On 14^th July, for the fourth and final webinar in our series on ‘Rewiring the Ecosystem for Resilience’, we were joined by corporates in a Q&A session to discuss the changing reporting landscape, evolving investor expectations, the importance of building trust, and how companies can ‘rewire for resilience’ in the future. The webinar also discussed the significance of Black Sun’s six principles of trust: purpose, culture, stakeholder engagement, cognitive diversity, responsible business, and transformation and long-term thinking.

Sallie Pilot, Chief Insight and Engagement Officer at Black Sun, spoke to Ben Matthews, Group Company Secretary at BP Plc, and Carla Bloom, Head of Investor Relations at Brewin Dolphin Plc. Moderating the event with Sallie was Sue Lawrence-Jones, Chief Services Director at Black Sun.

Watch the webinar

Please see below a summary of the discussion from the Q&A session:

1) Do Black Sun’s six Principles of Trust resonate with you? Which ones resonates with you the most?

Ben Matthews: All the six principles resonate. The broader concept of trust is increasing in importance, and has been brought more into focus by the COVID-19 crisis. Indeed, Boards and corporates are becoming increasingly conscious of the expectation society has for business to act as a force for good. Companies need to demonstrate how they have engaged with stakeholders, and fulfilled each of the Principles of Trust.

Carla Bloom: Whilst all the principles resonate, it is good to start with purpose because the other principles naturally flow from purpose. The purpose helps stakeholders understand what the company is trying to do, and should be framed around all stakeholders. Transparency helps to develop long-term relationships, and is essential across the six principles in order to develop trust.

2) The reporting process can help to challenge mind-sets and behaviours, create better dialogue and drive accountability. Can you share examples of when you have seen reporting drive fundamental change or thinking within your own organisations?

Carla Bloom: Companies traditionally had a separate sustainability report. However, many companies are now looking to integrate the sustainability report within the annual report. Vodafone has evolved its reporting in this way. There is greater realisation that regulators and employees are seeking out sustainability-related information. Adopting the ‘Integrated Reporting’ framework has often been a catalyst for driving behaviours internally. The ESG and sustainability agendas often achieve greater prominence for reporting and the wider business if the Board and Executive Committee buy into the agendas.

Ben Matthews: Institutional investors and regulators are seeking out more overt connectivity in corporate narratives between strategy and performance outcomes. Rio Tinto did a superb job in improving the connection between strategy and performance in its reporting. BP has delivered creative reporting to outline its transition from a hydrocarbon company to being a more significant player in the renewables market. The transition is a multi-decade journey so the story had to be told cogently and coherently, and had to be clearly tied in to performance and stakeholder considerations.

3) Companies are finding it difficult to link purpose and strategy. Can you share how purpose can be used as a driver for strategic decision-making, and how this can be achieved?

Carla Bloom: If initiatives and targets only sit at sustainability level, then these teams often won’t have the resources to drive effective change. It is easier to formulate and deliver on targets regarding purpose and ESG, if responsibility for these targets is owned by the Executive team. Change can be driven more easily from the top-down. For example, Vodafone held its first ever ESG-day, which helped ESG issues resonate more at Board-level. A lot of material from the ESG-day was useful for regulators and investors, and helped to drive the alignment of ESG issues across the company. Moreover, it is important to educate the leadership team on the growing importance of the ESG agenda.

Ben Matthews: It can be achieved through the leadership owning this agenda. For example, John Browne, the former CEO of BP, launched the ‘Beyond Petroleum’ campaign which acknowledged the contribution of hydrocarbons to climate change and set out a path for BP to evolve towards renewable sources. However, it is important to get the investment community on board with such a seismic shift in priorities. At the launch of the ‘Beyond Petroleum’ campaign, many investors were still keen on double-digit returns from hydrocarbon investments. These days, however, many investors are conscious of the momentum for urgent change in order to combat climate change. It is important to develop readiness both internally and externally for a big overhaul, such as BP’s net zero ambitions.

4) What are your thoughts about the current balance between the three components of ESG?

Ben Matthews: The main focus has been on the ‘Social’ component of ESG in our recent interactions with institutional shareholders. Investors have been keen to find out what companies are doing to protect their employees during the COVID-19 crisis. In the next annual reporting cycle, investors will be interested to read how companies tell the story of their response to the COVID-19 crisis.

Carla Bloom: ‘Governance’ has been around for 10 years. ‘Environment’ has markedly risen up the agenda in the last few years. The catalyst for ‘Social’ has been the COVID-19 pandemic. ‘Social’ was traditionally considered through diversity and inclusion discussions, but COVID-19 has been the catalyst for equalising the balance between the three components of ESG. This equalising needs to be reflected in corporate communications moving forwards.

5) How can companies communicate better on ESG issues? What should companies be doing regarding reporting standards?

Ben Matthews: Investors are becoming more active in submitting ESG-related resolutions. This is an opportunity for companies to seize the ESG agenda, and communicate how the company is advancing ESG policies aligned with investor desires. For example, following a recent shareholder resolution, BP acted to align its reporting with the 2015 Paris climate change goals. Furthermore, to communicate better, BP decided to adopt the TCFD reporting framework. It seems likely that TCFD will become the de facto standard for climate reporting in the near future. This would be welcome, as it would introduce a new baseline which shareholders could use to compare and contrast companies’ performance in a more informed way.

Carla Bloom: Companies should prioritise the multiple disclosures, indices and surveys that are useful for ratings. Shareholders tend to do their own diligent analysis on this front anyway, and often only use indices/disclosures as a screening method. Industries should come together to agree on the use of certain benchmarks/reporting methods moving forwards.

6) Not all Boards are heavily engaged with the annual report. Do you have any advice for how the reporting process can be used to elevate certain topics higher up the Board agenda?

Carla Bloom: Boards tend to be heavily involved in the governance and risk sections of the annual report, and less involved in formulating the strategic narrative at the front. Formulating targets is an effective way of getting the Board more involved, particularly ESG remuneration targets. Moreover, having one person responsible for the agenda makes pushing the agenda easier.

Ben Matthews: Reports must disclose information that is demanded from shareholder resolutions. In the case of BP, the company was obliged to evidence how its strategic actions were aligned with the Paris climate change goals. Sustainability topics can rise up the Board agenda if they are firmly embedded within the core business dialogue, and if certain Board committees are allocated responsibility for them (i.e. the CSR committee).

7) What are your views on the importance of building trust with stakeholders?

Carla Bloom: The focus on stakeholder engagement has changed fundamentally, with the growing expectations of ESG investors ensuring that it has risen up Board agendas. Companies are seeking to emphasise that they are a ‘responsible business’, and evidencing stakeholders considerations is a way of underlining this.

Ben Matthews: It is important to remember that a company is never going to satisfy all of its stakeholders all of the time. With finite resources, the challenge is to continue to make sure that stakeholder dialogue remains meaningful. It is important to keep stakeholders feeling confident by effectively articulating the progress you are making.

Poll Results

During the Q&A, we conducted a number of polls to gauge attendees’ views on corporate reporting. Attendees included company secretaries and corporates working in investor relations and communications. The top three responses from some of our polls are outlined below:

• When asked how their reporting has evolved over the last three years – 65% of attendees stated that it is offering a better form of strategic insight into the company, 53% stated that it is becoming more reliable for internal and external use, and 47% stated that it is becoming more forward-looking.
• When asked about the main factors that will be important to business success in the future – 59% responded with profitability/financial returns for investors, 47% selected ‘inspiring and engaging people’, and another 47% selected ‘meeting social and environmental needs and protecting the interests of future generations’.
• When asked what were the top issues on their Board’s agenda at the moment – 85% stated they were reviewing their strategy, business model and operating models, 46% selected ‘embracing ESG as a business imperative’, and 46% stated they were ‘redefining’ and trying to better communicate long-term value.
• When asked which topics investors were applying pressure on or showing increasing interest in – 69% responded with ‘risk disclosure’, 62% stated ‘governance’, and 54% stated ‘business model and strategy’.

How we can help

• Led by insight - We provide research-led consultancy insights to enhance communications and support better practice reporting. This includes regulatory advice, consultancy for ESG and Sustainability, as well as benchmarking. We can also help frame and inform your COVID-19 report communications, and give advice and guidance on how to best communicate and engage with your stakeholders through various platforms. 
• Communications planning – We can work with you to develop a communications plan that ensures a coherent and consistent suite of messages are delivered in a seamless and integrated way through all your touchpoints.
• Connecting through film - One of the most powerful ways to reach remote audiences is to harness the power of film. We would recommend including rich media such as video or animations in your communications mix.
• Engaging your remote workforce – This will remain one of the biggest challenges facing organisations even beyond the pandemic. We can help you connect and engage with your employees by developing internal communications programmes and by opening new digital engagement channels such as employee Apps.
• Sustaining your voice through digital marketing – We can help to sustain your external communications, across social media, through broadcast channels such as email, and ensure that you stay relevant and connected with your stakeholders.
• Measuring engagement and interactions - As more communications go online, your company will need to understand how people are engaging with you. We can help you develop measurements and analytics that give you the insight to continuously improve the effectiveness of your communications.
   

If you would like to find out how else we can support you, please contact Naomi Hawkins.

Black Sun is a stakeholder communications company. We help businesses to communicate authentically how they deliver value to inspire, engage and influence their important stakeholders. We believe that inspiring strategic communications can spark positive change and drive long-term, sustainable performance. We want to work with companies who want to build better businesses through better communications.