Without clear and tailored communication of often complex stories, it is almost impossible to extract the financial and reputational benefits of investment in strategic ESG.
ESG is rapidly moving into the mainstream. Companies’ ESG stance and performance are being looked at by an increasing number of equity and fixed-income investors, the ratings agencies and other key stakeholders, including employees and customers. All are demanding ever increasing levels of transparency. As a result, companies are producing more data, in more detail, more frequently. The question is, are they producing the right data, and are they tailoring their reporting correctly to suit their different audiences?
The first communications job for most ESG teams is internal. ESG programmes need standard bearers and they need buy-in from the C-suite. If ESG is to truly to be integrated into business strategy, then real CEO commitment is a prerequisite. So, as a number of the ESG leaders who attended the recent Thoburns ESG event stressed, it is critical for ESG professionals to be able to put a strong business case to senior management and to be able to evidence not simply the risk mitigation benefits but also the longer-term financial and business rewards. This communication process, often a steep learning curve for compliance or IR professionals, is invaluable in setting the parameters of the external messaging programme.
Externally, according to the attendees, the two key initial tasks are to show you understand your company’s purpose and then use that authenticity to demonstrate real commitment and dispel any suspicion that you are simply paying lip service to the notion of ESG. If you can’t do this, then no audience, wholesale or consumer, will accept your ESG credentials and you will struggle to accrue any of the benefits available to those who can. This is a key opportunity to differentiate yourself from sector peers and the wider corporate community. And as one participant added, “What you did last year is important but what you’re going to do next year is more important.”
Job two is to maximise the potential for cost of capital benefits. This means developing a specific ESG IR story tailored to those investors you have identified as being aligned to your business needs. It is all too easy to swamp people with raw data organised for your internal consumption, or for regulatory disclosure, rather than selected for its ability to tell the appropriate story.
As one investor said at the breakfast, “We don’t want just the basic reporting, but it’s much more than that. It’s the narrative that differentiates between the organisations that use metrics to mask what’s going on and those where the metrics indicate a culture of long-term planning and a strategic commitment to sustainable business.”
Identifying the investors whose ESG criteria best match the ESG strategy best suited to each company’s specific business is a task all to itself. But once done, ESG teams then need to ensure that they align their data and narratives to those investors’ requirements. This translation of internal metrics and KPIs into messaging investors can easily digest is a critical communications and IR task as it dictates the extent to which an ESG programme can realise a measurable ROI in the short to medium term. If investors are not persuaded, then companies will not benefit fully from the lower capital costs ESG is proven to deliver.
And the third core task is to engender the customer engagement and employee goodwill that a well-communicated sustainability programme can create. Clearly, this requires a different treatment of internal metrics than any B2B messaging, and a key challenge is the sheer breadth of activities which fall under the ESG umbrella. Deciding the relative importance of carbon, diversity and social contribution, for example, and designing the headlines under which to group more complex data is another critical communications task. Here, participants at Thoburns’ event also identified maintaining consistent messaging internally and externally as a key challenge.
But the rewards are worth the effort. One attendee described how they had consolidated their 27 internal ESG categories into just two, social contribution and carbon, and found that they were achieving better engagement on social media – both B2B and B2C engagement – with their ESG messaging than with anything else.