Maximise ROI on ESG: four insights Maximise ROI on ESG: four insights
Maximize the ROI of ESG reporting: How to clarify your reporting audience and priorities
The gap between public companies and investors on ESG-related communications is as wide as ever. Investors are increasingly aligned around a desire to understand the company’s long-term value creation plan and receive credible, standardized information to support long-term risk assessments.
But many public companies, even when they have a good story to tell and robust processes to manage ESG risk, are not giving investors the right information in the right format. And with so many intermediaries collecting and aggregating ESG data companies risk losing control of their ESG story.
Last month, as part of our CONNECTED series of zoom discussions, we convened representatives from a range of global companies to explore what businesses can do to address this with a particular focus on ESG reporting. We were lucky enough to also have the investor view with unique insights from Andy Howard (Global Head of Sustainable Investment at Schroders) and Mike Tyrrell (Founder of SRI connect).
What unfolded was an eye-opening discussion around ESG reporting, with a particular focus around WHY it has become so important and WHO is engaging with it. Our attendees included the a range of well-known global corporations from food and beverage, mining, packaging, retail, chemicals sectors amongst others, demonstrating how important this topic has becoming.
Below are our four key takeaways from our discussion:
1. Start with audience, not output
The ESG reporting process needs to incorporate an IR mindset more closely – individuals not ‘stakeholders’. Many are missing direct, up-front engagement with a small number of key company investors in their approach. Reporters need to identify their 20-40 priority investors and analysts, understand who they are and ask them what information they need to evaluate your response to material issues. Start doing this tomorrow and do it every year to refine and evolve your report.
2. Reach analysts by elevating material issues and strategy
ESG analysts at ratings firms seek granular, comparable datasets on a broad range of issues. The role of an ESG report is not as a single repository for all this – because they are not your principal audience. Instead it should be a short summary of the material sustainability-related risks and opportunities that your company faces with an explanation of how you are addressing them – strategy, management approach, supporting performance data. It may be true that too many asset managers still use ratings blindly, but that’s even more reason to reach out to them directly.
3. Bear in mind: your audience is time poor
With the industrialisation of ESG into the mainstream investment process reports are read ‘properly’ less and less often (there are simply too many companies to cover). Make information easy to find and interpret, with easy to understand tables and accessible data. There will be a need for copy to explain risks, opportunities and to show how you are addressing them, but keep it concise and decision-useful. Prioritise information over narrative.
4. Control the narrative across channels. It’s not just about reporting
The core aim of ESG reporting is to present your ESG risk mitigation and value creation story – including the growth potential from identifying and managing ESG issues. But investors gather a lot of information from a range of company and external channels, making it hard to control what they ultimately ‘hear’. The best response is to focus on delivering a consistent story through every channel over time. Break down the different elements of communication (e.g. long-term ambition, strategy, data, impact on product or innovation plans, operations etc..). Each of these elements comes through more than one channel. Over time, evolve from a report to a more 360-degrees communications plan for ESG. Once you’ve made this plan stick to it and don’t be afraid to overcommunicate.
Are you reporting to ESG or keen to get started? Click here to get in touch with our team of experts to help you navigate this challenging space and get the most out of your report.
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