Board members and C-suite executives should perform a cognitive evaluation of their own as they evaluate what the metaverse means to their company. The best evaluations are not only about the metaverse; they also hinge on the organization’s ability to monitor emerging technologies (and combinations of technologies—which the metaverse assuredly is), evaluate their potential threats and opportunities, and conduct use cases for identifying risks. Whether we refer to this capability as R&D, planning and strategy, an innovation capability or something else, its successful execution boils down to fundamental risk management.

That’s not to downplay what the metaverse might become or its staggeringly lucrative potential. The dollar value of metaverse-related business opportunities is routinely quantified in trillions, and some jaw-dropping use cases have appeared across a diverse collection of industries, including manufacturing, sports and entertainment, healthcare, the military, retail and fashion. “The market opportunity is huge and the amount of investment capital going into this particular space is very, very significant,” Nokia executive Raghav Sahgal asserts in MIT Technology Review.

Leveraging this opportunity requires a playbook. Business leaders know that their organizations require a resilience capability to thrive in the “permacrisis” era. Companies also need a repeatable way to monitor and respond to a steady stream of marketplace-changing technological disruptions—AI, quantum computing and the next big things—that also might “revolutionize everything.”

Many technology companies already have this type of capability, and some have placed big bets on the metaverse while developing new offerings related to interoperability, 3D modelling, hardware, networking, payment rails and other metaverse building blocks. Companies in other industries will use the metaverse to generate efficiencies and value via new products, services and businesses. As such, most boards and C-suites should get a feel for what the metaverse is; its needs, benefits and challenges; and how it might evolve.

The next internet

When proponents and writers take cracks at explaining the metaverse, they often refer to enabling, interrelated technologies. The three co-authors of Navigating the Metaverse: A Guide to Limitless Possibilities in a Web 3.0 World, define 20 terms and technologies, including 5G, artificial intelligence (AI), virtual reality (VR), non-fungible tokens (NFTs), augmented reality (AR), decentralized applications (dApps), crypto wallets, decentralized finance (DeFi), play-to-earn games, and smart contracts. One of the book’s co-authors, tech futurist/metaverse strategist Cathy Hackl, calls the metaverse as “a convergence of our physical and digital selves,” while noting that the metaverse hasn’t yet been fully realized—a process most experts expect to take five to 10 years.

In their metaverse coverage, writers and reporters frequently mention Second Life as a failed metaverse precursor and credit sci-fi/speculative fiction writer Neal Stephenson with coining the term in his prescient 1992 novel, Snow Crash. Today, Stephenson is cofounder and chairman of Lamina1, a layer 1 blockchain optimized for the open metaverse. The term frequently sparks confusion and adverse reactions. John Riccitiello, the boss of a real-time gaming development platform Unity, told Fast Company that “metaverse” is “one of the most misused and abused, hyperinflated terms I’ve seen in a long time.” He prefers “the next version of the internet,” one that will be significantly more three-dimensional, interactive, social and real-time than it is today.

Hackl’s “Web 3” framing will help those less familiar with the metaverse: Web 1 connected information and produced the internet, Hackl tells CoinDesk, while Web 2 connected people via social media. “Web 3 connects people, places, and things—or people, spaces and assets,” Hackl adds. “And those people, spaces and assets can sometimes be in a fully virtual environment…”

Meanwhile, Ball considers the metaverse as a fourth computing wave, following mainframe computing, personal computing and internet/mobile computing. He also has developed a definition while stressing that we cannot predict what the metaverse will look like in 2032 any more accurately than we could have predicted how the 2022 internet would look and work in the 1980s when the internet protocol suite was being adopted. Ball describes the metaverse as “a massively scaled and interoperable network of real-time rendered 3D virtual worlds and environments which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments.”

Ownership is a key concept in the metaverse—or whatever you prefer to call it—which is why Hackl and her co-authors discuss DeFi, crypto and smart contracts prior to offering definitions. “What’s most striking about the metaverse (and its cousin, Web3) is the emphasis on ownership,” writes Harvard Business Review senior editor Thomas Stackpole. “Users can have a stake in almost anything; they can vote on decisions about the communities they belong to and the apps they use, make and sell NFTs, and even get paid for playing games in decentralized apps that run on peer-to-peer networks rather than on servers. User ownership is a real revolution because it creates a new economy … In this vision, users can monetize their digital assets, selling, renting, or even borrowing against them.”

Building blocks and challenges 

Ball’s definition above is helpful because it references most of the enablers that must be in place for the metaverse to fulfill its promise. These include:

• Interoperability: The immersive, 3D virtual worlds that some video games offer today need to be connected in the metaverse. This requires data, digital identities (that remain intact and protected across different metaverse worlds), payment standards and 3D objects to move freely across different metaverse worlds and realms. Think of APIs (a software interface allowing computer programs to communicate) but on a massive, multidimensional scale. “In an interoperable metaverse, your identity and ability to engage in commerce are as seamless as in the real world,” notes Tech Target’s George Lawton while parsing the interoperability challenge. “Consumers are able to bring their wallets and smart objects across virtual worlds, just as they bring their credit cards and backpacks across stores today. That said, interoperability in an open metaverse will be a little more nuanced than in the real world and technically more challenging, as all the systems and standards to make it happen are not yet in place.”

• Governance: Technical interoperability requires agreement among companies and the humans who work inside those organizations. Microsoft and Meta demonstrated that spirit of cooperation last fall when it was announced that the Windows operating system along with Microsoft’s Xbox games and business applications would be available in Meta’s virtual worlds. Another encouraging sign: the member roster of the Metaverse Standards Forum (MSF) continues to expand. While not a standards organization, the MSF’s mission is to “encourage and enable the timely development of open interoperability standards essential to an open and inclusive Metaverse.” How this and related efforts play out will be important to monitor. 

• Hardware: Lighter, more powerful VR and AR (as well as VR/AR) headsets are being developed and hitting the market, but more hardware is needed, including numerous sensing and haptics devices and technologies (e.g., time of flight camera and flexible strain sensors). New displays, wearables, flexible batteries, transparent antennas, and optical metamaterials represent other metaverse “hardware hurdles.”

• Computing power and networks: A fully realized metaverse requires orders of magnitude more computing power than what is current available. Networks also need to be much faster, with less latency, so that experiences are not impeded. “One of the biggest challenges, in fact, is networking infrastructure and, arguably, the internet protocol suite itself,” Ball emphasizes. “This is actually the most important element when it comes to democratized access,” he says. He points out that reliable broadband access is available to a sliver of populations in the Middle East and parts of Asia. U.S. broadband access also needs to be expanded, especially in rural areas.

AI, IoT, blockchain and edge computing also will play a role in driving the next version of the internet. In addition to monitoring progress on building blocks, leadership teams should recognize that some noteworthy metaverse risks also require attention:

• Data security and privacy: New markets for digital assets expand the attack surface for cybersecurity crimes. The metaverse is not unique on this count. The same risk has arisen due to the massive installation of IoT sensors. New metaverse threats—like invisible-avatar eavesdropping and the cloning of voice and facial features via avatars—will join traditional cyberattack methods such as phishing, malware and ransomware.

• Global alignment: While the current metaverse requires interoperability, satisfying this need will be difficult given that different global regions and countries take substantially different approaches to managing and regulating internet activity. Countries that can agree to interoperability might enable the metaverse to mature faster from usage and economic standpoints.

• Customers of tomorrow: As consumer-facing companies vie to attract “customers of tomorrow” in the metaverse, attention will intensify concerning practices related to engaging with and selling to children in virtual worlds.

• Mitigating the current internet’s worst features: “There are many problems with the internet today,” Ball says, before ticking off a list that includes myths and disinformation, radicalization, toxicity, abuse, harassment, user rights, data rights, data security and data literacy. “[A}nd most of them will become harder in the metaverse. Why? Because more of society is going to move online. And that means more societal challenges will move online. And each of the aforementioned areas will become at least more important if not also technically harder. But I also think it provides us with a reset opportunity,” he says. HBR’s Stackpole concludes that the metaverse will reflect the desires of its user base, “be they entrepreneurship, escape or convenience. Dystopia is one risk. Another is disappointment: we dream of the metaverse but end up with a mall.”

Trillions of opportunities

Even if the metaverse generates only a slim fraction of its projected economic value, it will be worth investing in. Projections vary wildly—in large part due to the unknown ways the metaverse will mature during the next five to 10 years—yet they tend to be massive.

Citi ($8-13 trillion), Goldman Sachs ($6.9-9.3 trillion), McKinsey ($5 trillion) and Morgan Stanley ($8.3 trillion) have all weighed in with estimations of the metaverse’s 2030 market size. Deutsche Bank calculates the overall average of these projections at $8 trillion.

Potential metaverse-related value-generation opportunities exist across most industries and are too numerous to detail. Successful use cases now exist in healthcare (augmented reality surgeries), manufacturing (digital twins, virtual/mixed reality uses on the factory floor), travel (virtual tourism), military (training, battle simulations), and transportation (real-time simulations to improve passenger movement in airports). From a cross-industry perspective, recruiting, onboarding and training activities might also be performed far more effectively and efficiently via the metaverse’s immersive 3D experiences. Digital financial services expert David G.W. Birch is bullish on the financial services industry’s opportunities in the metaverse, which he views as a “nexus for safer commercial interaction and the location of better, cheaper and faster financial services.”

MIT Technology Review organizes opportunities into consumer, enterprise (i.e., designed to drive business value) and industrial (i.e., designed to drive operational value, but with related opportunities for new revenue and new businesses) groupings. From a manufacturing sector perspective, the metaverse has the potential to take digital twinning, a range of current simulations and—more broadly—Industry 4.0 (4IR) capabilities to new levels. A Nokia executive tells the Technology Review that the industrial metaverse can reach “a much larger scale with increasing complexity by creating digital twins of entire systems such as factories, airports, cargo terminals, or cities—not just digital twins of individual machines or devices that we have seen so far.”

B2C and B2B e-commerce improvements and breakthroughs mark another big area of potential benefits. By 2030, Deutsche Bank projects that global retail e-commerce value from the metaverse will reach $2 trillion annually, which the bank estimates will be approximately 20% of total retail e-commerce value. “The metaverse will bring the e-commerce experience to a new level by making it more personal, more real, and more immersive,” according to a Deutsche Bank report on the metaverse’s role in driving an e-commerce revolution.

Since the metaverse is composed of multiple, overlapping technology systems, the next internet’s unexpected evolutionary progress, detours and dead ends will produce related advances and breakthroughs of value to businesses. For example, advances in microfluidics-enabled 3D printing designed to make virtual designs and products tangible could lead to medical and healthcare advances in wearable sweat sensors that use similar technology to measure levels of hormones and chemicals in human sweat.“The metaverse is coming,” Ball asserts. “There’s no turning around... Most forecasts believe that the metaverse by the end of the decade will be between $6 trillion and $13 trillion.” That’s why digital finance guru Birch argues that every business should have a metaverse strategy. They should also have the mechanisms in place for creating it, regardless of where the metaverse’s hypothesis and ambition takes it.

Meta then spent billions of dollars and assigned thousands of employees to fulfill the metaverse dream. But since Mark Zuckerberg announced his big bet on the metaverse, the company’s stock price has dropped more than 70%. Its metaverse struggles are characterized by skepticism, confusion and frustration, and much of the metaverse narrative, in the U.S. at least, has been colored by Meta’s ebbs and flows.

Half a world away, China is poised, and perhaps more determined than ever, to make the metaverse central to its future economy. Ironically, Meta’s vision sounds like the metaverse blueprint that China is following. In November 2022, a year after Meta’s name change, the Chinese Ministry of Industry and Information Technology (MIIT), together with four other government agencies, published a 12-page Action Plan to develop the virtual reality (VR) sector and integrate VR with industrial applications like manufacturing, health care and smart cities.

“Powerhouse of the digital economy”

While other countries have announced aspects of a digital strategy, I think it’s safe to say that China’s is the world’s first national, and most comprehensive, metaverse industrial policy. According to the 14th Five-Year Plan for National Economic and Social Development of the People's Republic of China and the Long-Range Goals for 2035, VR is one of the “key industries of the digital economy” designated by China, which will help the country become a “powerhouse in manufacturing, cyberspace, culture and the digital economy.”

The Action Plan is titled The Virtual Reality and Industry Application Integration Development Action Plan (2022-2026). In it, China wants to expand the VR industry output to 350 billion yuan (U.S. $48 billion) by 2026—six times the level of 2021—showing it aims to become a world leader in the emerging metaverse economy, far beyond VR devices and content for entertainment alone.

In line with this government promotion, Chinese companies are investing heavily in the field. Major Chinese internet companies like Tencent, Baidu and Alibaba have announced plans to begin developing metaverse technologies. The state-owned telecom firms are also directing funds into the metaverse.

For example, in March 2022, Alibaba led a $60 million investment round into Nreal, a Chinese manufacturer of augmented reality (AR) glasses. China Mobile has a subsidiary dedicated to creating digital VR and AR content. Most notably, TikTok’s parent company, ByteDance, acquired VR headset maker Pico for $1.5 billion in 2021, a move similar to Facebook’s acquisition of Oculus in 2014.

Kornik: I want start with a level-setting about the metaverse and its overall potential. I know you’ve called it the next evolution of the internet. Explain that in a bit more detail if you could.

Perez: Indeed, the metaverse will be the biggest opportunity for modern business since the creation of the internet. It’s the next evolution of digital platforms and the successor to yesterday’s desktop and today’s mobile internet. Now, the metaverse will not fundamentally replace the internet, but instead will build upon and iteratively transform it. The best analogy is the mobile internet, a “quasi-successor state” to the internet; even though the mobile internet did not change the underlying architecture of the internet, it led to changes in how users access the internet—where, when and why—as well as the devices they use. With the rise of digital commerce, the metaverse will unlock new opportunities for buyers and sellers to connect in a new way. You could imagine online shops becoming more immersive, with the option to buy physical or digital products. Today, people can attend online events; these can evolve into mixed-reality experiences where some people could join in person and others would buy a ticket for the virtual experience.

Kornik: It sounds like you’re bullish on its potential. From a global economic perspective, how big of a game changer will the metaverse be and when can we really expect its arrival?

Perez: The metaverse is a new iteration of the internet, one where people gather to communicate, collaborate and share with virtual presence through a personal avatar on any device. The metaverse will be an interoperable platform for immersive co-experiences, where a potentially unlimited number of people can come together within millions of 3D experiences to learn, work, play, create and socialize. This, in turn, will foster a rich community built on shared experiences, an engaging community where people form real connections. We are already seeing some glimmers of this future, but we know that the primary way people will experience the metaverse in the short-term will still be through 2D apps. The real metaverse, which will bridge the physical and digital realms using real-time 3D software, will probably take decades to become a reality.

Kornik: So, the big payoff is still far off, but several companies are already in the metaverse. What companies are already using it effectively and what lessons can be learned from these early adopters?

Perez: Certainly, gaming companies such as Roblox, Microsoft and Epic Games appear to be early leaders in the race for metaverse leadership. Game makers have been able to attract large, active users; these companies could seek to add additional social features and make user-generated content a larger part of their experiences. Business leaders would be wise to monitor these developments, establish internal teams that can understand the technology and its implications, and decide whether it makes sense to develop their own metaverses or partner with established platforms to test the waters.

Kornik: Let’s talk about governments and regulation. Beijing has already said it plans to regulate “digital humans” in the metaverse. What do you see for the metaverse in terms of regulation and restrictions, and how could that impact business globally?

Perez: Like almost all user-facing applications in China, metaverse users are likely to be required to tie their digital personas to their real identity via the so-called real-name verification process. This is paving the way for China to build another digital landscape that will be different from the rest of the world in the ongoing global metaverse race. Conceptually, the metaverse will not be tied to any one platform in particular; experiences, possessions, identities and contacts will move unchanged across platforms in an extremely seamless way. That is a challenge most companies recognize today as an imperative; while that is certainly manageable when the jurisdictions involved follow common principles, the difficulties grow exponentially if jurisdictions diverge in their regulatory approaches, opening the door to a metaverse decoupling even before the concept is fully baked.

Kornik: How could business leaders prepare for a metaverse future? What advice would you offer them?

Perez: Once upon a time, the only way to stay up to date was reading newspapers, watching television or listening to the radio. The reality today is that people are spending more time online, giving rise to a new ecosystem of virtual living that encompasses digital possessions, relationships and social spaces. Therefore, brands will need to be a part of the digital third spaces that are pulling people’s time and attention, because people aren’t just working in digital spaces; they’re also socializing, shopping and discovering products there. To help bring the metaverse into their business models, companies have a key pathway: perfecting their end-users’ experience. They will want to focus on how their consumers expand their lives into virtual worlds and find the partners that can help them reach the audiences of the future. As the metaverse develops, collaboration between companies will not only be essential, but the quickest point of entry.

Another female gamer, Jordan Belamire, was initially “smitten” with her first virtual-reality experience. “Virtual reality had won me over, lock, stock and barrel.” But the excitement was short-lived. Within three minutes of joining QuiVr, a multiplayer virtual-reality game, she was harassed and violated and wrote an open letter describing her experience. “The public virtual chasing and groping happened a full week ago, and I’m still thinking about it. What’s worse is that it felt real,” she says. Belamire asks: As VR becomes increasingly real, how do we decide what crosses the line from an annoyance to an actual assault? “Eventually we’re going to need rules to tame the Wild, Wild West of VR multiplayer games.”

The experiences of these two women offer a glimpse into how an existing problem of online sexual predation and violence could get a boost from an exciting new technology that is still uncharted territory. As CEO of the Mekong Club, an expert in human trafficking and a former United Nations representative, I often hear about human trafficking cases that start with online encounters on the internet. And I have no doubt that predators will be able to do this—and worse—in the metaverse.

Just like on the internet, people in these new worlds could pose as love interests, new friends or even legitimate job recruiters. After establishing a false sense of trust, these traffickers could lure their unsuspecting victims into modern slavery, prostitution or forced labour—either in the real world or online. The more time people spend interacting in the virtual environment, the worse the problem could become.

The sinister potential of the metaverse is not lost on some of the companies that are building it. Meta (Facebook), for instance, has created a “safe zone,” which offers a protective bubble that users can activate when they feel uncomfortable or threatened. Within this space, no one can interact with them, and setting personal boundaries would help ensure "behavioural norms," Meta says. Another option being discussed includes a button or alarm that immediately alerts an administrator within a virtual world that abuse is taking place. But for this to be effective, immediate action and consequences must follow. One such consequence could involve a lifetime ban from the metaverse, although how such a ban would be enforced is unclear.

Layers of virtual learning

Imagine taking learners’ avatars on a virtual walking tour of an archaeological site, a battlefield, a nuclear reactor or a meeting of a corporate board of directors. We already have the tools to create a learning immersion that text, multimedia content or the internet cannot provide. Now imagine that the avatars can experiment with a variety of “What if?” questions in real time. What if ashes were found next to a skeleton? What if Alexander the Great had never invaded Persia? What if the control rods had not been withdrawn from the reactor core at Chernobyl? What if the board approves a smaller dividend than the market expects? Chatbots will provide preliminary answers to those questions and suggest other content, or even other virtual spaces, in which to explore them further. To the extent that the metaverse can offer alternative scenarios in real time, learners can improve their critical thinking skills, challenging aspects of inherited wisdom as they study science, the humanities or business. This is the initial approach that many universities around the world have taken, often embedded in existing face-to-face classes.

The immersive potential of the metaverse derives from the creation of a dynamic, 3D parallel universe by means of a mix of virtual reality (VR), enhanced reality (ER) and artificial intelligence (AI). Professors know the importance of re-creating the context in which the subject, topic or phenomenon at hand takes place. Traditionally, we would have learners run experiments in the lab, visit an archive, watch a video, listen to a guest speaker or participate in a field trip. The potential of the metaverse lies in creating a new system of learning in which immersion is a central feature. Moreover, the metaverse is on demand and cost-effective. At a time when many universities are reeling from rising costs and reduced enrollments due to demographic change and geopolitical tensions, the metaverse offers new options that also have the advantage of resonating with students.

The second critical step in a metaverse-based learning journey consists of providing tools that enable and motivate learners to engage with the subject and take part in problem-solving. A virtual visit to a slum, for instance, could lead to a planning exercise to build a sewage system. Or learners could work on curating an exhibition of digital art in a virtual gallery they can create themselves. In business school or inside a company, participants can learn about environmental, social and governance matters (ESG) and calibrate in real time the extent to which specific projects would reduce the carbon footprint.

The benefits of immersion and problem-solving can be multiplied many times over through social interaction, the third phase of metaverse learning. Early metaverse technology was developed to enable gamers to join and leave groups of players, regardless of physical location. The always-on character of the metaverse lends itself to spontaneous interactions among learners, whereby they can even create their own virtual study rooms, organize events, and invite speakers or experts. The gamification of learning started a few decades ago with computer-based simulations, which the metaverse and AI can take to new heights. Here lies a key opportunity for universities in general and business schools in particular. Students and employers are attaching more importance to social skills. In the past, these would be developed through teamwork and other face-to-face activities. But in the future, the key will be to develop virtual social skills, especially if shopping and entertainment grow in the metaverse as expected.

Karapinar: Can you talk about the United Nations and its 2030 Agenda for Sustainable Development, the 17 goals adopted by all United Nations Member States back in 2015? The United Nations Convention to Combat Deforestation (UNCCD) is the Custodian Agency for Sustainable Development Goal (SDG) 15, “Life on Land.” How would you say we’re progressing on those goals?

Thiaw: The international community agreed in 2015 to prioritize and work together on 17 goals in order to steer the world on the path towards sustainable development by 2030. Goal 15 concerns life on land. UNCCD is actually custodian of a specific target: Achieving land degradation neutrality. This target measures the progress being made to have as much healthy land by 2030 as we did in 2015. Progress is measured in terms of changes in three areas—degradation does not take place on new land (avoid degradation); the loss of productive land slows down (reduce degradation); and degraded land is made healthy (restore degraded land). The expected result from 2015 going forward is to maintain—and hopefully increase—the amount of healthy and productive land available to present and future generations. The disastrous impacts of extreme events such as floods, droughts and wildfires on land make achieving these targets ever more challenging.

Karapinar: Of all the challenges and threats facing the planet and humankind today, which are the direst and in need of the most immediate action?

Thiaw: Arguably, three top the list: Climate change, biodiversity loss and the loss of productive land. Water scarcity, drought, climate change, land degradation and biodiversity loss are key drivers of current and future global crises. Already, up to 40% of all land has been degraded. The loss of soils and the accompanying land degradation are a threat to the livelihoods and security of over 3 billion people. Half of the world’s GDP depends on terrestrial ecosystems staying healthy and productive. The global economy will lose a whopping $23 trillion (US) by 2050 through land and soil loss alone if we continue with business as usual. Repurposing $4.6 trillion of our investments to protect our productive base and secure the production of healthy food could guarantee our prosperity while protecting our planet. Humanity is at a crossroads. We must act on all these interlinked crises concurrently.

Karapinar: The UNCCD does a lot of policy work on drought. The “mega” drought that has enveloped southwestern North America for the past 20+ years has made the region the driest since at least the year 800, according to a new UCLA-led study. How worried should we be about the impacts of drought on our societies, economies and businesses?

Thiaw: Droughts have always been a part of nature and the human experience but are now much worse. The impacts we are witnessing around the world—in Africa, Europe, China, Australia and the United States—remind us that no country or region is immune. Droughts are up 29% since 2000. That means, instead of a major drought occurring every 10 years, we have one every six years, on average. What’s more, droughts are lasting longer and are more severe. By 2050, drought may affect over three-quarters of the world’s population. Between 5 and 6 billion people may be living in areas where severe water shortages occur at least one month each year. Drought is a hazard, made worse by climate change, but many of its disastrous impacts can be contained by anticipating and preparing for them, which will allow us to respond adequately and recover when they strike. We will need to move from a reactive response to a more proactive approach to drought, including stress testing and drilling to prepare ourselves.

Podcast transcript

Joe Kornik: Welcome to the VISION by Protiviti podcast. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content initiative examining the big themes that will impact the C-suite and executive boardrooms worldwide.

Today, we’re exploring the future of ESG and its strategic implications for 2030 and beyond, and I’m thrilled to be able to welcome two wonderful guests in, Dr. Shannon Deer and Cheryl Miller, co-authors of the book, “Business Doing Good: Engaging Women and Elevating Communities,” which outlines six principles business leaders can implement to effectively hire women who have experienced serious hardships: incarceration, poverty, homelessness, addiction, violence, or engagement in the sex trade.

Shannon is currently the Interim Associate Dean for Undergraduate Programs at Texas A&M’s Mays Business School and a clinical associate professor. Her work emphasizes the importance of corporate social responsibility, along with the intersection of business and solutions to social challenges, specifically ways businesses can invest in women to positively impact business and the communities in which they operate.

Cheryl Miller is a former teacher and an 18-year veteran in the nonprofit sector before she started her own business, Quantum Consulting and Training, which helps women who have experienced hardships find meaningful careers to help them transition back into society.

I’m thrilled to have them both on the podcast today, and I’m also happy to welcome in my Protiviti colleague, Amber Acosta, Manager on the Diversity, Equity and Inclusion team. She is specifically charged with developing gender equity strategy for Protiviti, including strengthening our strategic partnerships and ensuring our talent pipeline remains strong at every level.

Amber, thanks so much for doing this today, and I’ll turn it over to you to begin.

Amber Acosta: Thank you so much, Joe. Appreciate it. All right, welcome to you, Dr. Shannon Deer and Cheryl Miller. Excited to join here with you today. So, let’s go ahead and get started.

Shannon, I wanted to talk to both of you about the starting of your book—what an impactful book and a great space for you all to be with us today. Let’s hear a little bit more about the origin story of the book. How did you two get connected, and why did you decide to write this book?

Dr. Shannon Deer: Sure. Thanks, Amber. We’re excited to be here. Well, I was doing some research in 2016 on women who were exiting the sex trade and their experience, really, in how work, lawful work, really influenced their transition out of the sex trade. So, I had called a bunch of different organizations to help try to find participants for the study, and somebody said, “Well, if you really want to know someone who’s really helping women transition out of whatever challenge they’ve had, you should call Cheryl Miller.” So, I called her up, and the way I tell the story is that she grilled me a little bit to make sure that I was going to take good care of the women that I was interviewing, but she doesn’t remember it exactly the [Laughter] same way, so she thinks “grilling” is too strong of a phrase. But it was a great conversation and really talked about what some of her philosophies were.

When I went to interview the women that were—she was running a housing program for women who were overcoming poverty, addiction, incarceration, and there was a lot of intersection of women who had engaged in this sex trade. So, when I went to interview the women from her organization, I really saw a significant difference in the experience they had and the outcomes that they had compared to other organizations that were supporting women. So, I wanted to know what was different, and she was excited to get to see that from a research perspective.

So, I went and did that, and then we’ve stayed in touch over the years, and she wrote me an e-mail one day and said just, “Hey, do you want to write a book together?” I wrote back and said, “Yes,” and then instantly wrote back again and said, “Wait, what is this book about?” Assuming it was about the women that I had interviewed and kind of their experiences and what she had done, but I wanted to make sure. So, then she said, “Yes, it’s about that.”

So, we started writing. We actually wrote a version of the first few chapters and completely scrapped it and really redesigned it to be centered around the stories of women who have had these challenging experiences and overcome them and the support that they received that worked. So, the book has six principles, but it also has six stories that are not any one woman’s story necessarily, because we don’t want to tell those, we want them to be able to tell them, but it’s an intersection or a conglomeration of a lot of different women’s stories about their experiences.

So, I know Cheryl has her own experience with overcoming, and so I’d love for her to share that story, too, which had a great influence on the book.

Cheryl Miller: At that time, we were doing this work at the housing program that I was running and we were seeing such significant results, and I was thinking, “Gosh, I wish there was some way to let other people know about this.” So, when I reached out to Shannon about writing the book, I thought this is going to be a perfect partnership because what we were doing was hands-on, grassroots kind of work, but Shannon brings such a different perspective to it with her business background and her research, and so it was really exciting.

For myself, it was 30-something years ago that I was a single mom. I was pregnant and homeless, and I had two children that were born into the welfare system. Actually, when I was pregnant, I found out, when I went into labor, that I was having twins, and not only twins but they were now found out then that they were 10 weeks premature; they were only 30 weeks. So, I had two really sick babies that were born into the welfare system. And the people that worked with me after that were people that realized that I didn’t need to be fixed, I needed to be challenged, and they provided support for me to go back to school. So, I went back to school, got my degree, became a teacher, and then eventually left teaching and moved into the nonprofit sector.

When I first started working at the home, I realized that the women were just like the past me and that this was something that resonated with me, and I knew that it would work. I brought my perspective from my own personal experiences of I had what it took to make it, I had what it took to overcome, and so I knew that these women did, too. So, we just moved in that direction, and we just kept pushing forward, and we ended up creating a really powerful model, and that’s what the book is about.

Amber Acosta: That is really fantastic and thank you for sharing that with us. It is certainly valuable for us to hear those different perspectives.

Shannon, I remember fondly as you were doing that research and to these women overcomers, and then also tying that, I remember at the time, tying that to your business perspective. So, I think it’s really fascinating to hear Cheryl tell the story of how she wanted to understand how to scale, right? We say in business, how do you scale this concept of this model?

So, before we dive too deeply into it, I did want to take a step back and take a look from a macro level. I think the perspective that you both provide, Cheryl as an overcomer, and Shannon with your business acumen, that unique perspective and view into the world, in general, how do you think business leaders are doing right now in terms of “doing good,” right? Title of the book, “Business Doing Good,” how are we making choices, and are we making the right choices in the diversity, equity and inclusion space? I know we talk a lot about business ethics as well, so how optimistic are you that we’re heading in the right direction and will ultimately make good choices?

Dr. Shannon Deer: None of it’s easy. So, are people doing a great job? I think we’re on the right trajectory in a lot of ways. It’s been an interesting evolution to see ESG, which has a big diversity, equity and inclusion component as part of it, and doing the right thing, it’s been interesting to see over the years how this has evolved.

I was talking about these things several decades ago, and no one was listening. [Laughter] I was part of helping some companies do their very first sustainability report, some large companies to do their very first sustainability reports. It was interesting because I have an accounting background and worked in public accounting, and so there was some aspect of that that had—and we’re seeing it even more now—but some aspect of that where the reporting side of it, we’re doing the 10-K and so, hey, how do we do the sustainability report annually in the same way that we’re doing the 10-K? So, I was excited about it from that perspective and really seeing companies make some better decisions and try to find strategic ways to not only improve in doing good but improve their profit as well.

So, I was kind of beating on the doors and really excited about it, and it was not getting a lot of traction 20 years ago. But now, it is; people are really paying attention. I think we’re at a really interesting inflection point or pivot point or whatever it is right now where if things continue on this trajectory, we could see some really good things. And if they don’t, I’ll be really disappointed, and where we go.

But it’s like anything else, there’s a pendulum swing. We’re seeing a huge focus on ESG, and now we’re seeing some pushback on that, on doing good, and what that means, and what does that mean from an investing perspective, and should these portfolios focus on doing good or should they focus on profit? I think you can focus on both. I think that there’s a way both in investing and in a company.

So, I’ve seen companies do ESG well from a strategic perspective. I have seen a lot of companies not necessarily not do it well but not do it from a strategic perspective. So, there’s a big difference between philanthropy and ESG. They’re both great, and companies have—there’s a place for both in companies, but they’re different.

So, really, what I’ve tried to do with companies is say, “Okay, I want you to do this because it’s the right thing. I do. I want you to do diversity, equity and inclusion because it’s the right thing.” But I can also make a business case for it and here’s the business case for doing for doing all of these things within ESG strategically.

When I see a lot of the pushback on ESG, I start to ask questions like, do you think it’s a bad thing if companies can remove human rights violations from their supply chain and make a profit in doing so? Is that a bad thing? Just answer those questions. I actually work a lot with oil and gas companies as well, and ESG, that’s been in the news a lot. Are oil and gas companies excluded from these ESG portfolios from an investment perspective? But I get to see these oil and gas companies be some of the leaders in ESG, and it’s been really interesting. Now, are they going to have lower emissions than Protiviti? No, [Laughter] but they are really trying to work towards the holistic view of ESG.

So, it’s challenging, it’s not going to happen overnight. If we stay on this trajectory of really improving in this area, I’m so optimistic. I’m also cautious because I’ve seen it get some momentum and then lose it, and get some momentum and lose it, but I’ve never seen the momentum like this around these topics, and I’m excited.

Amber Acosta: So much of what you’re sharing their ties to other work that we’re doing. So, I know I’m working more directly with our EVP of DEI and ESG here at Protiviti. A whole lot of letters to say! [Laughter] Someone that is helping to talk about the intersection of diversity, equity, inclusion and ESG as more than just the S in that model, but I think you so wonderfully laid out how it is taking this momentum and capitalizing on it.

I think we talk a lot in the DEI space about we’re getting past DEI as a moral imperative and instead looking at it more so as strategic business imperative and how does it infiltrate everything that we do here at a company-wide level? So, thank you for so wonderfully illustrating that, and I think you’ve really done a lot to help capture how this is the right moment for the challenges that are laid out in your book.

So, let’s turn back to the principles that are outlined there. As mentioned in the intro, the book highlights the six principles business leaders can implement to effectively hire women who have experienced serious hardships. You all call them “women overcomers.” As Cheryl mentioned and you talked about, you’ve used some real-life examples and how powerful that is to kind of take their stories and collate them into six narratives that were really able to follow the principles.

Cheryl, can you please take us through some of the highlights of these stories?

Cheryl Miller: It was really, it was only in the last probably a couple of years of working on this that we really started seeing a dramatic change. It was kind of like a snowball effect, where it took one or two women to really get in there and try it, and then we realized it started working.

One of the early stories that we tell was of a woman, she was the first one that we did a microloan for, and she launched this small business. It was kind of her side business and she was doing it very well and she was making money at it, and she was only seven months sober from a 21-year crack addiction and she was homeless and had been on crack for 21 years. She was only nine months sober when we lent her the initial money for her loan, which puts her at a really high risk [Laughter], obviously, but we had safety parameters in place to address the issue that might come up with having that kind of money and having a problem with addiction. But within a very short period of time, she had paid her loan back in full and she was never late on a payment.

She’s still in business today, and she is doing well. She ended up being a mentor to several other women that launched their businesses. At one point, she kind of hit this barrier. She found out that she was going to have to get some kind of federal approval, and she looked into it, and the paperwork was just absolutely overwhelming. So, she was like, “I can’t do this, I’m going to shut my business down,” and I was like, “Why in the world are you—why are you freaking out over this? You’ve overcome so many other things. What’s the deal with this one?” She said, “Well, I don’t want to do it because I’m afraid if I start that process and I do it wrong, I’ll fail and I’ll look like an idiot.” I looked at her, and I was like, “Are you serious? I mean, you’re afraid of failure?” I said, “You’ve been a failure your entire life.” [Laughter] It’s like, “You’ve overcome every single time, so why in the world would you be afraid of it now? If you fail, you fail. It’s not going to hurt anything.” She just looked at me and laughed. She said that’s not very nice, but she realized it was true, and she went on to complete all the paperwork and she got the certification that she needed.

So, to me, she’s just a really good example of how somebody who shouldn’t have the experience can figure out how to do something as complicated as federal regulations to be able to monitor their business and continue to grow, which is what she’s done over the years.

Amber Acosta: I really do love that story. I think it’s so much, so capitalizes on the principles that you all outline, and something that I really heard in there is you all were taking some risk, right? All of that is about taking a risk assessment and then weighing that out and taking a chance on her, as people would say. You said that she had been labeled as a failure her whole life and instead, to help her reframe and how she’s an overcomer, and I would just really love that.

I think so often, in corporate social responsibility or in ESG, it is daunting in that same way, right? That it’s a little bit of uncharted territory and it’s sometimes simpler for companies, as Shannon was mentioning earlier, those in oil and gas, to think of their carbon footprint or their emissions. I’m a little bit different for those of us in consulting to think about ESG.

I think there are some real correlations here, though, between—and I’m continuing to hear both in the stories and in the book overall—some obvious aspects of CSR and of ESG. But I want to pull this back to that point that we were talking about earlier, how it’s not just about doing the right thing or making a significant positive impact, but that there is a real strategic business case to be made here. Would you agree, Cheryl?

Cheryl Miller: Absolutely, absolutely. We say that businesses should be hiring these women because it’s the right thing to do, but the reality is they should hire them because it’s going to benefit their businesses. They bring a nontraditional skill set into the workplace, and they bring a sense of resilience and tenacity that you’re not necessarily going to find in your traditional employees. They know how to think on their feet, they know how to overcome, they know how to make things happen, they’ve been doing it their whole life. Unfortunately, most of them for the wrong reasons, but that skill set ends up being a really valuable asset to the workplace.

We tell the story of there was this one woman that I knew. She had been on heroin and crack for 20 years, and she lived in a metropolitan city at that time and she decided she needed some more dope and she didn’t have any money. So, she got on a bicycle in the middle of the summer, it was like in August. She rode down the feeder road to the freeway to a mall that was near where she lived, went in, shoplifted a bunch of jeans. Of course, they saw her, so they started chasing. They expected her to get in a car, but she ran around the back because she was on a bike. Got on the bike and ran to the backroads with the jeans and bags on her handlebars, took them and sold them, and used the money to buy drugs.

Now, obviously, we don’t want her doing that type of work, but how many employees, how many people would like somebody who would do that kind of—go to that kind of extreme, ride a bike for two hours to get the work done and then hustle to make it happen? All she had to do was translate that skill set into a workplace, and she becomes a really valuable employee. She’s no longer doing anything illegal; she’s now being an asset to the business and she’s increasing the profit for the business because she’s an incredible employee who works hard, who works fast, and is loyal.

Amber Acosta: I can certainly see that there. I think you have done a great job, both you and Shannon have done a great job of convincing business leaders that this is a good thing. So, I want to ask you, what’s next? How do we help business leaders put a plan into action, and what do they need to help guide these women overcomers throughout their career?

Dr. Shannon Deer: Yes, I’ll start that off. There are a few things that businesses can do. First of all, I will say, when we talk to companies, and we talk to a lot of companies about hiring overcomers, because, obviously, companies right now are struggling to find human capital and to find top talent. We have organizations that can be a pipeline to hiring really good employees that will be loyal and reduce turnover. We see all of these outcomes that are really important, and it’s in our research, but it’s also in other research that’s being done.

The Business Roundtable is doing some research with their Second Chance Coalition, and we’re seeing all kinds of really good things with—and we obviously look at a broader population. They’re looking specifically at people who’ve been formally incarcerated, but we’re seeing all kinds of good things, and we’re able to really talk to companies differently than we used to. We aren’t having to do quite so much convincing, one, because there’s a need to create a new pipeline of talent, but also because employers’ views are really changing on what it means to have a criminal record. So, we are seeing that. It needs to continue, and it needs to flow down through the organization.

So, some next steps that companies can think about is how can they really push that attitude down through organizations? The data’s showing us that we’ll still talk to companies sometimes and they’ll say, “Well, we’re willing to take a chance on these women,” and we’re like, “It’s really not a chance. The data shows that there’s not worse outcomes, there’s not higher firing rates.” In fact, a lot of the people that I talk to, I go into prisons and work with women; Cheryl goes into prisons and does some other work, but I get to work with women on helping them build their business plans, and they’re all like, “Well, I have this charge, is that going to prevent me from getting a job?” I’m like, “Not in most companies.” There is an opportunity in some companies to find those people who are willing to hire people who have a criminal record. We also know that in the U.S., there’s an equal number of people who have a college degree and those who have a criminal record. So, we’re starting to see that shift.

I’ll give a plug for Cheryl because she’s awesome and incredible, and she owns a training and consulting organization that helps companies really put these practices into place.

So, thinking about next steps, I would say if you’re an executive in an organization, read the book. That’s not just a shameless plug on the book. It’s just that we wrote it so that it was an easy way to get all the information we know. But read the book, and then reach out to Cheryl and talk to her about doing some trainings with your organization to really push that concept throughout the organization.

Cheryl, you have a great story about a company in your town that came to you because Cheryl was creating a pipeline for employers. Her housing program was developing talent in a way that other organizations weren’t. Even higher education wasn’t training talent in the same way, and she had lots of different training organizations, but one of the companies came to her and said, “We need more women like the women that are coming out of your organization. What can you do to help us get more people? What can you do to train people who aren’t going through your organization to get them ready in the same way that the women are?”  That’s awesome to create those kinds of pipelines out.

So, we want to do, one of our principles is a three-point partnership with the women, nonprofit organizations, and businesses to create that pipeline. But Cheryl said, “That’s fine. We can still be your pipeline, but I want to train your supervisors.” Because if you don’t—and, Amber, you know this as well as anybody else—if you don’t have an inclusive environment where the women can thrive, it’s not going to work.

So, what Cheryl really tries to do is train those supervisors to create an environment, implement the principles that are in the book to create an environment that is conducive to hiring a different population that has some different needs.

Now, fortunately, all the principles in the book, one of the biggest surprises from the book has been that people will say, “I need to implement that principle for all of my employees. I hadn’t even thought about that, and that would help all of my employees.” And the answer is “Yes. That’s not why we wrote it, but absolutely, all of the principles will help all of your employees.”

We went and talked to a large company and presented to their legal department and some of their executives. Afterward, there were probably about 10 people that came up to us and kind of whispered, “I’m an overcomer,” and they were in executive-level jobs and they were doing really great things within the company. They said, “I want to be part of helping. I haven’t told anybody my story, but it might be time for me to do that because I need to help us build in the culture that’s going to be conducive to this.” So, Cheryl can do the trainings that will help all of your employees, but certainly help you to create a new pipeline of hiring and retention with overcomers.

Cheryl Miller: Well, and I want to add to that, Shannon and I do these trainings together, and she brings a whole another valuable tool to it from her business perspective that I don’t have. She understands the language and stuff in businesses and can speak to businesses in a way that I can’t do. I can’t do that. I can speak to them from the perspective of having worked with the women, but not necessarily from that business perspective.

But I want to add to what she was saying about the actions that they need. For me, the biggest thing that needs to happen is a mindset change within the corporations or businesses. Because a lot of times, when you’re thinking about helping people, you tend to see them as helpless. So, one of the mindset changes needs to be that these are not women that need to be coddled. These are women that have a lot to offer, and so employers need to see the assets that these women are bringing into their business and they need to build on those assets as opposed to saying, “Well, I’m just going to help this woman out because she’s had a rough life and I’m going to give her a job.” That’s more of a pity perspective, and that’s not what the women need or bring to the table. Really, what they bring to the table is what I said before, some really valuable assets.

So, I think that change in mindset is probably one of the biggest things that needs to happen, and that’s a cultural thing, and cultural issues within businesses or any organization are really hard to change, but it can be done.

Amber Acosta: You both are very much speaking my language. As Joe mentioned in the intro, what I do for Protiviti is diversity, equity and inclusion work, specifically in the gender equity space and how we work to drive an inclusive culture. And that is a big charge, to change that culture.

I hear so much of what you all are saying in terms of helping people to pinpoint all employees, to pinpoint any biases that they may have, whether conscious or unconscious, right? We have a lot of studies in that space, but so much of that is about not judging a book by its cover, not judging someone by their past, but instead seeing them for the potential that’s in front of them. So, so much of what you are saying is resonating with me.

I would like to close this out here with asking you all to make some bold predictions here. So, I’m going to ask you to envision a world, say, a decade out. Let’s say 2030, 2035, what do you see in that future world?

Dr. Shannon Deer: I would say a place where—I’ll be a little broad, but I would say a place where ESG is a strategic initiative for organizations, that we really do shift from that philanthropy mindset to a strategic ESG mindset where—and I think it will prove itself out in that time that the most strategic, the best companies will have really—they’ll be the ones that have solid ESG strategies, that will infiltrate all these areas that we’re talking about, not just the S, but the E [Laughter] and the G. But within the S, it’ll be the diversity, equity and inclusion, and we think about that more broadly.

I had a student who asked me the other day, we were talking about diversity in class, and he said, very kindly, this was not a confrontational question. He said, “Do you think, from a profit perspective, it is worth it to compromise quality for diversity? Just financially does it weigh out? Because we know that having diversity is helpful for profit, but it’s compromising quality.” I said what I think we have to do, and this is what I hope for 10 years from now: I think we have to do is redefine quality. We define it so narrowly, and even within higher education, we define quality as a GPA, oftentimes. But quality is so much more, is so much broader than that. It’s about the perspectives and experiences that you’ve had. So, a student who’s worked full-time all four years and has below a 3.0 but lots of different experiences and perspectives, that doesn’t mean that they’re not a high-quality student who would be maybe one of your best employees.

So, when I think about even the context of this book, it’s those kinds of things. We have to just broaden the way that we think about these things. Now, GPA is easy, right? Because it’s a number, it’s measurable. I can compare it across all the candidates that I have, but it doesn’t tell me the whole story. So, how can we really start to think about that whole story would be what I want, for whether it’s overcomers or where I work in the higher education space, is just thinking about that differently.

Cheryl Miller: For me, looking at a broad perspective where we would be in 10, 15 years, I think we’re going to see a significant—not significant, but I think we’re going to begin to see a reduction in poverty. Because these principles just make sense, and people are starting to realize that these principles make sense. Nonprofits are moving more towards entrepreneurial work and microlending and that type of stuff because they recognize that jobs and business is a part of the solution to poverty.

So, I think we’re going to see that momentum grow, and once businesses start implementing the principles in the book and hiring and they’re seeing that they can make a difference in their bottom line and doing the right thing at the same time, that’s just going to reduce poverty. So, I think that’s going to be one of the big benefits of this in the future.

But on an individual basis, and this is kind of taking it from the broad down to the narrow, what I think is really significant is we’re going to see a lot of families that are living different lives in 10 to 15 years because of the businesses that implement these principles. My children were born into the welfare system; those two babies were born into the welfare system. But because I was given an opportunity, they did not grow up in poverty. Those two kids now have children of their own, and none of my grandchildren, I have eight grandchildren, and none of my grandchildren were born into poverty. Whew! And so many of the other women that I’ve worked with is the same. They came out of harsh situations. They did the work; they made the changes. Not only did it change their life and now they have a productive life and they’re making a difference in the world, but it changed their children’s lives. So, we’re talking about hundreds, if not thousands of people that will be impacted by this because of the generational piece that it has. So, for me, I see a lot of lives that are going to be a lot better in the future, not to mention businesses will be thriving and doing the right thing.

Amber Acosta: Oh, that was incredible. Thank you all for that. And, Cheryl, you really got me there. I think I heard so much of it’s not just the moment that we’re in; it’s how that moment turns into momentum that moves us into a movement and how that will occur across generations.

I think, Shannon, you bring such wonderful perspective in that space, educating the leaders that are in higher education that will become our business leaders tomorrow. I am always captivated by those in higher education and the ability to see movements and trends before they come, so I could not agree more that ESG is coming. That next generation is asking and asking the hard questions that we, when we were in their shoes, were afraid to ask.

Just as much as I hear what Cheryl’s saying, and your story resonated with me from my own background, and so I thank you very much for that. I think a lot about generational wealth and the legacy that I’m leaving my children. Coming from where I am, remembering where I come from, culturally, financially, socioeconomically and the opportunities I’m providing my children for a better world. So, thank you both for that.

This has been such an enriching conversation. I have great admiration for Shannon, and by extension, you, Cheryl, [Laughter] being her coauthor and someone that she looks to so often. So, thank you both for joining us today.

Cheryl Miller: Absolutely.

Dr. Shannon Deer: Thanks for having us.

Cheryl Miller: Yes, it was great. I really enjoyed it. Thank you.

Joe Kornik: Thanks, Amber, and thank you, Shannon and Cheryl, for those insights and perspectives. What great work you are doing, and it really is such an important book and important work, so we thank you for taking some time out of your busy schedules to enlighten us and offer us some of those perspectives that you did. It was powerful, very powerful.

Thank you all for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to podcasts, and be sure to check out VISION by Protiviti’s ESG initiative at vision.protiviti.com. We’ve got a lot of great ESG content up on the website as well as quite a bit of DE&I content as it relates to ESG.

So, thanks again. On behalf of Amber, Shannon, and Cheryl, I’m Joe Kornik, signing off, and we’ll see you next time. Thanks.

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Video transcript

Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content initiative examining the big themes that will impact the C-suite and executive boardrooms worldwide.

Today, we’re exploring the future of ESG and its strategic implications for the next decade and beyond. I’m thrilled to welcome Cristina Dolan, an engineer, entrepreneur, author and speaker. As founder of InsideChains, Cristina works with organizations to digitally transform business models through advanced technology, data, and blockchain ecosystems, offering new business models with greater visibility, richer data and cybersecurity. She has held executive roles at Disney, Hearst, IBM, and Oracle, and is a member of Forbes Technology Council and the Vice Chair of the MIT Enterprise Forum in New York. She is also co-author of the excellent book “Transparency in ESG and the Circular Economy: Capturing Opportunities Through Data.”

Cristina, thank you so much for being here today.

Cristina Dolan: Well, Joe, thank you so much for having me. This is a topic I’m very passionate about.

Joe Kornik: Yes, I’m really excited to have you on the show today because today, we’re going to talk data, metrics, measurement, and I think those things are often missing from the ESG discussion and I love that your book is talking about those.

I’ll start out here. Where have most companies missed the mark in terms of ESG transparency and data?

Cristina Dolan: First thing I want to say that ESG has been totally misunderstood, right? It has been hijacked to mean something like social justice or some political agenda, but in fact what it is, is a really, really important metric. Part of the confusion comes in that there are so many different frameworks and standards, right. So you’ve got SASB, which is the impact of the world on an organization from the lens of an investor, for example. Then you have another like GRI, which is used a lot in Europe. That’s about the organization’s impact on the world with many stakeholders, very different from SASB. For example, then you have the UN Sustainability Goals, and those are about things like poverty and healthcare and education.

With all these different metrics, you can understand why there would be a level of confusion, and we can get into this in a little bit more detail in a minute, but these are very important metrics because as organizations utilize technologies to solve interesting problems, they create these transformations that involve things like society and the workforce that plays a role in bringing these technologies into the marketplace. If you don’t have the data and understand what’s happening, you can see how jarring these transformations can be on society, and so over the course of time, these transformations have taken place a little slower but today they’re happening so quickly that without an understanding of these massive transformations and the impact, it’s really hard for organizations to play a critical role in managing the impacts going forward.

Joe Kornik: Right, and I often think that maybe a lot of companies are thinking of data as the next step, or ESG 2.0 or something, when, really, it’s crucial now, right? It’s crucial in all components of it but particularly as we really start to embark on this ESG journey or make our way down the road. What are some of the strategic business implications of having that transparency in ESG? Your book mentions opportunities through data, so what are some of the opportunities that maybe companies are missing? Are there any metrics for success we should be looking out for?

Cristina Dolan: Well, first of all, I think about ESG as a true risk metric, and organizations today are already involved in risk metrics, but this is a very important one because it impacts not just their organization and their customers and their direct employees, for example. It affects other organizations, the tax base and communities, the small businesses. We see this domino effect because we live in this networked world, so when organizations can plan ahead and understand what these risks are on a global perspective, it allows them to perform more effectively because they understand the risks that they’re going to face and allows them to plan for them in advance.

Joe Kornik: Right. Earlier this year, you wrote a fascinating article, actually, for the World Economic Forum, saying that companies need to start looking at cybersecurity as part of ESG and that cyber is actually the most immediate risk organizations face today. Why do you think that is?

Cristina Dolan: First of all, when you look at all these industrial revolutions that have created these jarring effects and corporate social responsibility that has evolved into what we called ESG over the course of the last 15 years, the third Industrial Revolution created the byproduct of carbon and we hear a lot about that and its impact on the environment. But if you look at where we are today in the fourth and fifth Industrial Revolution, the negative byproduct of these networks’ technologies that utilize IoT devices and data and connect all of our organizations and people and healthcare and supply chains, the negative byproduct that we are dealing with right now is obviously cybersecurity and it’s a problem that’s growing. When you look at some of the statistics, people said it was the largest industry in the world. You’ve got, for example, the FBI had posted some statistics about how much money North Korea was making, it’s like 8% of their GDP. So nation states are involved and obviously with the great returns, I don’t see them stopping anytime soon. It has become a weapon. It has been weaponized in the current war.

Cybersecurity is probably the most immediate financial and material risk that organizations face, and you can take down utility like electric grid, and that will impact society faster than probably any other weapon. You don’t have to send in any military. You don’t have to send in people. You could do it somewhat quietly and the impact will be quite immediate. People can’t fill their cars with gas. They can’t get water. That is an immediate risk. Organizations that get hacked, it’s not even just taking their business down. You look at what happened in one of the healthcare organizations, I think it was in the UK that got hit and they couldn’t even provide accurate prescriptions for patients. It’s not even just that. It’s the fact that when you have a cyber risk, the regulators also will fine you and those fines alone could be financially impactful and cause a company to have to shudder. The risk is huge and it has many different perspectives that have to be managed and understood.

Joe Kornik: Right, and along those same lines, when I think about risk, when I think about data, I’m thinking a natural tie-in there to sort of the reporting and the governance standards around ESG, and I know that that’s, again, the next wave of ESG. Climate has taken center stage. Social has really now become more in the forefront, and I think right behind that is governance and reporting, and there has been a lot of talk about where their standards will go. We’ve got self-reporting. We’ve got people doing it obviously. Companies in different countries are doing it in different ways. How do you think that all plays out? What do you think those standards will go over the next decade or so?

Cristina Dolan: Part of the problem, and I talked about this a little bit in the book with respect to data, is that there are so many different ways to look at this. I had said before SASB is the impact of the world on a company with the lens of an investor, and then you have GRI, which impacts on the world, many stakeholders, and UN sustainability goals are a completely different lens. It’s poverty, healthcare, etcetera, but then below that, you have different datasets. Some look to the past and some look to the future.

There’s a Harvard article that talks about Berkshire Hathaway and how old Charlie Munger is in the management and whether or not they have a succession plan, and then yet another rating agency says, “Well, if you look at the past, they’ve never had a governance issue.” One looks forward, one looks back, and they have completely different views in terms of the sustainability of that organization. The analysis on these different datasets is also different. Some will use AI and satellites, and some will use some old government data to assess what the risk is on a particular company.

Then on top of that, there are weightings, so some metrics might be more important than others. For example, if you compare GRI and SASB when it comes to training of employees, one looks at the spend and the other one looks at the amount. It’s hard to normalize those different viewpoints when they’re so different.

I think what we’re going to have to see is more transparency with respect to what is used in order to create these reports because today, it’s really hard to understand even, for example, some of the rating agencies how they came up with some of the scores they’ve come up with. If the goal really with these risks is for organizations to be able to improve upon this particular risk, then they have to understand what are the rating agencies using as their metrics? What kind of data are they using? Just to get like some sort of random rating doesn’t necessarily mean that the organization could go back and make those changes.

I think we’re going to have to see a bit more transparency with the approaches being used, the different datasets that are being used, and I think we have to think about this a little bit differently. We have to start thinking about this as a metric that allows organizations to improve and reduce the risks.

Joe Kornik: Right, yes. I think there’s a bit of a fear that we’re just going to end up sort of chasing ratings. We’re going to be chasing rankings, and that’s going to be our gold seal of approval or companies are going to be able to say that they’re doing the right things because their rating says they’re doing the right things when they may not be necessarily measuring the right things at all. I think that’s something that I think is pretty interesting.

You’ve laid out some really interesting things for us to think about regarding data, risk, cyber, so what should companies be doing about it? What would you advise business leaders? What steps should they be taking to ready their company for the next decade?

Cristina Dolan: I think what’s really important is really to understand these risks. The cyber risk is very important to understand because if you don’t understand it, how do you measure it? How do you create metrics? How do you set KPIs? How do you define what resources you need to solve those risks? I think that organizations really have to take a step back and understand holistically what are all these risks and then put plans in place to address those risks. When it comes to cybersecurity, it’s not even just measuring the risks. It’s putting together the resources and making plans to actually defend against it because today we live in a world that you can’t just insure against those risks and hope it all works out.

Joe Kornik: Right. The point of VISION by Protiviti really is to bring smart people together and have them give us their vision of the future, have us talk about the business impacts of megatrends. If I could ask you to look out, let’s say, a decade or even more as far out as you’d like to go, tell me what you see in terms of transparency in ESG or just ESG in general.

Cristina Dolan: Well, I think one of the things that’s going to happen is that you’re going to see a little bit more clarity and conversion on all these various lenses—datasets, weightings, analysis tools, and these very opaque weightings that actually come out of a variety of different agencies because I think that one expectation is that companies should be able to respond to that risk and improve upon it. If you don’t understand what’s under the covers, it’s very difficult to do that.

But in order for that to happen, I think you need to have a better understanding across the board of what these metrics mean. Now, of course, you hear a lot of people pushing back on ESG because they don’t understand what it is and they think it’s some political or social justice metric when, in fact, it’s really a far more important metric about how society and organizations are evolving and transforming to solve interesting problems but in doing so, they create other issues, other problems, other risks, and those have to be understood. I would bet that in the next 10 years, you’re going to have a better definition of that risk landscape so that everybody’s talking the same language and more importantly for organizations to be able to improve upon those risks that they’ve identified, which I think is really tough today when there are so many different lenses and mechanisms by which to measure and disclose this type of risk.

Joe Kornik: Right. Well, it will be really interesting to see how it all plays out. That’s for sure. It’s evolving quickly and as you know, ESG is top of mind now for business leaders in corner offices all over the globe. We’ll see how it plays out.

Cristina, thank you so much for doing this. I enjoyed our conversation.

Cristina Dolan: Well, thank you so much, Joe. It was a real pleasure.

Joe Kornik: Thank you for watching the VISION by Protiviti interview. I’m Joe Kornik. We’ll see you next time.

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