Waka Wang

Why ESG should be top priority for corporates

Why should ESG be one of the top priorities for corporate communication?  

There is growing evidence that ESG investing is becoming a mainstream activity as investors across the globe continue to push business leaders to take into account the impact of environmental, social and governance matters on their financial performance. Over the past few years, we've also had an increasing number of companies of different sizes and sectors seeking a bespoke ESG communication strategy. As companies have just started to focus on integrating ESG into their business, they are also realising the importance of developing a more strategic and effective way of communicating how they identify and manage ESG risks and opportunities to key stakeholders such as shareholders, potential investors and ratings agencies. It has to be material, relevant, accessible, and timely too.

IR Society's 'Best ESG communication' award

IR Society's Best Practice Award provides a benchmark for how companies should be responding to the stakeholders' growing demand for ESG disclosure.This year, the judges have particularly looked for evidence of:  

- A consistent year-round approach to communicating to investors and wider stakeholders

- How ESG risks and opportunities are identified, understood, managed and measured

- How ESG issues contribute to competitive advantages

- Positive impact on the employees, communities and operational partners

What does this mean in practice?  

Following last year's success, we are excited to share that three of our clients - DLG, Rio Tinto and G4S - were shortlisted for successfully putting the award's best practice principles into practice.

1. Direct Line Group

DLG aimed to create an integrated approach to communicating its ESG strategy, using a variety of core investor channels, alongside customer and employee focused channels, in order to maximise the reach of its message and fully embed its wider value creation approach. This has included a range of campaigns and publications throughout the year, focused around the issues with most material impact to the long-term success of the business.

We help DLG develop a consistent ESG communication across the two most crucial communications channels - Annual Report and Corporate Website. Their 'ESG dashboard' outlines all ESG-related issues and policies, with clear signposting to specific areas of the report/website. The section also provides an overview of the Board's oversight of ESG activities, evidencing the effective ESG risk management framework.

2. Rio Tinto

In 2018, Rio Tinto refreshed its sustainability strategy, developing an integrated approach linked to the United Nation's Sustainable Development Goals and ensuring that material sustainability issues are integrated into its overall business strategy. This integrated approach extended to the Group's reporting suite in 2018, not only through the Annual Report but in focused, creative and accessible sustainability reporting across the Sustainable Development Report, Climate Resilience Report, Slavery and Human Trafficking Statement and Taxes Paid Report.

Rio Tinto use global reporting framework to articulate the positive impact on wider stakeholders. The Annual Report and Sustainable Development Report both communicate the economic contributions they have made to employees, local communities and wider society in a quantitative format.

3. G4S

G4S's Integrated Report identifies the most material issues to the business and its stakeholders, and reports on their socio-economic and environmental performance. The report provides a table which outlines key material issues and performance indicators, as well as a detailed account of risk management mechanisms for identifying and managing ESG risks such as health and safety, and corporate culture. ­­­

Key takeaways

ESG communication goes beyond just identifying the sustainability issues that have a significant impact on financial performance. Truly meaningful, effective and coherent ESG strategy goes further by responding to the information needs of the key stakeholders, to clearly articulating how a company's ESG goals create business value.

Top considerations for your ESG communication strategy:

- What ESG topics are material to your business?

- Are you communicating them clearly through your ESG story?

- Are you engaging with investors and ESG data providers to ensure the data they are considering are consistent with what your business consider material?

At Black Sun we help our clients tailor their ESG communication strategy to align with stakeholders' needs. Do get in touch with us and we will be happy to have a discussion around your ESG reporting journey.