When the Floor Drops, Shatter the Ceiling

When the Floor Drops, Shatter the Ceiling

Super Bowl LI is in the books, and it may be best summed up as the game of shattered expectations – that a 25-point third quarter lead is safe, that Lady Gaga can’t be any more entertaining and that deregulation means companies are free to ignore social and environmental issues.

To some, the Super Bowl commercials that focused on social issues such as inclusiveness and equal pay were seen as repudiations of recent moves by the Trump administration. However, it is more likely that these corporate social responsibility (CSR) messages were being used because they resonate with key stakeholders. After all, Coca-Cola has been teaching the world to sing and advocating for polar bears for decades because consumers find those messages appealing.

While political leaders may be expressing an interest in lowering or removing regulatory hurdles, public expectations of companies and their environmental, social and governance (ESG) actions are disassociated from regulatory demands. In fact, as the floor drops on legal restrictions, it can be argued the burden on companies to aim higher may even increase. It’s perhaps a thought that influenced the thinking of Super Bowl advertisers.

Why won’t ESG expectations diminish even if regulations and enforcement are lessened? To answer this, it’s important to look at the motivations of two important corporate constituencies:

  • Consumers are increasingly seeking relationships with brands that share their values.
  • Investors are demanding more robust ESG reporting by companies to gain insight into the quality of management and their approach to risk mitigation.

Buyers not Bureaucrats

In a Nielsen survey of 30,000 people in 60 countries across the globe, 66 percent of respondents say they are willing to pay more for sustainable goods. Among that group, more than half are influenced by key sustainability factors, such as a company being environmentally friendly (58 percent), being known for its commitment to social value (56 percent) and having a commitment to community (53 percent). Sales, and coupons didn’t even make the top five.

These findings suggest corporate interest in CSR is being driven by buyers, not bureaucrats, and it is resonating through supply chains. In a recent article in Forbes, Dell’s chief responsibility officer, Trisa Thompson, said: “Completely regardless of the global political environment, corporations will continue the march toward sustainable production because it makes sense and is a business necessity.”

21 Trillion Reasons to Pay Attention

The $21 trillion estimated by HSBC Bank as managed assets flowing into the ESG investing category is also not contingent on compliance. It reflects a growing acknowledgement by the investment community that companies that understand and manage material ESG issues are more likely to deliver better investment outcomes.

Take for example three developments that occurred almost simultaneously with news about a potential rollback of financial and environmental regulations:

  • Global investment research firm Morningstar announced that it has created 20 new ESG indexes. These ratings measure how well companies in a portfolio are managing their ESG risks and opportunities and provide a basis for comparison across funds. According to Morningstar, “They give investors a new lens to analyze any fund, regardless of whether it has a specific sustainability or ESG mandate.”
  • A shareholder activist group called on Amazon, McDonald’s, Target and Walmart to phase out polystyrene foam from their packaging materials.
  • The CEO of State Street Corp, one of the world’s leading asset managers with $2.47 trillion in assets under management, sent a letter to the boards of directors of all public companies in their portfolio asking them to provide information about how they are addressing climate change, safety, workplace diversity and various other ESG issues.

Clearly, expectations of ESG excellence are not being diminished amid recent discussions about deregulation.

Rising Expectations of Self-Reporting  

All this interest in ESG performance raises the bar for companies to be transparent about their plans and performance. Voluntarily issuing sustainability reports and including ESG metrics in SEC filings is becoming nearly as important as filing required OSHA injury reports and EPA impact statements.

For some communicators, this can be a tough internal sell, particularly with the finance department. For decades, ESG reporting was aligned closely with compliance. For those accustomed to this mindset, the current political climate may get them thinking less communications about environmental and social issues will be required.

To battle this type of thinking, those responsible for stakeholder relations – human resources, investor relations, product marketing, customer service – need to band together and demonstrate how cohesive ESG reporting and messaging adds value.

While the government may set the floor for legal compliance, there really is no ceiling on the expectations stakeholders have for companies wishing to win their loyalty.

Ron Loch is Managing Director, Chicago, G&S Business Communications. In a competitive global marketplace, Ron helps businesses gain by doing good. A G&S veteran, Ron’s collaborations with global Fortune 1000 companies and green business start-ups have delivered strategic, integrated programs to gain value from sustainability efforts and commercialize clean technologies. Ron oversees publication of the annual G&S Sense & Sustainability® Study, which gauges public perceptions of the corporate commitment to environmental and social responsibility. He also moderates many of the firm’s thought leadership events, which have welcomed speakers from Businessweek, Burt’s Bees, Verizon, Time Magazine, The Sustainability Consortium, The World Food Prize Foundation, U.S. Green Building Council, U.N. Global Compact, and more. Ron graduated with a B.S. in Journalism and Mass Communications from Iowa State University and received a Master’s Certificate in Managing the Sustainable Enterprise from the Illinois Institute of Technology Stuart School of Business. He has also completed the certified GRI sustainability reporting curriculum. Ron hones his crisis management skills by tackling obstacles in Spartan races.


Leave a reply

Your email address will not be published. Required fields are marked *