There have been a lot of headlines lately about environment, social and governance (ESG) issues. On the political front, some Washington lawmakers want to prohibit fiduciaries from using ESG criteria in their decision making. There have also been credible claims of corporate greenwashing environmental efforts. But no matter what happens in Congress, or if outlier firms abuse investor and consumer trust, ESG has become a critical factor for corporate reputation and overall success.
Environmental concerns, such as dramatic climate change, pose a very clear and immediate financial danger in diverse ways, such as agricultural production, home prices, and insurance claims. Anyone investing in these sectors would need to take into consideration the increasing prevalence of droughts, wildfires, floods, stronger storms, and rising sea levels.
Social criteria have a direct impact on brand acceptance and sustainability. For example, if a company has built a following by adhering to strong social equity principles (responsible sourcing, commitment to a diverse workforce, etc.), then accountability is required. The same level of integrity is needed for all types of companies. The ability to communicate what they stand for, why, and what they are doing to achieve their social goals becomes an integral part of a successful business strategy. Growth and profitability comes from more than just deciding on new products or entering new markets.
When it comes to governance, such issues are a responsibility for both fiduciaries who are accountable to their investors and boards who have a duty to shareholders. If corporate executives are behaving in ways that bring added risk through potentially illegal activity, discrimination, and/or harassment in the workplace, governance procedures help a company address these issues.
These issues are not going away and based on recent research, markets are demanding action, putting ESG top of mind for many business leaders.
“Young investors want fund managers to advocate for environmental and social causes. Older investors want them to stick with generating financial returns”, according to results of a 2022 Stanford survey of 2,470 investors. With waves of younger investors entering the market, ESG criteria will be a major element in their decision making.
A 2022 Deloitte sustainability action report indicated, “57% of executives report having implemented a cross-functional ESG working group tasked with driving strategic attention to ESG and another 42% are taking steps to do the same. A similar profile of survey respondents in 2021 indicated that only 21% had implemented a cross-functional ESG working group.”
ESG is going to be a key metric upon which investors, consumers, and employees evaluate a company. This will come to bear at all stages of growth, to both private and public firms.
A fact all industry leaders understand is that meeting expectations is good for business. Corporate executives who address ESG — from supply chain integrity (not using forced labor, for example) to maintaining ethical standards and not exploiting the environment — are positioned to do especially well.
From a consumer standpoint, top of mind issues relate to organizational values, and encompass real business risks beyond the simple profit and loss criteria of the past. Furthermore, consumers want firms to be proactive. An SEC Newgate ESG Monitor report of more than 12,000 people in 12 countries and territories found that 71 percent expected companies “to launch ESG action”. Nearly half said “they would be prepared to pay more for better ESG performance, despite the cost-of-living pressures being felt around the world.” Similarly, an increasingly mobile workforce that has in-demand skills expect their employers to demonstrate positive ESG policies and actions. With a tight labor market, workforce retention often presents a challenge. A strong ESG program becomes a difference maker to attracting and retaining global talent.
Having a well-defined, articulated, and implemented ESG strategy helps companies adhere to regulatory demands, appeal to investors, produce a positive work culture, and support their bottom line. Given the impact of these issues in the business, an effective approach warrants attention from an external communications perspective. An authentic story needs to be central to any company’s ESG business plan.
Communications is a Constant
ESG Communications
ESG has become important from a regulatory, social and investor standpoint. As companies determine their strategy, they need to be able to articulate their ESG position. Communications plays a valuable role in uncovering the facts and insights relative to the company’s view on and actions related to ESG. A thought leadership platform centered on ESG is key to advance the ESG business strategy and communicate it with stakeholders.
Pursuit PR has expertise working with corporate leadership to elevate strategic business priorities. Our work raises C-suite eminence and advances corporate reputation and visibility.
For more information on our ESG services, click here.
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