Speaker 1:
You’re listening to Rattle and Pedal, divergent thoughts on marketing and growing professional services firms. Your hosts are Jason Mlicki and Jeff McKay.

Jason Mlicki:
All right, Jeff. So last time when we left off, we were talking about really the opportunities available, really, from the ESG movement and some of the growth, and this has a central issue that it presents the firm. So today we want to talk about risks and rewards, but I guess the question is… As we talked in set-up, are we starting with risks or are we starting with rewards?

Jeff McKay:
Yes.

Jason Mlicki:
Let’s do it then.

Jeff McKay:
We’re going to talk about both, because they really are opposite sides of the same coin. I actually was hoping we’d start off with another Michael Jackson song or something.

Jason Mlicki:
I don’t think I have any more.

Jeff McKay:
Well, let’s jump into the risks. That’s my personality, I like to identify the risks and engineer them out. So let’s talk about that. So from my perspective, given where we are, and this is particularly U.S based, I would also argue to some degree, this would apply to EU countries as well, but because you and I are in the U.S, we take a predominantly U.S focus. The challenge with ESG as this nascent… You called it a movement, which I find interesting. Is it a movement? Is that the right word for that? I’m going to have to think about that. You got me thinking again, Jason. My perspective, the biggest risk with this, where the movement is right now, is that firms are playing with political fire, because so many of the issues in the E, S and G, and there are actually within this movement, those that think those three letters are not enough and there should be more letters in it. Imagine that, it’s very political.
And my sense is, one of the biggest risk is if you have a prominent brand, whether that’s globally, nationally, or even locally, that people know it’s not a matter if you’re going to fall on the wrong side of some of these E, S and G issues, it’s a matter of when and to what degree. And there was a recent example I just saw in the Wall Street Journal. And some of these examples, I think it’s important to note, may not be insight-driven companies, professional services firms, or SaaS companies, or necessarily complex B2B companies that listen to Rattle and Pedal. But I think these are the canaries in the coal mine, if you will, and their consumer brands. And one of the most recent ones was Anheuser-Busch. Everybody knows Anheuser-Busch. They have been called out during pride month for contributions to GOP candidates that seek to legitimate discrimination in the minds of the other side.
And the reason they were called out is because they made $35,000 contribution to local GOP candidates. $35,000, what percent of Anheuser-Busch’s lobbying budget do you think that is? $35,000. And now the Stonewall Inn in New York during pride month, Stonewall is considered the birthplace of gay movement, is pouring Anheuser-Busch products down the drain this weekend, and they’re doing it because they have the platform to do it. Think about that, because Anheuser-Busch contributed $35,000 to local GOP candidates, they’re being protested. And Anheuser-Busch has a very strong LGBTQ support, they’ve given, I don’t know, 10, 100 times that amount to other organizations, but they’re being called out in a very public way right now.

Jason Mlicki:
I’m going to shift gears a little bit, not a lot, but to your point of risk of alienation. I thought what you also hit on was true, which is the political fire piece, just this notion that so many of the issues that are wrapped up inside of the ESG and everything tied with it, everything’s become super political in this country, even things that are really simple. So look at just the whole mask thing that we faced during the pandemic, how that became such a flashpoint for so many people, about a rejection of a pretty simple ask at the end of the day for a lot of people. Hey, you walk into a store, can you throw a mask on while you’re in there? Of 10 minutes you’re in there, right? And it became a big flashpoint.
So the example I’ll give is… You ever heard of the company Uline?

Jeff McKay:
Yes.

Jason Mlicki:
So Uline makes packaging supplies, I guess. They send out a pretty big catalog, we get it here at our office because we had bought some packaging supplies from them years ago. Send out a pretty thick catalog every, once or twice a year or however frequently they do. And I opened it up one day, and I had got it in the mail, I flipped it, I looked it, and for whatever reason, I flipped right to the page, it was a letter from the CEO. And the letter from the CEO was essentially this very open candid message saying that our country was on the wrong direction since Trump left office, and that she prays and all these things that that will bring him back, and it was this very politically charged message, very clearly, unlike anything I’d ever seen from a CEO.
And I thought, wow, that is a really risky letter to write, only because you’ve just alienated a good chunk of customers that are like, “I don’t like doing business with you because you’re clearly a very avid Trump supporter.” And then you’ve probably attracted a whole bunch of customers as well. And it just struck me as a really interesting maneuver that a CEO would choose to use their product catalog, their central marketing asset, as a chance to present a political position like that. Like you always say, obviously… Presumably, she understood the risk and she did it anyway, because she thought it was the right thing to do. But I just thought, wow, what an interesting place we are that a CEO is doing that. If I add it to the discussion, right? It just took us off course.

Jeff McKay:
No, I don’t think it took us off course at all. I think that’s exactly what we were talking about in our last episode about that Venn diagram of those focused on shareholder value, those focused on purpose and making those strategic choices. And purpose can be left or right, and then you have the, as we said, that muddled middle, if you will, that I refer to as the herd, that probably is made up of both pragmatists who are trying to figure out which way these winds are blowing, and then those that just have no idea, right? They’re just going along with the flow. But I think your comments are spot on. This is political fire that we’re playing with, and whether you make the choice or someone makes the choice for you is the essential question here, because the choice will be made for you if you don’t make it.
So you have to decide are you going to be in control of your brand and the messages that you send out there? Are you going to let somebody else control your narrative? And textbook branding would say you don’t want somebody else to control it, particularly if the organic development of that brand is negating your strategic objectives, right? When your consumers of your brand give it an energetic and positive life, that’s great, but when your competitors or negative forces do it, it’s not good for you.
So I want to go back to something you said about the lobbying though, because I think this is another critical dimension of strategy for professional services firms in general. Big firms have strong lobbying contingents because so much of what they do is driven by statute and regulatory bodies. In March, under the Biden administration, SEC, there is a focus on E, S and G, and there is a stampede into that space to shape what these E, S and G regulations are going to look like. And the Deloittes, and KPMGs, and PWCs are all going to weigh into that because it’s going to impact how audits are done, what gets reported, because right now, E, S and G are voluntarily reported. But it seems to me that that probably is going to change soon.

Jason Mlicki:
I think it has to change. It’s interesting because… One of the things I was going to point out in our drivers episode was there has been a huge flood of capital into ESG funds. So if you look in Fortune magazine, I think it was not the most recent issue, but the April, May issue, they had a summary of this, and I don’t have it in front of me. But you’re talking thousand percent growth, thousands of percents of growth into ESG funds in 2021. So there’s a huge interest from investors, both institutional and individual, to invest in companies that are making progress on the ESG front.
Here’s the problem. To your point, a lot of those funds, it’s a little fuzzy whether or not they’re actually investing in companies that are making strong environmental movements or addressing these issues, and what constitutes a company that is invested in by those ESG funds is an unregulated concept, right? It’s an investment purpose statement on a fund’s prospectus, but it’s not really organic, right? You can be organic and not be certified organic, right? Same kind of thing. So probably a good idea, but that much capital going in there, because it creates space for… Just face it bad players, right? People to claim that they’re doing things and not do them. So interesting.

Jeff McKay:
I thought that was an insightful comment and it reflects, to a large degree in my mind, what’s happening with the ESG movement and why there’s such an emphasis on this through corporations. Corporations, in my mind, have become the global power brokers. They transcend nation states and their resources. I mean, the big four accounting firms, their revenues, I want to say in 2020, maybe 2019, I wrote a blog post on this, was $154 billion combined, four companies. That combined total was bigger than almost half of all the nations GDPs. Just those four corporations combined were bigger than any economy in the bottom half of the nation states. That’s incredible power to wield.

Jason Mlicki:
Yeah. And the flip of that is, look at the opportunity for change, right? So I’ll tell a really quick story. I don’t remember really where I read it, I read this article. It might’ve been in Fast Company or Fortune, it’s been years, 10 years ago probably, and it was about this environmental activist. So it was a guy that was one of the leading voices in the environmental movement. So I don’t remember exactly what his role was, he had worked in non-profits, he had been a very vocal activist in creating change in our carbon footprints, our pollution, you name it, right? Out of nowhere, the guy leaves the community of activism and takes on a role at Walmart in an environmental capacity, and he gets completely torn to shreds by the environmental community, that he’s going to the dark side, right? It’s like you joined the Empire here, because you went to Walmart.
And he was like, “No, you don’t get it.” He’s like, “I can create more change at Walmart than I could ever create as an activist.” And so his point was, when I come into the company and I have a mandate to make us a more sustainable company, and the scale of Walmart globally, I can have a bigger impact on the entire climate than I ever could as an activist. So in a sense, I guess maybe to your point, because of the scale of corporations, this is where there’s opportunity for real change and issues that matter to people, so that’s… [inaudible 00:13:40].

Speaker 1:
You’re listening to Rattle and Pedal, divergent thoughts on growing your professional services firm. Your hosts are Jason Mlicki, Principal of Rattleback, the marketing agency for professional services firms, and Jeff McKay, former CMO and Founder of strategy consultancy, Prudent Pedal. If you find this podcast helpful, please help us by telling a friend and rating us on iTunes. Thank you. Now back to Jason and Jeff.

Jeff McKay:
Do a Google search on titles like Chief Diversity Officer, Chief Sustainability Officer, and look at the trend of their usage, and you’ll see a huge uptick in the usage of those terms. I mean, those things didn’t exist a decade ago, and now all organizations are moving in a direction of having those titles in their organizations and on their boards because they’re assigning ownership of impacting these areas. And for some, those are critical roles, I would argue for some they’re window dressing, no matter what they would argue contrary to that. Again, those are important things to manage because they will be identified if they’re window dressing, but the corporations wheel the power, and it’s coming to… I think it’s really coming to the rubber is hitting the road, if you will. And let’s talk about the next risk here, the first one is this brand risk, that the true commitment and viability of your ESG efforts, are they real or are they window dressing? Is the first one.
The second is, I think revenue generation. And there’s two dimensions of this risk. The first one is, are you, as an organization, willing to turn away business that represents values or an approach to business that is inconsistent with your own, in your stated purpose and ESG goals? Are you willing to walk away from that business? That’s when you really begin to see how committed organizations are to this. And it’s important that leadership teams understand that if you want to do audit for some organization, and this is a $50 million audit opportunity or whatever it is, and you’re saying, “No, we’re not doing it because they are not doing x around the E, S and G, and we don’t want to be associated with that.” That’s a big decision to make.

Jason Mlicki:
Yeah. But I would liken it to just… It’s an extension of a positioning decision, right? So good positioning attracts and repels, right? So if you decline that huge audit opportunity because you don’t agree with the… You don’t want to partner with that particular organization. The flip of that is that may draw someone to you who says, “Man, Deloitte, or KPMG or whatever really lives by their ideals. They said that this is what their stance was on this issue, and they’re making hard revenue choices about that. I want to do business with them,” right? So with every closed revenue door, there’s another revenue door that opens. So as you said at the beginning, it’s not risk and reward, there’s risk and reward on every decision.

Jeff McKay:
I think the other part to revenue generation is, if you do not have the right positioning or the data to back up your propositions, many of the RFPs that are going to be presented to you may not invite you to propose, right? Or you’ll get knocked down in an early round if you’re not aligned, I’m going to say if you’re not aligned. I think one of the challenges, and we’ll talk about this when we talk about how to manage, is geographic risk, right? If you’re a large global organization or even a multi-national, how you approach E, S and G is really going to depend on the geographies that you’re operating in.
And like some of those consumer brands, there are local flavors that are adjusted to those local geographic needs, if you will. Whether you’re selling KFC, or McDonald’s, or Coca Cola or whatever your product is, there’s going to be some adaptation at the geographic level. Well, when we’re talking about insight-driven firms, where your world is really digital and all that thinking, it’s a little harder to do and there’s risk associated with that, right? Because ideas flow across geographies in a very different way than flavors, if you will. So thinking through what’s the geographic strategy and how are these going to be adapted in a way that maintains the global brand perspective and purpose of the organization, but are sensitive to local geography demands.

Jason Mlicki:
Yeah, I think that’s a really good one because I was just trying to… I was looking forward to data to see if I had it, there was a piece on renewable energy in the United States, and there was comparisons between renewable energy in the U.S versus other countries. And as you would guess, I mean, it’s an extreme minority of the energy production in the U.S, but if you look at, say a Nordic country, then it’s a very high percentage, 60, 70, 80% of energy is actually renewable. So to your point, if you’re going to emphasize your environmental standards, it’s going to look a little different in the States than it is in Norway, and it’s going to look a little different in Texas than it does in Maine.
And so you’re going to have to think through all those layers, and how you’re going to talk about your firm, and your stance on that one issue of energy. To the extent, it’s germane to what you do, right? [inaudible 00:20:21] you need to have a position on this. Maybe you don’t need to have a position on this at all, but if you do, you got to think about it in all those levels, right?

Jeff McKay:
Yeah.

Jason Mlicki:
Okay.

Jeff McKay:
So the flip side of all these risks are the rewards, and we’ve touched on them somewhat, and alluded to it at the end of our last podcast. The reward right now is the opportunity to help organizations sort through the complexity of E, S and G, and for firms to offer new solutions around these. And there are a lot of revenue generation opportunities coming out of this, because organizations are wrestling with how to navigate these uncertain waters, so all that risk we just talk about, firms need help with. And there’s a great opportunity for professional services firms, I think they’re in particular.

Jason Mlicki:
Yeah. And if you think about it, there’s cascading levels, right? That they need advice, they need technology, they need data, they need analytics. I mean, there’s so much that clients need in order to move on some of their goals around social issues and environmental issues, from firms, it’s almost staggering. So, yeah, I think that to me, the place… Well, and we’ll go to wrap here, but to me, the place that firms need to put the most thought into this is personally, I think it’s more on the client side. How do we help our clients navigate through this than it is on their side? Not saying they don’t have to deal with it on their side, especially to your point of some of the really large firms that are, let’s face it, going to be under the same scrutiny that any other publicly traded company is. But it just seems to me that clients need a lot of help and firms are positioned to help them.

Jeff McKay:
Yeah. And then I think the final, well, not the final, because you’re going to be the clockmeiser here-

Jason Mlicki:
We’re well past [crosstalk 00:22:19] delivery here. So we’re like a slow Spanish train arriving in Madrid.

Jeff McKay:
So I think the other reward here is where, maybe to a large degree, this all started, and that’s in the access to talent. And we talked about it on our last podcast with the millennials and gen-Z, and they’re wanting to work with organizations that are purpose-driven and having an impact on the world. If you’re going to want access to the best talent, this is what the talent is wanting from the organizations. So you’re going to have to speak into that in some form or fashion and then perform accordingly. And if you do that you’re going to be able to expand your talent pool, and that’s critical.

Jason Mlicki:
Yeah, maybe a great way to stop… And then I’m going to read a headline from a journal article, I’m just going to read the headline. Forget going back to the office, people are just quitting instead. Says as the pandemic cloud lifts, Americans leaving employers for new opportunities is at its highest level in more than two decades. Acquiring talent is going to be more difficult in the direct and near future, so if you’re concerned about getting access to good talent, you better be on top of this because going to be important. All right. So we’re going to put this to a wrap, like I said, we are well past our mandate, hopefully people are still with us. The next episode in this series is going to be, really about how do you do this effectively? How do you think about ESG effectively in your firms? So as I recall, we talked about three different levels of that, that we want to go through. So we will cover that next time.

Jeff McKay:
Fun conversation, buddy.

Jason Mlicki:
Cool. Yeah, it was good. Thanks.

Speaker 1:
Thank you for listening to Rattle and Pedal, divergent thoughts on marketing and growing professional services firms. Find content related to this episode at rattleandpedal.com. Rattle and Pedal is also available on iTunes and Stitcher.