Numerous environmental and social challenges were brought into sharper focus by COVID-19 in 2020. The pandemic highlighted crippling economic inequality, failing healthcare systems, and an increasingly fragile macroeconomic landscape – all underpinned by the rising urgency to act on climate change. It also caused a leadership shift in the corporate world: Environmental, Social, and Governance (ESG) went from being a ‘nice to have’ aspiration to becoming a series of active demands required by investors, employees, and third-party stakeholders alike. Business leaders can no longer hide from evaluating, or having others evaluate, their mission, execution, and output based on ESG factors.
The global health emergency helped demonstrate how the climate crisis could unfold, urgently raising awareness and resulting in collective action that prioritises a green recovery made up of investments that help accelerate economic recovery while also enhancing social equity, such as in renewable energy, resilient infrastructure, and social impact. Consequent investor appetite for green investments has further encouraged public companies to illustrate how their values closely align with the cause.
For example, a group of investors introduced Climate Action 100+, a net-zero company benchmark that assesses the world’s largest greenhouse gas emitters on progress toward the net-zero transition. Investor signatories now represent $50 trillion+ in assets under management, which continues to rise. On the policy side, Europe’s new Sustainable Finance Disclosure Regulation approved earlier this year set out specific rules for how and what sustainability-related information public firms need to disclose, alongside the Task Force on Climate-related Financial Disclosures (TCFD) Reporting becoming mandatory in the large UK-based firms from next year.
‘Green’ has historically been eponymous with ESG, despite only representing one part of it. However, the pandemic highlighted the need for responsible businesses to consider their social and governance impact too. This paradigm shift catalysed a series of events, such as increased stakeholder demand for measurable steps taken towards promoting cultures of diversity, inclusion, and belonging. Meanwhile, board governance has been tackled for systemic gaps in representation, encouraging regulators worldwide, such as the UK’s Financial Conduct Authority (FCA), to set out proposals that would require listed companies to disclose and explain their levels of diversity in senior management and boardrooms.
From trillion-dollar asset managers to bourgeoning startups, we’ve seen ESG transform into a distinguishable part of many business’ communication activity. It all sounds great, but, as the adage goes, talk is cheap. Conveying authentic corporate interests to improve general wellbeing, increase diversity across organisations, and reduce the effects of business on the environment, is quite difficult. Moreover, it has led to greenwashing.
While initially used to describe attempts to convey a false impression or provide misleading information about how a company’s products are more environmentally sound, today the term is broadly used to describe any practice towards making brands and corporations appear more sustainable than they really are. Think businesses who gratuitously promote ESG practices, firms that overstate promises to investors, and giants who are reluctant to disclose their data.
Communicating ESG practices and more importantly, how corporate actions positively impact the environment and the lives of stakeholders by taking into consideration ESG factors requires genuine and heartfelt effort. The occasional internal newsletter on World Earth Day, fanciful press releases, and big website banners that seemingly set corporates aside from their peers can come across as surface-level and even deceitful.
Growing regulatory pressure and stronger public interest is creating a growing demand for transparent and standardised ESG data, reporting, and disclosure to weed out greenwashing. Oftentimes, PR is tasked with spinning negative stories and being the snake oil. Nevertheless, it’s so easy to fall into this relatively easy trap. The task is threefold: promote honesty, transparency, and dialogue in meaningful ways, without trying to reduce ESG performance or ambition into a yearly slogan; ensure boardrooms have delegated representatives that move the needle from top-down; finally, hire agencies whose values actually align with what you’re trying to accomplish.
This article appeared in the Cicero/amo December 2021 newsletter.
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