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The rise of Environmental, Social and Governance (ESG) has set the new gold standard for corporate leadership, especially for publicly traded companies.
In one global survey conducted in December 2020, it was found that 88% of global public companies have ESG initiatives, followed by 79% of venture capital and private equity backed companies and 67% of private companies.
Unlike the corporate social responsibility model, ESG provides a framework for companies to document their work and the resulting environmental, social and governance impacts.
To date, ESG reporting is mandatory for publicly traded companies in some jurisdictions, such as Hong Kong. But is ESG only relevant for listed companies? Is ESG reporting itself enough to effectively communicate companies’ ESG initiatives to a hitherto disparate stakeholder community?
Related: Why ESG Reporting Could Be Your Company’s Next Winning Move
1. ESG storytelling is relevant for companies of all sizes
As consumers become increasingly concerned about sustainability issues, the right ESG story promises brand relevance and marketability. CGS Survey shows that two-thirds of customers would pay 25% more to get only green products.
Such enhanced brand relevance gives companies a lasting excellent reputation for 92% of consumers and brand loyalty for 88% of them, as found by cone communicationimplying increased marketability potential.
Meanwhile, companies with strong ESG values are more likely to attract and retain top talent. According to Mercer’s 2020 Global Talent Trends Surveyone in three employees would prefer to work for an organization that shows responsibility towards all stakeholders.
ESG storytelling builds an emotional bond between businesses, consumers and employees as the company’s ESG initiatives would showcase the company’s values that align with its stakeholders’ ethical consumption views and its long-term commitment to creating value for them.
Related: 5 Big Mistakes Companies Are Making When Addressing ESG
2. ESG is more than just a label
ESG investing continues to gain momentum worldwide and a report of Broadridge Financial Solutions suggests that ESG assets could reach $30 trillion by 2030. Given the hot money in the ESG space, there are growing concerns about companies superficially applying the ESG label to lure money from investors. Influence mapa nonprofit organization, warned that more than half of ESG-labelled mutual funds were exaggerating.
Traditionally, ESG reporting has encompassed a range of industry-specific terminologies and technical data, which are not easily understood by stakeholders. Often unconsciously, technical data from specialists becomes incomprehensible, misinterpreted and therefore useless. A third of the respondents from a questionnaire conducted at the Asian Financial Forum 2022 even found incomprehensible ESG standards the main factor hindering ESG decision-making.
ESG storytelling can bridge the gaps and place ESG initiatives in easy-to-understand contexts and perspectives across disciplines. ESG storytelling can come in many forms. Even big goals as ambitious as Sustainable Development Goals can be discussed and studied in the form of a simple multiplayer card game known as the 2030 SDGs Game.
Meanwhile, ESG storytelling is not entirely different from traditional corporate storytelling. What communicators can do is integrate the ESG components into corporate storytelling, be transparent about companies’ ESG practices, and authentically communicate the impact of their operations on ESG matters.
Related: Why ESG Conscious Companies Are Resilient Companies
3. A price to pay without authentic ESG stories
Companies with successful ESG initiatives could help maintain positive public perception, but greenwashing concerns remain a potential setback.
For example, BNY Mellon just received a $1.5 million fine for providing misleading ESG investment information. A Brazilian meat processing company, JBS, had to face the potential consequences of withdrawing investment funds and losing large buyers after being exposed to producing more carbon emissions rather than complying with ESG initiatives, a media outlet said. . report†
Indeed, companies that have not actually implemented their ESG strategies would face public criticism and face major PR crises. A study conducted by Cone Communications in 2017 also found that nearly 80% of customers would stop consuming goods and services from companies known to have acted against their beliefs. This entails huge financial losses.
ESG storytelling provides a concrete answer to consumers’ doubts. By providing an accurate, specific and detailed description of companies’ responses to ESG issues, supported by statistics and tangible evidence, companies can resolve suspicions of greenwashing, maintain business integrity and gain the trust of nearly 90% of consumers. the same report from Cone Communications suggests.
Overall, ESG is much more than a mere PR exercise, but communicators have a key role to play as they are tasked with creating a narrative that brings companies’ ESG initiatives to life, creates emotional bonding with stakeholders based on values and prevents potential problems and crises that would kill a brand.