Lots of great brands are fighting to hang onto their customers, employees and shareholders these days. Lots of people are lying awake at night wondering if their company might be next on the endangered list. As global businesses face a multitude of risks, busy CEOs can miss important symptoms of deepening problems—many of which are non-financial indicators of corporate performance that enlightened communicators can detect, evaluate and address.
Certain competitive advantages aren’t easily observed along standard units of measurement for time, money or space. As a result, intangible benefits such as those derived from sustainability and ESG (environment, social and governance) factors have received less attention in the past. But not anymore. When it comes to financial risk and return, investor relations and corporate communicators must catch up to what the most advanced business leaders already know: Corporate responsibility makes good business sense.
Avoiding sustainability and ESG topics that investors, customers and employees care about is akin to “fowl” behavior. There’s the ostrich burying its head in the sand, or the canary in the coal mine whom others watch for signs of demise. Either way, ignoring sustainability and ESG matters helps guarantee that CEOs and boards get blindsided by issues for which they might have otherwise prepared the company.
For those who prefer to be ostriches or caged canaries, here are some proven techniques for ensuring that the value and reputations of brands never take flight.
Focus on the Short Term
Who doesn’t love surprises? For those with fiduciary responsibility, it’s a different story. Sustainability strategy and ESG vigilance can surface risks and opportunities that impact the company beyond the next one or two quarters. Stakeholders use a company’s sustainability reporting and ESG information to form long-term views of where the company is headed. The less that is volunteered, the more these folks will focus on the quarter-by-quarter story and miss the bigger picture about the company’s long-term strategy.
Avoid Meaningful Engagement on Sustainability Matters
To the reckless, seeking substance is boring and predictable. Sustainability communications and meaningful reporting take thoughtful investment of time and focus across an organization—right up to the board level. Everyone’s hair may be on fire managing the day-to-day communications issues, but that is fast becoming a tedious excuse for less ambitious communicators. The consequences for not prioritizing an ESG perspective? Missed risks and opportunities in the intermediate and long term—which, in turn, expose their companies, executives and stakeholders to a host of financial, operational and individual vulnerabilities.
Even reduced or minimal transparency can become an issue for investors, watchdog groups and news media. When sustainability communications are limited to high-level, generic or arcane jargon, people can interpret it as a corporate decision to deliberately hide or confuse.
Competitors also are watching closely for missteps. As corporate rivals get a head start on communicating their sustainability value proposition, they will hone their skills. And competitors will waste no time in telling the world how they are winning in the marketplace by preparing for shifting values in modern society and impacts of changing weather patterns on their businesses.
Ignore Investor Interest in ESG
Resisting the call for ESG disclosure is so “last century.” Sure, public companies were outraged when in 1933 the SEC established rules about sharing audited financial data after The Great Crash. However, today’s institutional investors already are building an arsenal of comparative ESG data about the companies they invest in and are staffing up with teams of ESG analysts.
In his annual letter to chief executives in 2017, BlackRock CEO Larry Fink included corporate responsibility as part of the call to take a long-term view of the “new world”:
“Environmental, social, and governance (ESG) factors relevant to a company’s business can provide essential insights into management effectiveness and thus a company’s long-term prospects. We look to see that a company is attuned to the key factors that contribute to long-term growth: sustainability of the business model and its operations, attention to external and environmental factors that could impact the company, and recognition of the company’s role as a member of the communities in which it operates. A global company needs to be local in every single one of its markets.”
Sustainability investing is the fastest growing category of investment activity and likely will have a major impact on future access to capital.
Investors Want Proof
Google and Facebook have been diligently communicating on selected environmental issues such as energy use and carbon footprints of their server farms. But this has possibly sidetracked them from having communications strategies for some of their more challenging ESG issues, such as diversity and equity in the workplace.
Both companies have received shareholder proposals asking for pay equity reports. While it’s simple to vote these shareholders down each year, that doesn’t stop mainstream and industry news media from covering the issue over and over—and over—again. Techcrunch went as far as to say that “Facebook is put at a competitive disadvantage by not showing leadership in this area, noting how tech companies like Intel and Apple have conducted in-depth reports to assess pay equity.”
The news media has also extensively covered Google’s wage parity problems with the Department of Labor. People will simply not accept at face value when these companies say they pay men and women equally. And investors want proof.
Because Twitter is where the world shares ideas and information about #diversity, #climate and #renewables, it’s easy to see why the company may have concluded that its platform could suffice as an instrument of corporate engagement. Instead of addressing material topics in its communication channels, Twitter has taken less controversial routes, such as corporate philanthropy. While focusing on philanthropy Twitter may have missed out on having a clear policy and communications to respond to criticisms over U.S. election meddling concerns.
Google. Facebook. Twitter. All three of these high flying, publicly traded companies would have been prepared for these communication challenges if they had focused on sustainability issues that are truly meaningful to their businesses.
All three are on harrowing, quarter-by-quarter rides while they renegotiate their reputation and regain the trust of their customers, regulators and long-term investors. Since shareholder proposals are the final resort of investors, it would have been difficult to ignore earlier signals that certain topics, such as pay equity, were ESG issues deemed relevant to the future value of the companies.
Without a thoughtful and meaningful communications program, the future will be uncertain for many brands that we know, admire, work for and invest in. However, guided by communicators who have heeded early cues from investors, successful CEOs will be easy to recognize as their brands and businesses soar above the ostriches and canaries.