On April 26th, Black Sun held a webinar entitled ‘Is ESG Sustainable?’, where we discussed the differences between the terminologies ESG and Sustainability, requirements for effective communication and best practice examples. You can view the recording here.
Speakers:
Anne Kirkeby – Investor and ESG Communications Director
James Whittingham – Sustainability Director
Dan Cowley – Digital Strategy Director
Richard Dixon – Chief Digital Officer
Over the last few years there has been an unprecedented seismic shift in the corporate landscape - sustainability is now topping the corporate agenda, and this is driving stakeholder behaviours and decision-making.
Investor focus around ESG has exploded over the last 5-6 years as evidenced by how global ESG asset mandates have grown, and how the green bond market has increased. Investors have the widest lens when it comes to sustainability and ESG and they have the ability to impact performance in the short, medium and long-term. The disclosure universe has also become a crowded market with a myriad of frameworks and agencies, some of which are much more ESG focussed and others more sustainability focussed.
ESG and Sustainability – two distinct, but connected concepts
ESG and Sustainability are both rooted in the corporate communications landscape, but they serve different purposes, are focused on different audiences, have differing content and communications needs and are managed by different parts of an organisation.
From an audience perspective ESG addresses company stakeholders, analysts, and rating agencies, whereas the Sustainability audience is broader and focusses on customers, employees, communities, and NGOs, and the relationship between a company and the environment.
The approach is also different, whether it’s about a risk management from an ESG perspective, or about a company ‘doing well by doing good’, from a sustainability perspective.
The purpose is different – from risk mitigation from an ESG lens to reputational and wider value creation of sustainability.
ESG and Sustainability have differing communications priorities
On a communications level, ESG is disclosure and policy focused, with little appreciation for the curation of narratives of key messaging. Reports and factsheets are still often the best formats to communicate information.
Sustainability is more narrative focussed, drawing on richer content and storytelling. It's about wanting to understand societal and environmental impacts, but still needing proof points. Digital, social, and short flyers are normally the best way of communicating these messages.
ESG and Sustainability audiences have different information needs
There is a set of elements that is common to both ESG and Sustainability. Everyone wants to know about a company’s approach to ESG/Sustainability – their commitments, targets and performance, human capital management, net zero roadmap etc. But this is where the commonalities stop.
ESG focusses on data, rankings and reporting frameworks, hence the importance of making ESG policy downloads available and easily accessible.
Sustainability is about purpose and role of a company in society - its values and culture and any additional disclosures which may be relevant to individual NGOs. This is often communicated through video and case studies.
ESG and Sustainability have many differing functions
Because ESG has a wider lens, many functions within a company are impacted, and responsibility doesn’t just sit with the sustainability team. Health & Safety, Risk, Governance, Human Capital, compliance, Company Secretary, Finance are all impacted. It is less broad within Sustainability, with the Sustainability function being impacted most. We are also seeing a trend in the finance function for both ESG and Sustainability.
Requirements for effective ESG communications
Managing different disclosure frameworks
There are many disclosure frameworks, but the key is to know your investors and broader stakeholders more generally and understand which are appreciated.
Align with the industry
What frameworks are companies within your sector aligning to?
Effort versus stakeholder appreciation
Engage with stakeholders to find out who is using what, what’s most relevant to you and how should you be communicating the information.
Map and keep track of disclosures
Ensure that disclosures you have which align with the different frameworks, either sit stand alone or somewhere that is easily accessible.
Managing rankers and rating agencies
Know your investors
Which rating agencies are your investors using? Are they just taking the data or do they also look at the scores?
Know what is available
Topline scores are publicly available but the whole assessment is not necessarily available.
Track your disclosures
Make sure you know where those disclosures are and where they sit in your reporting suite/on the website, so they don’t get deleted inadvertently by someone who might not realise that it’s an information point for a ranker or rater.
Impact on Reporting Formats
Currently most companies have an Annual Report, Integrated Report and perhaps a separate sustainability report. An Integrated Report tells a holistic story but a separate Sustainability report provides the level of detail that is needed to fulfil requirements of raters and rankers. We are also seeing a microtrend of companies dumping everything into the annual report.
There are different options, from using the website more to having a suite of different reports to serve different stakeholder groups, but key to the building blocks of reporting are the following underlying principles:
· Authenticity - create a balanced narrative and authentic reporting
· Transparency - report progress on external rankings and indices
· Accessibility - communication approaches matter. Stakeholders need to see that you’re on
a journey to improve the quality and breadth and depth of content of your sustainability report
For more information on Sustainability reporting, see our latest thought piece here.
How to communicate ESG and Sustainability effectively online
All audiences will access your website, and each is looking for ESG/Sustainability through their own unique lens. Most understand Sustainability, but few understand ESG, so how do we articulate ESG and Sustainability to those different audiences?
ESG is predominantly an investor lens on sustainability content, helping shape key decisions in the business, based on its moral, ethical performance.
ESG best practice principles
- ESG page located in the investor section, linking to sustainability content.
- Include disclosure on targets, progress updates
- Recognition and performance through raters and rankers to show progress.
- Alignment to purpose and business strategy
Sustainability best practice principles
- Standalone section in main navigation
- Overview of approach
- Define key focus areas and materiality
- Targets and performance
- Showcase stakeholder engagement
- Provide proof points and case studies
- Alignment to purpose and business strategy
To find out more information, please get in touch with our Senior Business Developer,
Naomi Hawkins.
About Black Sun
Black Sun is a global stakeholder communications company with offices in London and Singapore. We are united by a common purpose of making businesses more valued by their stakeholders. We are powered by a unique mix of strategic insight, creative inspiration and technology advantage, and help businesses communicate authentically how they deliver value to their stakeholders. We believe that inspiring strategic communications can spark positive change and drive long-term, sustainable performance.