Dame Alison Rose had a spring in her step as she greeted NatWest staff and shareholders in April.
Speaking at an annual gathering at the bank’s sprawling headquarters on the outskirts of Edinburgh, the chief executive had recently received one of the highest awards in the King’s first honours list.
Since winning the top job in 2019, Dame Alison had been feted not just for her banking nous but for championing corporate “values” and “purpose”, buzzwords embraced heartily by fellow blue chip executives.
“Our values are at the heart of how we deliver our purpose-led strategy,” she told the gathering.
Under her leadership, NatWest had come to describe itself as “a relationship bank for a digital world”. Its values are “being inclusive, curious, robust, sustainable and ambitious”.
They are laudable aims. Yet these same values would be Dame Alison’s undoing, as they were applied in ways she may never have imagined.
In a now widely reported dossier first revealed by The Telegraph, overzealous employees at Coutts, a private bank and subsidiary of NatWest, explained at length why they believed the group’s inclusion or “ESG” (environmental, social and governance) policies meant they should no longer provide services to Nigel Farage.
Dame Alison Rose declared NatWest a ‘relationship bank’ after becoming chief executive in 2019 - Andrew Lloyd / Alamy Stock Photo
His offence? The pugnacious former Brexit Party leader had made a string of public remarks that did not “align to the bank’s purpose and values”.
They included comments in support of Donald Trump, his sharing of a “transphobic” sketch by comedian Ricky Gervais on Twitter, and what Coutts concluded were his “xenophobic, chauvinistic and racist views”.
It is a fiasco that has thrust corporate values and so-called “woke capitalism” into the spotlight, underlining the risks companies can expose themselves to when they wade into politics and social causes.
Find meaning, not money
NatWest is by no means alone.
The mantra of “purpose” and ESG (environmental, social and governance) has been enthusiastically embraced by the jet-setting class in recent years, with advocates claiming it helps to boost customer trust and motivate staff.
In 2021, Alan Jope stood up and declared that Hellmann’s mayonnaise, a best selling product ever since its invention in a New York deli 108 years earlier, had finally found its purpose.
It was not simply to be a condiment that people used in sandwiches, salads and other meals, the then-chief executive of Unilever insisted.
“Fighting against food waste – that is the purpose of Hellmann’s,” Jope said, as the company unveiled a campaign highlighting how the product could be combined with leftovers in the fridge.
“Hellmann’s believes food is too good to be wasted and food waste should be socially unacceptable,” the company’s website said. “We want to help people to make any food delicious, so they don’t have to waste any.”
There was just one problem. While Jope and Unilever were busy dreaming up purposes for Domestos disinfectant (“to win the war against unsafe sanitation”) and Knorr stock cubes (“reinventing food for humanity”), investors were growing frustrated with the share price – which was going nowhere.
“A company that feels it has to define the purpose of Hellmann’s mayonnaise has clearly lost the plot,” the entrepreneur wrote.
“The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler alert – salads and sandwiches).”
The row is one of many examples of companies getting more deeply involved in social causes, not always with success. Food and drink giant Mars was ridiculed for “going woke” last year when it redesigned the iconic M&M characters.
M&M's knee-high boots were swapped for a more ‘progressive’ redesign
Gone were the green M&M’s knee-high boots, which had been replaced by a pair of trainers. The heel on the brown M&M’s stilettos were also cut to a short stub, reflecting what Mars claimed was “a more dynamic, progressive world”.
The company later backtracked following a high-profile backlash, giving its so-called “spokescandies” another redesign.
In some cases, companies have been criticised for what critics say are performative gestures, leading to allegations of “greenwashing” and “rainbow-washing” – where corporations back gay rights or environmental causes in western countries but take little real action or remain silent on them in other markets.
It is prompting businesses and their shareholders to question the wisdom of politicising everything, while Conservative politicians eye an opportunity to attack left-wing groupthink in boardrooms.
Luke Tryl, UK director of More In Common, a charity that tracks debates about contentious issues in Britain. says: “People welcome meaningful examples of corporate social responsibility, but what they don’t want is virtue signalling.
“But there’s a real grey area in which kind of inclusion initiatives fall into taking a political stance and which fall into actually just being a good corporate citizen – and that is a really tricky line for businesses to walk.”
Go woke or go broke
Despite the jargon, the principles underpinning ESG are hardly new.
From the Cadbury family’s decision to build homes, parks and libraries for chocolate factory workers to Lord Leverhulme’s model village for his employees at Port Sunlight, Merseyside, there’s a long tradition of businesses supporting their staff and championing social causes.
But the birth of the modern ESG movement has been credited to a paper published by the United Nations in 2004. “Who Cares, Wins” claimed that companies applying these principles were not just doing the right thing but also made themselves more competitive.
Perhaps no British bank embodied this transformation as much as NatWest, previously known as Royal Bank of Scotland.
Under former chief executive Fred “the Shred” Goodwin – dubbed “Britain’s most notorious banker” – RBS embarked on a global takeover spree, briefly making it the world’s biggest bank before it crashed spectacularly. It was bailed out in 2008 to the tune of £46bn in taxpayer cash, and Goodwin became a lightning rod for public anger.
By contrast, Dame Alison’s public image could not have been further from Goodwin’s. A bank lifer who joined as a trainee, she spent years patiently climbing the corporate ladder and, later, cleaning up the disgraced investment banking division of RBS.
When she succeeded Ross McEwan as chief executive a year later, she immediately set about replacing the RBS brand with the less toxic NatWest one, while launching a company-wide process to find the lender’s “purpose”.
“I truly believe that if you are going to lead an organisation and create an organisation that has value over the long-term, it has to be purpose-led,” she told the Blueprint for Better Business podcast last month.
“No organisation deserves to exist. We have no right to exist tomorrow unless we are creating value for all of our stakeholders, which are our customers, our communities, our colleagues, and our shareholders.”
In 2021, NatWest was one of several large British companies – alongside the National Grid, food producer Unilever, outsourcer Capita, rival lender Barclays, pensions manager Fidelity International, law firm Hogan Lovells and water supplier Severn Trent – to vow to put the needs of staff, local communities and wider society higher on agenda.
Guy Jubb, an honorary professor at the University of Edinburgh, and the former head of stewardship and governance at Standard Life Investments, says well-run companies that meet ESG standards will have “the ingredients to develop longer term prosperity for their shareholders and for society”.
“If you look to companies which have had serious ESG problems, you can get an impairment in value which actually undermines wealth creation,” he adds.
There is also evidence that, on the face of it, consumers welcome efforts by companies to act more responsibly, whether that is by cutting carbon emissions or welcoming employees of all backgrounds.
“People are very supportive. The scepticism tends to come when it’s seen as being tokenistic,” says Tryl from More In Common.
But as the ESG movement has grown, and a cottage industry of consultants, spinners and auditors have sprung up around it, so too have the risks of companies getting things wrong.
A twist of hypocrisy
Nike is arguably one of the most well-known companies in terms of its strident approach to brand activism.
The sportswear giant has created adverts criticising “the patriarchy” and showing American football star Colin Kaepernick – who famously began “taking the knee” at games to protest against racism and was sacked – with the words: “Believe in something. Even if it means sacrificing everything.”
Nike's advertising campaign featuring Colin Kaepernick was considered a divisive move - AP Photo/Marcio Jose Sanchez
The campaigns have won Nike plaudits from some campaigners and accusations of “woke-washing” from others, who noted that less than 10pc of the company’s own vice-presidents globally are black.
Sometimes, brands face criticism even for what seem like harmless gestures of support.
United Airlines last month found itself at the centre of a storm over its sponsorship of London Pride, when Just Stop Oil activists warned that they would seek to disrupt the event unless the company pulled out.
And while many British businesses have rushed to sign up to Stonewall’s Diversity Champions programme, which advises on creating inclusive workplaces, their decision to adopt the charity’s gender ideology has put them on the front line as debates rage about how society should adapt to the growing use of non-traditional pronouns and genders.
Amid a growing backlash about corporate campaigning, US Republicans have attacked companies championing ESG as “woke capitalists” and taken drastic actions, such as withdrawing state funds from money managers such as BlackRock.
Disney has found itself in a feud with Ron DeSantis, the Florida governor and potential Republican presidential nominee, after opposing laws that banned discussion of sexual orientations in schools, dubbed the “don’t say gay” bill by critics.
Florida's Republican governor Ron DeSantis is embroiled in a row with Disney over his so-called ‘Don't Say Gay’ legislation - Nathan J. Fish/The Oklahoman via AP
Companies have also left themselves open to accusations of hypocrisy, when their “purpose-led” values only seem to apply in countries where it is easy to champion them.
The blowback against ESG has been so fierce in the US that Fink, BlackRock’s boss, has stopped referring to the term in his annual letters to investors. He recently complained that it has been “weaponised” by critics.
This new caution has also been reflected in mentions of ESG during earnings calls by blue chip companies, which peaked at 156 in the final quarter of 2021 but fell to 74 in the first quarter of 2023, according to data from Factset.
Amid the fallout at NatWest, the Government has taken a tough line, issuing a stern readout following a meeting with banking executives – minus the recently exiled Alison Rose – warning them not to impinge on customers’ freedom of speech.
“The idea that a person could face having their account terminated for expressing their political views [is] wholly unacceptable,” the statement added.
Boardroom box-ticking
Even within boardrooms, ESG has come under fire for the mountains of paperwork and sometimes topsy-turvy outcomes that it generates.
Oil giant Chevron achieved a higher score in the assessment, which was based on a variety of factors including green credentials, corporate governance and diversity.
Just Stop Oil activists frequently warn they would seek to disrupt events that do not align with climate concerns - Photo by VCG/VCG via Getty Images
Yet the stakes for companies are real, with pension funds and other top investors increasingly using ESG indexes to allocate their funds. This is despite a variety of different standards being applied by various different asset managers and audit firms.
A report published in November by Tulchan, a financial PR company, found British companies were frustrated at a “box-ticking” approach taken by investors towards ESG policies, warning it was “over-prescriptive and formulaic”.
Some felt the situation was getting so bad that they were “locked in a struggle” with investors over how to run their own businesses.
Romi Savova, chief executive and founder of financial technology provider PensionBee, supports ESG goals but thinks companies should be wary of straying too far outside their areas of focus.
“Consumers do expect businesses to be good corporate citizens and the meaning of that will be specific to each business,” she says. “But it should generally encompass issues that are material to the business, rather than any and all issues.”
For example, she says PensionBee’s customers are diverse and so the London-listed company aims to mirror that in the makeup of its own workforce.
It also campaigns on issues such as the “carer’s pension gap”, affecting people who have to take time off work to care for a loved one.
However, Sir Martin Sorrell, the advertising guru who built WPP into a global titan and now runs digital ad agency S4 Capital, warns that the current check-box nature of ESG requirements can hinder rather than help businesses.
“We’re a tiny company, we produce a 200-page annual report and a separate ESG report,” he explains. “It’s absolutely crackers.”
Different regulators all demand different standards as well. “So we have about 10 different sets of standards to comply with, and we had a board meeting yesterday where half the agenda was taken up in approving policies in relation to ESG.”
However, Sorrell says, that doesn’t mean these policies aren’t needed in some form or another – he just believes the ESG industry has gotten over-complicated.
“If you’re going to maximise long term profitability, you have to have gender equality, you have to have a fair representation of the communities in which you work, you have to take into account the interests of all stakeholders – that’s stakeholder capitalism.
“But there’s been this sort of business school over-complication of it all, when it’s really very simple. If you’re trying to build a business for the long term, you will naturally involve all stakeholders.
“So the objective is to maximise long term profitability. And that’s it. Everything else will fall into place.”
In the NatWest example, he points out, if staff were truly thinking about the long-term, they would not have chosen to debank Nigel Farage.
“It places you in an impossible position. Because, are you now going to go through every one of your customers? It’s just illogical.”
Polling power
As public attitudes grow more sceptical towards “woke” corporate values, one question being debated in political circles is how much the Tories can make hay from these issues, if any.
Pollsters say the by-election in Uxbridge, where the Conservatives saw off a challenge from Labour and narrowly retained their seat, is a sign of how issues that affect voters’ wallets can be powerful swing issues.
Sadiq Khan's Ulez expansion became a divisive political issue - Chris J Ratcliffe/Getty Images
Many residents in the borough were unhappy about the ultra-low emissions zone (Ulez) being implemented by Labour’s Sadiq Khan, the London mayor, and voted accordingly.
Some Tories believe this is a sign of more widespread opposition to net zero policies among households.
“I think the whole population recognises that we need a transition that is affordable and particularly for working families, people who are struggling to make ends meet,” says Danny Kruger, a Tory backbencher.
Yet others are concerned that this could backfire. Among those who voted Tory in 2019 and plan to vote Labour next year, more than half felt Rishi Sunak has “not gone far enough” on tackling climate change, a recent Opinium poll for The Times found.
“It would be wrong for either the Conservatives or Labour to conclude that Uxbridge was a rejection of environmental policies,” says Sir Alok Sharma, the former cabinet minister and ex-president of the Cop26 climate conference, pointing to polls like that one.
“Of course, the cost of living is front and centre right now and that is why we need to support people to make a transition.
“Ultimately the cost of ‘not zero’ will be way greater than the cost of ‘net zero’ with none of the upsides in economic growth, jobs and a cleaner environment.”
Tryl, of More In Common, says debates around topics such as gender are unlikely to make good “wedge issues” for the Tories because most voters will simply question why politicians aren’t prioritising more bread and butter issues such as the economy, the NHS and immigration.
Gavin Williamson, who was Education Secretary at the time, branded the move “simply absurd”.
By Tryl says politicians should avoid jumping on anti-woke bandwagons. “Someone asked, ‘Why is the Education Secretary commenting on this? Hasn’t he got better things to do?’ And everyone in the group agreed.
“The next election, given where the economy is, is going to be fought through an economic prism, and I think the danger of focusing on social issues is you start to look like you’re missing the public mood.”
A similar mood prevails towards businesses, he adds, with most consumers preferring companies to focus on providing good services and treating their own staff well.
“Before you start doing any of the other stuff and kind of pushing and trying to persuade others, actually, you should be getting your own house in order,” Tryl adds.
“There’s a big difference between demonstrating your values by, say, sponsoring something at a Pride March or getting to net zero, and using those principles to effectively drive people out – that’s where people go, ‘Business shouldn’t be doing this’.”
Before leaving NatWest, Alison Rose liked to say that “being purposeful is not about the easy decisions, it’s about the tough decisions”.
As she’d surely now testify, the consequences of those decisions can also be very tough as well.
