Companies face several challenges in telling their sustainability stories: ensuring they are authentic and true to the business; addressing multiple stakeholders’ interests while maintaining consistency; providing information that’s not just accurate but genuinely trusted; and managing the ever-evolving landscape of sustainability regulations, reporting frameworks and ESG rating firms.
To tackle these challenges, The Conference Board convened a working group of more than 300 ESG and communications executives from 125-plus companies. We captured more than a dozen key insights from these discussions in a new report, including these five practical recommendations.
1. Tell your story through a tiered approach
Companies want to focus their sustainability stories on the handful of issues that truly matter to their long-term future, but many sustainability reports have ballooned into 100-plus pages. These phone-book style reports meet neither businesses’ nor their stakeholders’ needs. How can you focus your reporting while satisfying seemingly endless ESG data requests?
Instead, use a tiered reporting approach. Focus on the first-tier issues (those that truly move the needle) with a main narrative report, which can be adapted to different audiences. Address your next-tier issues, which stakeholders still care about, using supplemental, standalone documents or searchable databases that provide a deeper dive on specific areas. This approach can help with investors, reporting frameworks and ESG rating firms that are looking not just for a narrative that describes the company’s main focus areas but also for timely data on a range of topics.
Ultimately, effective stories meet different audiences’ needs. When determining what and how to report, ask what information your stakeholders need and why. This will be different for investors, customers, consumers and employees.
2. Align your sustainability story with your company’s business strategy
To ensure authenticity, your sustainability story should be anchored in your company’s business strategy, ambition and culture. The link to strategy often poses the biggest challenge.
To strengthen the link, aim for not just having a standalone "sustainability strategy" but for ensuring that your company’s business strategy itself embraces sustainability.
Sustainability should become a lens through which your company makes business decisions. Your sustainability narrative should match how your company runs its operations and approaches everything from risk management to product development.
But this requires both a top-down sustainability commitment and bottom-up alignment and action. Business leaders also should share how their decisions link to sustainability and, similarly, those who tell the story need to fully understand the business.
3. Engage your employees
While top-down sustainability commitment is important, your company’s sustainability story should not feel like a directive from corporate communications or the CEO. While the specific ways in which they engage employees can vary, companies have found employee involvement can be crucial. There is plenty of room for improvement: More than 40 percent of the executives we surveyed were dissatisfied with their company’s two-way sustainability engagement with employees.
Employees can be a great resource for keeping a sustainability story authentic, so engage them in identifying the issues that truly matter to your company. One business, for example, surveyed more than 17,000 employees globally over 12 weeks to help identify and describe the issues for which the company stood. This effort culminated in a purpose statement that reflected the views of those stakeholders.
External assurance ... can strengthen internal controls and reporting systems, driving better decision-making based on higher-quality sustainability information.
Employees can also be powerful sustainability ambassadors, especially if the company’s message passes their gut check. They will ultimately carry out much of that sustainability story in countless actions and behaviors, so make sure to educate and equip employees to genuinely engage in the messaging and understand how sustainability links to business strategy. And don’t forget that employees can also be a great source for the language, stories and images in your sustainability reporting.
4. Ramp up the use of external sustainability assurance services
External assurance gives investors (as well as business partners and regulators) confidence in your data’s accuracy, and it can improve your rankings with key third-party ESG rating firms. Indeed, The Conference Board’s surveys find that ESG rating firms and investors are the top two drivers of companies’ decision to obtain assurance. And more companies are opting to do so: Nearly three out of four of our survey respondents plan to obtain assurance or expand what they currently assure.
Gaining external assurance is not just helpful with others. It can strengthen internal controls and reporting systems, driving better decision-making based on higher-quality sustainability information. As this process can be expensive and time-consuming, you may want to increase the use of assurance services over time.
When getting started, find a path to build confidence. For example, before auditing, consider building a database system to prepare your sustainability data for pressure testing, and then pick the right partners to help scrutinize the data.
When determining what and how much to assure (as it can range from just a few indicators to the full sustainability report), consider starting by obtaining assurance for your biggest risks. But keep in mind that you may have limited discretion if your company is subject to regulatory requirements related to sustainability assurance, such as those recently proposed in the European Union.
5. Don’t chase all the ESG rating firms
By some estimates, there are more than 600 ESG rating and ranking firms. And while there is some consolidation of sustainability reporting frameworks, ESG rating and ranking firms continue to proliferate. Our surveys find that the biggest problem companies have with these firms is the time and resources required to respond to information requests. To avoid becoming inundated, be strategic about which organizations you engage with and how you do it, while ignoring the rest.
One approach: Develop three engagement tiers for ESG rating firms. Proactively engage with the first tier (three to five companies); interact with the second tier of firms more passively — solely to verify data, for example (include a handful of firms in this group); do not engage with or devote resources to serving the last tier (all the other firms).
When evaluating ESG rating firms, look for the top three to five that give you the greatest coverage of sustainability issues that truly matter to your company. Also consider name brand and track record; ability to provide input into your materiality process; information timeliness; commitment to ongoing monitoring; and data accuracy, including the ability to engage with the firm to correct inaccuracies.
Next, consider prioritizing rating firms based on the level of effort required to engage, transparency (do you know what the firm is rating you against?), and accuracy (are they accurately capturing your information?). This approach should help ensure your engagement with ESG rating firms is productive and not burdensome.
With almost all S&P 500 companies issuing sustainability reports, it is clear that sustainability storytelling is mainstream and expected of large companies. But this practice is far from straightforward: information requests from regulators, rating agencies, investors and business partners are growing by the day.
Going forward, effective storytelling will rest on companies’ ability to strike the right balance between satisfying external requests for information and focusing on the sustainability issues that truly matter to the company. Doing so authentically means those stories should not only have the broad backing of employees but also need to be anchored in the company’s business strategy.