You’d think, in 2022, that the answer to this question would be simple enough to discover, but it’s not.

Most labels on the food we buy—coffee, chocolate, fruits & vegetables—focus on environmental practices. They ignore the well-being of the more than 1 billion farmers who put food on OUR tables.

This is why, even if I’m paying $20 a pound for coffee, I still have no idea if the farmer who cultivated and picked my coffee can put food on HIS table.

That might be surprising. Shouldn’t someone have figured this out by now?

Unfortunately, we’re stuck with a food labeling system that prioritizes  farming practices (“is the fertilizer organic?”) over farmers (“how much of my $20/pound actually goes to the farmer, and is it enough?”)

The good news, you might think, is that ESG (“Environment, Social and Governance”) is coming to the rescue. After all, capital invested in ESG increased 10-fold from 2018 to 2020. Bloomberg estimates it could be a $54 trillion market — 1/3 of all capital invested globally — by 2025. Surely this means that the market is coming to the rescue to solve this massive inequity.

Not so fast. As my colleagues and I shared in an article we published last week in Stanford Social Innovation Review, there are two massive problems with ESG. These problems could undercut everything good that might have come from this movement:

1. If it doesn’t matter to shareholders, it doesn’t matter. Standards bodies have agreed that the only things that are relevant to rating the ESG performance of a company are things that affect returns to shareholders.
2. We should probably call it “EG investing,” because the S doesn’t exist. That’s very bad news for farmers, for employees, for communities.

If it doesn’t matter to shareholders, it doesn’t matter.

This is by far the most surprising thing about how ESG has been defined.

You’d think the notion was: “environment, social and governance factors are inherently important. That’s what makes this different!”

But instead it is: “we’ll figure out which of these things might impact shareholder return and report on those only. Nothing else matters.”

The impact of this decision is that, as we say in our article:

“…there are many companies that are mistreating workers and worsening health outcomes—doing obvious harm to society by improving their bottom line—while still garnering top ESG ratings. How else could one explain the fact that British American Tobacco has been part of the Dow Jones Sustainability Index for the past 20 years, garnering top scores along the way.”

This is the core of the ESG mirage as it exists today.

We should probably call it “EG investing,” because the S doesn’t exist.

My hope is that this is a function of time. The initial thrust of EG investing was the Environment, so that’s where we started. Corporate Governance, which is relatively easy to define and quantify, can come along for the ride.

But if we don’t make a fuss about the missing S, it will never get a seat at the table.

And this is not a small technicality.

Two billion or more people grow the food we eat, produce the clothes we wear, assemble the electronics that power our lives.

And, a generational shift is taking place in how we think about investment capital.

Yet this shift, from day 1, is largely ignoring the well-being of these 2 billion people.

That is one of the biggest missed opportunities the world has ever seen.

We propose a number of ways to fix this in our article, perhaps the simplest one is this:

We should return to having separate categories and frameworks for E, S, and G. Currently, companies focused on E or G but neutral or even negative on S can get a high aggregate ESG rating. This incorrectly implies that they perform well on all three. Separate rankings on environmental, social, and governance factors should be clearly distinguished so that both companies and investment funds could be selected and evaluated based on their performance on individual dimensions.

This way, at least, we can avoid the biggest risk of all: the illusion that we are solving a problem, instead of just papering it over.

Coming Back to Our Farmer

The first step to addressing any problem is to see the problem clearly.

The second is to gather the data you need to start fixing the problem.

My company, 60 Decibels, is working to do just this. We want to make it as easy as possible to collect, understand, and compare data on farmer well-being, and then make these data as transparent as possible for consumers.

If this might interest you or someone you know, here are two ways you can help:

1. If you know of specific, progressive companies that are treating farmers well and need better data to tell that story, please let me know, please email me to let me know, I’d love to talk to them.
2. If you have ideas about how to raise awareness, to consumers, about the importance of this issue and the need for more transparency, I’d also love to hear about that.

By now we’ve all learned about the interconnectedness of our world: our health, our supply chains, our markets, are all deeply intertwined.

Imagine if we could, bit by bit, find the leverage points that would shift how these markets work and, in so doing, unleash more prosperity and well-being for billions of people around the world.

That’s what I’m working towards, and I’d love your ideas about how to make that happen.