How ESG Is Changing

Corporations’ understanding of environmental, social, and governance (ESG) management is changing. The topic is more complicated and more important than ever.

For example:

• A renewed urgency to make the world sustainable has inspired a heightened interest in sustainability investing.
• The COVID-19 pandemic and dramatic surge in social activism in 2020 together have challenged businesses to rethink their commitment to society. In the United States, 68 percent of people surveyed by Edelman expect CEOs to step in when governments do not address social problems.
• A spike in crippling ransomware attacks has drawn attention to the importance of cybersecurity governance.
• Employees, job seekers, and customers form an increasingly important audience for ESG issues, whereas in the past, ESG focused mostly on investors.
• Businesses are being scrutinized, and in some cases distrusted. A recently published Forrester report says that only 34 percent of European consumers trust businesses when they say they will commit to reducing climate change. In the United States, people expect businesses to fight racism in society, but companies also face widespread criticism for their own commitment to making themselves more diverse.

As businesses update their ESG strategies, they’re also taking a closer look at how well they communicate them to investors, customers, job seekers, and employees who look toward corporations to play a more meaningful role in society.

All of these factors are influencing how corporations share their commitments to ESG:

A Focus on Stakeholder Capitalism

Instead of defining their value solely in context of investors’ expectations, companies are rethinking value creation in terms of how they meet the needs of all audiences and society at large. This shift in thinking is known as the embrace of stakeholder capitalism. As a result, companies are having to quickly change their ESG messaging strategy from one of compliance to one that is integral to business success.

To deliver the bare minimum in terms of ESG communications -- to simply be compliant and meet ESG rating agency requirements -- will not position a company for success. Instead, companies need to be transparent and deliver ESG content with a strong narrative and rich content to ensure that they truly engage with their audience to build their reputation. Those that are looking to be compliant instead of truly engaging with their stakeholders concerning the importance of ESG will find themselves falling behind their peer group when it comes to access to capital markets, consumer support and talent acquisition.

ESG Is Converging with Corporate Social Responsibility (CSR) and Diversity/Inclusion

Your audience probably does not make a distinction between those issues anymore (if they ever did). Diversity/inclusion alone is a bigger conversation now that encompasses accessibility, mental health, people of color, and the LGBTQ+ community.

In America, 60 percent of the population expect brands to take a stand on racial justice. (For people 18-34, that number jumps to 78 percent.) In addition, half of LGBTQ+ people, 45 percent of racial/ethnic minorities, and 39 percent of the general population overall have chosen not to pursue a job because of a perceived lack of inclusion.

There Is More Pressure on Businesses to Measure and Report Their Progress Embracing ESG

For years, companies have been held accountable for ESG by investor-oriented yardsticks. We’re seeing a proliferation of new measures beyond the investing community.

For instance, A recently created ESG Brand Perception Index by the Association of National Advertisers (ANA) ranks U.S. brands based on their ESG impact. Whereas many public yardsticks report annual numbers, the ANA index is based on daily surveys of consumer opinions on the ESG performance of more than 400 brands across seven industries.

The index is but one example of how ESG is now a core concern beyond investors. All of your audiences care about ESG, and they expect businesses to hold themselves more accountable, as the Forrester data concerning consumer distrust shows. Businesses are under pressure to back their statements with hard data that shows what they’re doing to become better corporate citizens.

Companies Are Focusing on Cybersecurity

Cybersecurity is no longer a technology problem. It's a governance problem that affects the entire business. As noted by JPMorgan, "While cybersecurity has mainly been viewed as a technology issue, it is now also regarded as a key environmental, social and governance (ESG) concern, falling under the 'Social' pillar. 

ESG frameworks are a tangible means of evaluating corporate behavior; by incorporating cybersecurity, a new dimension is added, giving insight into cyber behaviors and risks which form a critical part of the bigger ESG picture."  As a result, businesses such as Walmart are articulating on their sites the role that cybersecurity plays in being a good corporate citizen in the digital world.

ESG Is Everyone’s Concern Across the Corporation

We’re now seeing businesses actively discuss ESG issues to all their audiences (including investors, of course). Businesses typically publish ESG sections on their website, but they also talk about ESG across their entire sites, through PR, social media, and everywhere people interact with their brand.

As a result, businesses need to coordinate ESG communications more strategically and comprehensively. It’s no longer a focus for investor relations alone; anyone with a stake in the company’s brand needs to be part of the plan. This holistic approach challenges businesses to be more thoughtful and coordinated in how they discuss ESG.

A Resource to Help Corporations

Our new report, The ESG Agenda, will help you get started. The report contains tips for how businesses can discuss ESG in ways that build trust with all their audiences. We also rank – for the first time – the Top 10 businesses around the world that articulate their commitment to ESG via digital. Read this report to understand what a successful ESG story looks like -- and how to get started telling yours more effectively.

Contact Investis Digital to amplify your ESG story in a more powerful way.