Is ESG really making a difference or just making your job harder?
July 2022: ESG (Environmental, Social, and Governance) reporting has become an established cornerstone of corporate issue communication. But is it achieving its purpose, asks Tony Jaques, and does it risk going the same way as previous sustainability initiatives?
A recent article in Harvard Law, provocatively headlined The False Promise of ESG, posed a key question: “Are highly-ranked ESG businesses really more caring of the environment, more selective of the societies in which they operate, and more focused on countries with good corporate governance? In short, is ESG really good? The answer is no.”
Similarly, a long report last year by researchers at the EDHEC Business School in France, under the challenging title Doing Good or Feeling Good? concluded: “the investment industry, in spite of its promises, does little to reallocate capital in a direction and in a manner that could incentivise companies to contribute to the climate transition.”
Experts around the world have been arguing for years about the effectiveness or otherwise of a conga-line of initiatives and their snappy acronyms, such as Triple Bottom Line Reporting; Corporate Social Responsibility; Sustainability Circles; Responsible Care; Impact Investment; and, most recently, Net Zero Reporting and ESG. While each has met with varied success for issue managers and other corporate communicators, the fundamental task is largely unchanged - to help persuade management to do the right thing, and to convince a sceptical public.
Moreover, it's not getting any easier. A recent study by SEC Newgate found 91% of Australians surveyed either don’t trust what companies claim about their ESG performance, or are unsure. And a new American report last week found four out of five frequent investors said it’s difficult to assess if companies are actually operating in ways that are as environmentally friendly as they claim.
Worse, research from WE Communications and YouGov reveals a clear disconnect between the expectations of C-suite members and middle managers about company sustainability measures. While 61% of executive leaders and C-suite members said their company was planning to implement a just transition strategy to more sustainable operations, just 40% of senior and middle managers said the same. As Ted Kitterman commented: “If your organisation’s sustainability goals and practices are murkier than a sparkling clean waterway, then it may be time to work with your comms team about getting everyone on the same page.”
Although the operational challenges for ESG are undeniably complex, PR Week neatly captured the way forward for communicators:
Be transparent -this is the foundation of trust; without trust there is no credibility;
Be honest – it’s okay to admit what you haven’t done but explain how you plan to rectify it;
Keep it live – every day your business must actively deliver against your sustainability agenda;
Embrace connectivity – you can only achieve your sustainability goals when they are an integrated part of a wider business strategy, working within your stakeholder ecosystem;
Lead by example and with purpose; a compelling sustainability narrative needs leadership from the top and leadership by example;
Understand your audiences – monitor audience feedback, review current data and analytics, and conduct surveys and experiment with content to find out what your audience wants;
Think like an accountant – just as financial reporting is subject to increasing scrutiny, ESG reporting too needs to be evidence-based, consistent, comparable and material; and
Keep it relevant – sustainability is about innovation, technology, transformation and, crucially, people. Ditch images of green leaves and planets, and bring humans into the story.
Use the power of your brand. Use the tools in your brand toolbox to communicate your sustainability message and stay true to your brand’s identity and tone of voice.
Tony Jaques is an expert on issue and crisis management and risk communication. He is Director of Melbourne-based consultancy Issue Outcomes.