Future of ESG Part 2: Transparency, Disclosure, and Communications
An unprecedented number of companies around the world are taking action on environmental, social, and governance (ESG) issues. According to the Governance & Accountability Institute, 90% of S&P 500 companies published sustainability reports in 2019, compared to just 20% in 2011. In Schneider Electric’s 2020 Corporate Energy & Sustainability research, 70% of companies reported that they set energy or sustainability targets and announced them publicly. The rise in climate action commitments - from companies pledging carbon neutrality or net zero to the explosive growth in companies taking action via the RE100 and the Science-Based Targets initiative - is an indication that the business of sustainability is reaching maturity. No longer is sustainability a nice-to-have, but rather an imperative for companies that want to be around for the long term.
Alongside the rise in sustainability commitments is the increasing demand for companies to disclose the tangible actions they are making to back up their ambitions. And while sustainability disclosure is nothing new, there is currently a surge in pressure for companies to not only take meaningful action against ESG measures but also to transparently report and communicate on them too. In short, your credibility depends on your communications.
Why is ESG communication so important?
Stakeholders of all kinds want to see – and increasingly require – corporations to accompany their stated ESG ambitions with communications on the what, when, and how. What does ESG mean for your business and which reputable guidelines and science-informed best practices do you intend to follow? By when do you expect to reach that goal and what is your interim progress? How exactly are you going to transform your business in order to reach that ambitious goal set out by your CEO?
Investors are perhaps the most notable stakeholders applying this pressure. Many companies are being urged by their investors for more robust, clear, and transparent disclosures on their sustainability actions – and, more importantly, their climate risks. They expect to find this information not hidden within the deep annexes of an annual report, but rather represented alongside company financials, communicated regularly, and embedded within the overall business strategy.
Customers and employees, too, have a stake in corporate ESG communications. Members of the so-called “Millennial” generation are gaining a larger foothold in the global economy and have the power to decide whether to work for, buy from, engage with, or invest in a company with active ESG commitments. In fact, 64% of millennials say they won’t take a job if a company doesn’t have strong ESG/CSR values. This generation is also demanding quality and consistency in information.
