The formula for communicating ESG
Sustainability leaders understand that Environmental, Social, and Governance (ESG) investing forms the crux of the increasingly connected worlds of finance and sustainability. As institutional investors further recognize the relationship between ESG performance and improved risk mitigation/long-term financial value, they are calling on companies to better communicate their corporate sustainability story.
Despite investor demands and SEC climate change disclosure requirements, there exists no standardized guide for regulated ESG disclosure for publicly traded companies to follow. Rather, companies are left selecting between different reporting frameworks (GRI, SASB, IIRC, etc.), while determining which ESG issues to include. Due to the level of disparity, lack of transparency, and inability to benchmark, investors are left dissatisfied with the current landscape of ESG disclosure.
The rising demand for ESG information from investors has in part been met by third-party rating agencies, which provide extensive ESG performance benchmarking and data extracted primarily from sustainability reports, CDP responses, what is readily accessible online, and direct questionnaires. As companies strive to engage effectively with key audiences regarding various ESG impacts, they must evolve their communication strategies to meet investor demands, as well as engage more actively with rating agencies. However, companies looking to improve their ESG scores and achieve the greatest return on impact are strained by the differing and rarely disclosed methodologies of the many rating agencies — as well as the heavy burden of answering multiple questionnaires.
In this paper, we explore how strong storytelling around ESG initiatives can help companies create clarity in a way which amplifies social and environmental impact while satisfying and even exceeding demands for increased transparency. We offer a practical ESG Communications Formula which corporations can use to uplevel their sustainability storytelling and improve ESG ratings.
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