Why Companies struggle with ESG Communications

ESG is an acronym for Environmental, Social, and Governance. It is a framework by which the long-term sustainability of a company can be assessed. According to the World Economic Forum, research confirms that companies who managed their environmental footprint responsibly and have good governance structures and are socially responsible are more likely to be successful in the long term. Such companies are also more likely to be credible receivers of investment – simply because they have the structures in place and the required culture to manage resources well.

ESG reporting has therefore become quite important in sectors that require long-term investment in high-risk operations e.g. energy and extractive industries. This also means that many companies in such sectors have to be more effective in ESG performance and reporting to key stakeholders in the industry. Some countries have even gone as far as to make ESG reporting mandatory for all publicly listed companies.

ESG Communications Vs ESG Reporting

At this point it is important to highlight the difference between ESG communications and reporting. ESG reporting is a technical process and it is based on the applicable industry or regulatory code for reporting and is strictly a compliance requirement. The reporting is done by ESG experts within the company. And the reporting is delivered within the required legal framework and is targeted at the receiving body. Public disclosure is guided by the regulatory requirement.

ESG communications is not a mandatory regulatory requirement. It is something that is done at company’s discretion as a way of promoting and amplifying the storytelling about the company’s ESG performance. The audience can be internal and external – including selected media, employees, lenders, industry players, partners, suppliers etc. Typically ESG communications targets audiences outside of the reporting framework process. The communications is based on a narrative about selected ESG milestones or targets and includes key messages, key data points as well as a set of Qs & As.

Many companies struggle with communicating their ESG performance in a relatable way to general audiences for many reasons:

1. No narrative – There is no clear-cut storyline on what the company’s ESG philosophy is and why it matters. It takes some skill and expertise to re-work the data from ESG reports and metrics into a relatable storyline that could appeal to a broad audience and many organizations do not have a communications resource that can help with this.
2. Audience Identity & Need – In order to be effective in communicating ESG performance to general public audiences, there must be some level of audience segmentation and profiling to guide the choice of what metrics to focus on for story amplification and message simplification and dissemination. While ESG reporting focuses on the logic of impact, ESG Communications must focus on the heart of the impact. Identifying the right audience and message  to connect with them is a big challenge for effective ESG Communications
3. Confuse ESG narrative with sustainability – There is also sometimes confusion between ESG and Sustainability narratives. And as a concept both are interconnected but are not the same. Sustainability is a much more broader concept in that covers every aspect of business and operations, whereas ESG focuses on those 3 elements alone and for the purposes of whatever framework or investment criteria that the company or organization has signed up to.  To be able to develop a coherent ESG narrative, the organization needs to have articulated and signed up to a clear purpose and reporting commitment as a business imperative and not as a buzzword that is in use within the industry.
4. Yet to clearly articulate what their ESG priorities are: Many organizations are yet to reflect on and fundamentally align internally on what their ESG priorities are and articulate in the context of their unique vision and mission. This makes it impossible to have a concise approach to ESG communications as there is nothing to work with.
5. Failure to understand the difference between ESG Reporting and Communications – ESG Communications is targeted at a general audience. It should be relevant and accessible to a broad spectrum of people and be focused on human storytelling. ESG reporting is however very technical and is reported according to the agreed technical or commercial framwork that the business has signed up to. While ESG reporting is managed by the business, ESG Communications is led by the Corporate Communications team.
6.  Inability to humanize the narrative – This is probably the greatest reason for the noticable gap in credible, compelling and accessible ESG messaging and narratives disseminated as widely as other Corporate messages focused on business performance or CSR initiatives. Many organizations lack the competence required to humanize ESG narrative i.e. extract stories from within the organization or from the reporting framework; interrogate into the personal stories behind the reported data and craft relatable stories that would be appealing to a broad audience.
7. Inability to Visualize the Messaging: ESG communications messaging must be concise, focused, visual, data-supported, graphic and explanatory . It has to be done with a Tell and Show strategy. The best way to tell a story about environmental, social and governance performance is by sharing credible and verifiable data points, illustrating them graphically, showing images that speak to what has been achieved and provide the context that enables meaning and facilitates understanding.

That is the challenge of ESG Communications in the 21st century. To make a difference in this area is to begin to address all the above on a step-by-step basis.

Sola Abulu & Associates (SA&A) is a strategy and communications consulting and training firm focused on enabling businesses, brands and organizations to achieve their desired objectives through strategic communications, organizational effectiveness and reputation risk management. Learn with us 24/7 through learn.solaabuluassociates.com