Decoding ESG: The role and opportunity for corporate communicators

Climate change is for real! As natural catastrophes gain ground and extreme weather conditions engulf the world, climate issues are no longer a distant threat. They are upon us right now impacting our lives. Environmental, Social, and Governance (ESG) issues have therefore become a focal point for countries, corporations, and communities across the globe as they look for solutions to address one of the biggest sources of potential risks for both organisations and society alike.

What is ESG: ESG tracks the efforts of a company around the broad disciplines such as measures to mitigate climate change, greater adoption of digital technologies and proper disposal of waste to reduce carbon footprint. It also encompasses diversity and inclusion, human rights, health and safety at the workplace, learning and development, governance and transparency. The ESG standards enable companies to benchmark themselves, help keep businesses accountable and ensure a sustainable future.

Why ESG: Stakeholders of businesses - be it the employee, the consumer, the regulator, the community, or the investor - everyone is making additional demands on a company to put in place the tenets of a more responsible business. Competition for companies is no longer only at the marketplace. They also have to compete with each other to hire the best talent as the labour markets have gone through a significant churn in the post-pandemic world. Employees, now choose to work for companies which have good diversity and inclusion practices. Similarly, a customer too is increasingly gravitating towards buying products from companies which are sensitive towards the environment and the community. Companies have realized that operating sustainably is not just good for the planet but also good for the business. Even investors now make outsized bets on companies with good ESG ratings along with investment into ESG indices. In short, ESG has become a force to do good for people and the planet.

How are companies reacting: Short-termism is increasingly giving way to a long-term approach. The ravages of the pandemic have also brought many companies closer to their purpose of serving the customer in the most effective way and generating greater value for the community. They are no longer thinking just about the shareholders of the firm but about creating greater value for the entire stakeholder community over the long-term, giving rise to the phenomenon of stakeholder capitalism. This long-term approach of serving all stakeholders is also bringing them closer to their own vision of building enduring and respected institutions. Much like governments which have made aggressive commitments to reduce their carbon emissions at the recent COP 26 conference in Scotland, companies too have taken multiple initiatives to adhere to guidelines to reduce their carbon footprint, improve governance standards and serve the community better. 

What are the challenges: It is important for companies to outline their ESG goals and key performance indicators that meet business and regulatory needs. According to an EY report, the number of ESG regulations and standards globally has nearly doubled in the last five years, and there are over 600 reporting provisions globally, with multiple potential interpretations of sustainability. The ESG framework may have been there for a while but standards and regulations continue to evolve and expand. It has therefore become an onerous task to focus on the right ESG metrics. Therefore, companies find it tough to navigate it throwing up the bigger question that whether they are measuring, managing, and reporting it properly. Responding to this challenge, five leading sustainability framework and standard setting institutions (SASB, IR, CDP, CDSB, GRI) have joined hands and released a statement of intent to work together towards a comprehensive corporate reporting and providing guidance to the companies on how the different frameworks can be used in a way that is complementary to each other.

Role and opportunity for brand and corporate communicators

Several companies are adopting sustainability practices but it’s still a new discipline and largely falls under the HR, Finance or Risk heads domain. There are, however, multiple initiatives the corporate communication team can take to drive the ESG agenda in the company. Therefore, Chief Communication Officers (CCO) have a leading role to play in unlocking the sustainability potential of a company in a way that is aligned with long-term value creation. Let us examine how.

Internal communication: The success of ESG adoption is heavily dependent on how employees buy into the concept. Given the fact that it’s still new and needs to be integrated into the company culture itself, there is a specifically large element of change management exercise involved. This requires extensive communication with employees to get them to align with the ESG strategy of the company. Corporate communication teams need to wrest the initiative in creating strategies in discussion with HR teams to drive this communication to employees and create this much-needed behavioural change to integrate sustainability in operations.

Stakeholder communication: While a global framework is being created to report on sustainability-related financials, a multitude of ecosystem players operating under various regional political influences could play spoilsport. All the three major grouping of stakeholders such as politics and policy (consisting of regulatory bodies, stock exchanges, rating agencies), society (consisting of NGOs, media, academics) and businesses need to work in unison to further the cause of stakeholder capitalism, which is to essentially benefit the entire society. Corporate communication teams need to work closely with the risk and finance teams to ensure the company regularly communicates outcomes. Sustainable corporate transformations would happen only when there is regular communication to external stakeholders to suggest the sustainability journey is progressing in tandem with defined goals. CCOs have the responsibility to cross the Rubicon and ensure they are thinking beyond just helping the company sell products and services.

Rewiring ESG approach through thought leadership: As the multitude of regulations surrounding ESG reporting evolves, it is incumbent on the corporate communication teams to ensure their companies and CXOs are visible on industry platforms and op-eds in the media with a clear focus on driving ESG adoption and ensuring they are proactively setting the agenda on sustainability issues. Besides strengthening the cause of sustainability and differentiating it from competition it will also drive the reputation of the company.

(The author is a Media and Communication strategist and Reputation architect)