, corrupt and engaging in practices like bribery and tax evasion.
Many Korean companies, such as Samsung and Hyundai are chaebols and have been caught up in governance and corruption scandals. They often have strong government connections and avoid conviction or have severely reduced sentences for their crimes.
So the Korean Air scandals, being as overt as they were, were a prime and very public example of the way in which chaebols allow people to abuse their power and treat those ‘below’ them in a completely inappropriate and abusive way. Perhaps this is why the scandals elicited as much outrage as they did – they were indicative of a bigger problem.
So the CEO of Korean Air made the difficult decision to fire both his daughters and take full responsibility for their behavior. This action not only saved his business’ reputation, but garnered him a lot of respect from the Korean public.
The decision to protect his customers over his family made Korean Air appear as a company that is governed through listening and striving to be better, making customers more loyal.
