Shelton Stat of the Week: 1 in 4 Americans say brands who don’t communicate about their "good" efforts are not as trustworthy as those who do. — Good Company survey, December 2020-January 2021
What will happen to storytelling?
There have been many pushes over the last few years for integrated reporting — folding sustainability reporting into financial reports, such as annual reports and 10-Ks. Earlier this month, the Securities and Exchange Commission (SEC) announced the creation of a Climate and ESG Task Force in its division of enforcement.
From the official SEC press release: "Consistent with increasing investor focus and reliance on climate and ESG-related disclosure and investment, the Climate and ESG Task Force will develop initiatives to proactively identify ESG-related misconduct."
From a piece in GreenBiz adapted from a presentation by acting SEC chair Allison Herren Lee: "… in 2010 … under the leadership of [former SEC Chair] Mary Schapiro, the commission for the first time provided guidance to public companies regarding existing disclosure requirements as they apply to climate change matters. Part of what the staff will do now is review the extent to which public companies address the topics identified in the 2010 guidance and comply with current requirements.
"Much has changed in the last decade — in terms of market practices for gauging ESG-related risks, in terms of the science of climate change, and, unfortunately, in terms of the urgent nature of climate-related risks. And we need to assess how these risks are being analyzed and disclosed by companies to inform an update to the 2010 guidance — and to inform our policymaking going forward."
Americans increasingly want to buy from good companies, and they have clear ideas about what 'good' looks like. If you’re not telling that story, you’re missing an opportunity to make it on a consumer’s good list.
Translation: The SEC will be more heavily scrutinizing public companies’ climate disclosures, which means public companies will bring a lot more rigor to their measurement, management and communications around climate impacts. According to Shelton Group’s CFO, the Journal of Accountancy has communicated that the task force will identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules. In another statement to CPAs, the AICPA said, "Responsibility for ESG reporting is shifting from being the responsibility of sustainability and marketing teams to include accounting and finance professionals." In fact, in the most recent publications by the Journal of Accountancy, CPAs are being told to get up to speed on ESG with the expectation that attestation (audit) services will be required on this information.
Our CFO’s conclusion: "If I’m a public company, I’m steering clear of emotional storytelling about climate impacts and sustainability moving forward."
This wouldn’t be worth a blog post (we’d just chalk it up as one more piece of evidence that Wall Street is taking ESG very seriously and celebrate it) — except that in our experience, the sustainability report is typically a company’s foundational sustainability storytelling tool. The report is created annually and then content from that report is repurposed throughout the year in social posts, sales team presentations, employee communications and website content. In other words, the report often determines a company’s emotionally compelling sustainability story. So if reporting is going to go the way of precise data tables/facts/figures, what happens to a company’s sustainability story?
Well, as the stat above implies, it wouldn’t be a good idea for sustainability storytelling to go away — at either the corporate level or brand level. As I’ve been detailing from our latest Pulse reporting, Americans increasingly want to buy from good companies, and they have clear ideas about what "good" looks like. If you’re not telling that story, you’re missing an opportunity to make it on a consumer’s good list. In the long run, that will drop your company or brand out of the consideration set for purchase.
Bottom line: as sustainability reporting migrates to a colder, "just the facts ma’am" context, your sustainability story still needs to be told — to consumers, customers, employees and the universe of influencers that matter, such as NGOs, non-profits, the media, etc.