If U.N. Secretary General António Guterres's declaration that the planet is "on a highway to climate hell with our foot on the accelerator" doesn’t inspire you to act, it may not be because you are heartless or that you oppose environmental, social and governance initiatives. You probably are in favor of ESG — or at least you will be by 2030, based on the plethora of corporate commitments coming out of COP27. Among the reasons companies such as yours struggle to turn declarations into results is because they have yet to decide how.
Climate action ultimately comes down to collaboration among decision-makers, so lagging action could suggest relationship issues. And why do relationships stall out or fizzle? Poor communication.
Here’s one challenge: "ESG" and, more generally, "sustainability," are two terms that, were I to hazard a guess, 99 percent of people would struggle to define if put on the spot. Yet pressure is mounting on 100 percent of public companies to define their levels of sustainability in quantifiable terms by reporting, at a minimum, their Scope 1 and 2 greenhouse gas emissions. With a potential mandate on public companies to report Scope 3 emissions from upstream and downstream activities, suppliers are likely to feel the burden of compliance, compounding the pressure on millions of small businesses in uncertain times. While business owners and managers may participate begrudgingly in reporting, it doesn’t mean they are sold on sustainability.
For companies of all sizes, communicating sustainability begins with sharing meaningful data — but how this data is presented depends on the audience.
Supporting supplier sustainability requires more than a forward-looking procurement process. It takes commitment and collaboration across the entire value chain — and that takes communication, not merely that which imparts information, but also educates, engages and mobilizes. Unfortunately, ever-changing standards, definitions and responsibilities complicate a conversation that many folks still aren’t prepared for, even when it’s in their job description. This is not to say that sustainability reporting isn’t happening; in 2020, 92 percent of S&P 500 companies published sustainability reports — but reporting and communication are two different animals.
"In this space you can actually have a company that's completely transparent, but if you have 5,000 pages of text on a website, who can even get to what's meaningful?" said Beth Shiroishi, director of ESG communications at BrightLeaf Group, Inc., on the tradeoff that happens when transparency impedes comprehension.
Before joining Brightleaf, Shiroishi played an integral role in AT&T’s ESG transformation. In 2008, she built out the sustainability operating infrastructure on the policy side and then shifted to figuring out how to tell the story. Having walked the path from corporate social responsibility to environmental sustainability to ESG at one company, she now advises companies of all sizes on how to make sustainability meaningful.
"I view it as a journey," said Shiroishi. "It’s not one-size-fits-all, and it matters who your stakeholders are and what your objectives are. You really have to figure out what you are trying to do, plan your journey and make incremental progress."
The power of a data-backed sustainability narrative
How can decision-makers balance the increasing complexity of doing business in a changing world with human limitations in capacity and understanding? For companies of all sizes, communicating sustainability begins with sharing meaningful data — but how this data is presented depends on the audience.
For investors, communicating ESG is about conveying risk. As SEC Chair Gary Gensler stated about the agency’s proposed rule, "If adopted, it would provide investors with consistent, comparable and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers."
Corporations are willing to comply, but lack of data standardization complicates communication. As Walmart Director of Global Communications Aman Singh explained, "For years, companies have struggled to report on their social impact in a financially meaningful way — and taken solace in reporting efforts vs. impact… Yet, there has been little consistency in corporate disclosures." Singh’s article on the rise of social metrics in ESG reporting offers a helpful summary of the metrics landscape, but for those at the start of the journey, it’s enough to cause ESG overload.
While data matters, humans need more than data to derive meaning. A compelling and believable narrative is key for creating engagement and trust, especially for employees and consumers. Putting a stake in the ground for "sustainability" — whether CSR, DEI, ESG or all of the above — has never been more important for public companies, and increasingly for private ones.
"There are a lot of competing pressure points, and I personally think all of it leads to more reporting, and hopefully in the end, higher-quality reporting," said Shiroishi. "But I do think that gone are the days of, ‘Oh, let's just go tell a fun story about ourselves.’ Now it's more like, ‘Let's have a fun story, make sure it's completely accurate, authentic to who we are, and thoughtful in the way we publish it.’ But I also think you can't just pull back because we've passed that point. People expect business to have a point of view and be transparent."
Where your ESG story begins
For companies in the beginning stages of the journey, here are seven ways to get your ESG or sustainability story straight:
- Get educated. Shiroishi recommends Joel Makower’s three-part series on ESG ratings as a primer. If you work for a small or midsize private U.S. company or a startup, much of it may not apply (yet), but knowing where things are headed will help you be more strategic.
- Tune into different voices. If the demands for more information from regulators, investors, consumers and social media influencers have you too nervous to speak, try listening instead to build your knowledge base. Listening to podcasts such as S&P Global’s ESG Insider and ESG Talk will help you read the room before you take a stand.
- Assess materiality. Determine the issues that matter most to your stakeholders and use those as a basis for developing your company’s strategy. GreenBiz offers a number of resources in its materiality coverage here.
- If voluntarily reporting, decide on a realistic framework to fit your stakeholders’ expectations and your commitment level. "Measure what's important, share what's appropriate, but be wary of the reporting rabbit hole," advises sustainability strategist Scott Nadler. The formal ESG reporting terrain is shifting in light of the SEC rules under consideration, which would require about 7,000 companies to report climate-related data using a common framework. Many are likely to choose standards set by the International Sustainability Standards Board (ISSB) and/or the Task Force on Climate-Related Financial Disclosures (TCFD). Other common frameworks used by thousands of companies include the CDP for Scope 1, 2 and 3 emissions, and the GRI, the leading standards for communicating sustainability strategies and goals to key stakeholders since 1997. Nadler recognizes that formal reporting can be overly burdensome for certain types of businesses. "For most professional services organizations, for example, there are three overwhelming components to understanding your GHG emissions: office, travel and commuting," he advises. "If you know that and it fits, then you can put together the spreadsheet." Bottom line: If you vow to track emissions, you need a system — but which system you choose is up to you and your stakeholders.
- Get certified. Regardless whether or not your company is voluntarily reporting emissions, you can take actions that demonstrate commitments in other impactful ways. A wide range of certifications exist, including industry-specific ones such as these 33 green certifications recommended by Trish Kenlon. Other programs such as the EPA’s Green Power Partnership validate companies’ use of third-party certified green products and encourage the development of U.S.-based renewable energy. Appoint a cross-functional team to vet these opportunities to ensure you choose credible programs that align with your business goals.
- Magnify your commitments with collective action. Make your commitments to the Sustainable Development Goals more impactful by aligning with others who are equally committed. The U.N. Global Compact offers programs for companies with 250-plus employees and a special track for small and medium enterprises.
- Create a communication strategy. Once the building blocks of your sustainability program are documented internally, deciding what to go public with, and how, requires a team well-versed in public relations, integrated marketing communication, stakeholder engagement — and, of course, collaboration. "It may take some time for them to see the benefit," said Shiroishi of the different departments involved, including legal, before your sustainability story sees the light of day. "As in everything in life, there is a cost and there is a benefit, there is risk and there is potential. You need to be mindful of that and think through the path that will work best for your goals."
For those looking at sustainability through an opportunistic lens, working the process may seem more trouble than it’s worth. But for those who embrace it as a means of stress-testing your commitments, the outcome is a story that meaningfully conveys your company’s role as a pioneer, leader or catalyst. Grounding your corporate identity in an authentic ESG story can build organizational resilience today, and a culture to mitigate brand risk tomorrow. It can even open the door to future growth opportunities. When you look at it like that, what do you have to lose by starting now?