It was a staggering misjudgement; in the quest for more power, additional revenue and greater brand lift, the opposite has happened. The result? Huge reputational damage: not just to the clubs themselves, but to the owners and executives involved, as well as a dilution of influence.
Why ESG is relevant to sport
Why? How? What could have been done to avoid it? Why is ESG (Environmental, Social & Governance) so relevant to sport? And how could a simple ESG assessment have saved so much anguish across the game?
The cornerstone of great sport is celebrating competition and unpredictability, the volatility of change, the antithesis of good business. Owners that have ‘won’ in their professional lives, have to acclimatize to the normality of losing, and when they least expect it. Unless of course, you create a model where losing has little consequence, evidenced in the proposed American ‘closed shop’ model of the ESL, versus the promotion-relegation drama that UK fans find so compelling. These conflicting currents perhaps led to confusion and questionable decision-making.
Due diligence is an essential first step
It seems simple, when launching a new product; do your due diligence, embed fulsome risk analysis, think of mitigation and remediation strategies, and most obviously engage and get buy in from your key stakeholders such as your employees, let alone your consumer base.
Instead, ill winds quickly emerged, and in the teeth of the storm, biting criticism came from both coaches, in Pep Guardiola and Jürgen Klopp, and players such as Jordan Henderson. These value-based leaders showed their strongly held beliefs, insisting that perceptions of fairness and community are key elements for even global corporations. In a results business, this unfortunate outcome will cause a cultural chasm within these clubs and the two parties. The ESL decision makers - Nil, those on the front line, the guardians of success and the shop window – One.
If downsides of bad decision-making are not obvious enough via the placards, on social media forums and from the visceral reaction of the public at large, just take a look at share prices and reputational damage. Not just of the clubs themselves, but even their financial backer JP Morgan, which felt the need to apologise.
When three European leaders are commenting, and Boris Johnson is talking of a ‘legislative bomb’, you know that in search of the throne, your crown has slipped. The pain is also being felt further, not least in the ejection of key executives from the breakaway clubs. In the quest for control, the potential for legislative blowback is significant with independent regulation possibly following. Maybe that’s what is needed, in the absence of strong governance, this issue will create the opportunity to rebuild.
Sport is a wonderful, contradictory world. A force for good, inclusivity, generosity, mental and physical wellbeing, built on the bedrock of community and ‘good for all’. Iconic moments, Ali’s refusal to draft, the kneeling of Colin Kaepernick, the healing of Nelson Mandela by his wearing of the Springbok shirt, it is a platform for progression. However, sport often unearths myopic self-interest, fiefdom building, financial ineptitude and, sadly, corruption. Run your eyes down the list of the sports, and a litany of examples emerges. It reflects the very best attributes and some of the worst of E, S and G. Purpose-driven community engagement, a society-centric ethos at its heart – definitely a major plank in ‘S’, often let down by inept, unscrupulous, backward governance - i.e. the ‘G’. And what of the ‘E’ of ESG – sports environmental responsibility? Patchy at best. A threat if not addressed, a huge opportunity for progressive sports and leaders should they listen to the views of the coming generation. But this is not a given, as just proved with the ESL. The basics of good business is to listen and to take into consideration the needs and desires of all partners and stakeholders, however if leaders become tone deaf, when the musical chairs stop, it gets bumpy.
To be true to itself, sport needs perspective: to value difference, diversity, equity and inclusion is essential, with governance structures strong enough to ensure that the right values, objectives, and people are in place. Leaders who can listen, empathise, and understand as part of delivering success, as well as inspire, and have clear, transparent goals. Role models are there: be it the NBA’s Adam Silver, England Cricket’s CEO Tom Harrison, or Manchester United’s Marcus Rashford, who all show these qualities on a daily basis. Frustratingly it’s all too rare to see fine people thrive in this environment.
Private equity investment is positive for sport
For those that represent overt commerciality, such as private equity investors, is their involvement all bad for sport? Absolutely not, as long as there is a clear understanding and strong guardrails around the areas of influence, what success means, and its price. CVC seem to have this with the 6 Nations Rugby and its domestic competitions. It may even manage to flush through any political blockages and tactical, and short-sighted thinking.
Other examples are wide and varied. Take the oldest international sporting competition in history - the America’s Cup, which was married to the commercial behemoth ORACLE and Larry Ellison. A recipe for disaster? The opposite. He, with the visionary Sir Russell Coutts, created an incredible competition in 2017 in Bermuda: fan-friendly, community-centric, profitable, and unequivocally positive for the environment and Bermuda too. It can work, and did, and unlike the principle of sport, there was no loser. It was win-win. There was integrated, aligned ambition.
Sport and politics do mix, they have to, both drivers and reflectors of societal thinking. When Major League Baseball recently boycotted Georgia due to recent voting restrictions, sponsors were aligned, when certain global golf institutions don’t admit women, or only recently admitting black members, it is erroneous thinking from the last century – literally. Equality in various forms, thankfully driven by iconic names such as Billy Jean King, took far too long to emerge.
ESG, by driving good governance, meaningful engagement with society in all its forms, enables and protects businesses from risk, making them more sustainable, and thus more valuable, both emotionally and financially.
