ESG (Environmental, Social, Governance) has been on boards’ agendas for the past few years as investors, governments, and stakeholders look for meaningful ventures. What does it mean for marketers?
What is ESG?
ESG is a set of three-fold standards covering the environmental, social, and governance initiatives of an organisation’s operations as well as its strategic vision. They are among the key elements investors (mostly the new generation) consider to evaluate an organisation before investing in it.
ESG certainly provides more than just a set of standards to tick. When applied properly, they give a strong positioning in the market. Here’s why:
- Consumers are, more than ever, conscious about their buying and would prefer to choose sustainable brands. (PwC’s Consumer Intelligence Series)
- Investors consider ESG risks and opportunities as an important factor before deciding to invest (PwC’s 2021 Global Investor survey)
- More and more local companies are talking about their sustainability initiatives as an inclusive part of their Annual Reports. Previously focused on SDGs, sustainability reporting evolved to fully integrate with aspects of ESG.
- 88% of investors believe that companies focusing on ESG initiatives represent better opportunities for long term returns compared to others who don’t. (Edelman Trust Barometer)
- Value creation now relies heavily on the resilience of an organisation in post-pandemic and its ability to create positive impact in society (both internal and external to the organisation) (PwC’s Value Creation)
So, it is a fact – ESG is more important than ever. But, how does it impact organisations and what is the role of decision makers?
Who is Doing What to Support ESG Initiatives?
To position an organisation in the market, it starts with fully engaging every stakeholder forming an organisation’s eco-system. Internally, it is important to educate and create awareness around the 3 pillars.
Externally, stakeholders need to abide to key measures of success for ESG. For example, is the supply chain aligning to net-zero aspirations? Are we building an inclusive environment to engage minorities, small businesses and other players in the organisation’s ecosystem? And are these players benefiting in a fair manner?
A lot of important questions pushing organisations to recalibrate how they operate while understanding no-one is an island. We are all connected; one small change ripples to the extremities.
I only covered some of the C-Suite roles. However, ESG is a matter of all.
- Board: Having a vantage point, the Board assesses whether the company’s vision is inline with its ESG strategy. It will ensure ESG governance in areas that matter the most for stakeholders. The Board will also establish reliable ESG information, create the right disclosures according to alignment checks between information shared and the company’s purpose as well as strategy.
- CEO: Ensuring the organisation is collectively improving operational and strategic models to create value, positive impact on the society, while remaining transparent to all stakeholders.
- CFO: We know investors are looking at ESG initiatives and this urges CFOs to work on creating robust metrics, controls, and processes which impact on ESG Reporting. CFOs have taken bits in the role of sustainability leaders to feed to both the company and investors.
- COO: ESG is also about process efficiency. Similar to the supply chain example I gave earlier, the COO will overlook strategies on how to increase efficiency across the company. This can include critical metrics to achieving Net Zero to enabling Cloud transformation to support ESG initiatives.
- CMO: A big part of ESG initiatives is actually communicating about it and CMOs have an important role to play in it. The end result is to position the company as ESG-conscious by communicating in a transparent way to stakeholders, including investors.
The Role of CMOs in Driving Marketing Positioning Through ESG Initiatives
While ESG can lead companies to a land of opportunities, communicating about it needs to be strategic for two main reasons:
- To build trust through a unified company voice about ESG initiatives;
- To bring clarity and honesty while communicating on impact of ESG initiatives.
Among the key “trending” topics from ESG is how far companies are reviewing their Net Zero agenda. More than a PR exercise, CMOs need to ensure progress tracked is communicated in a clear and honest manner.
In a recent report by New Climate Institute and Carbon Market Watch, among 25 top corporate organisations assessed, only one appeared to demonstrate integrity.
So, how can CMOs help? Here are some key strategic moves:
- Bring clarity both internally and externally on the company’s ESG aspiration. Given that ESG covers a vast area, identifying those that matter the most according to your stakeholders can bring focus. For example, it can be Diversity and Inclusion (S in ESG) or Net Zero (E in ESG). These identified areas will then influence the marketing messaging across different platforms.
- Creating awareness within the company is also crucial as a big part of ESG initiatives is to actively working together. With minds from different specialities, business areas, and backgrounds coming together, solutions developed can be much more impactful.
- Demonstrate your capabilities within the firm itself. Most ESG campaign focuses on storytelling to share how companies have grown in becoming more environmentally friendly, more transparent, and inclusive. So, communicating through case studies, infographics, and videos can definitely help. However, it is important that these communications come with proper governance, traceability and reliability.
- Engage with stakeholders by using market intelligence. In fact, while ESG offers commercial opportunities, no company can achieve these alone. There’s always a need to work together with other specialists, local communities, or government. The role of CMOs is to inform companies leadership where these opportunities to create value through partnership are. Most importantly, CMOs need to work closely with Sustainability leaders, COO, and CFO to understand where ESG ratings for the company are dropping. This could be through a shared dashboard.
- Support causes for the company’s greater societal purpose should also be on the agenda for CMOs. From the outset, both the new generation of investors and consumers are moving to brands which are eco, diversity, inclusion, and people conscious. Millennials for instance would prefer buying from a brand mindful of the environment. Communicating about the company’s standpoint on these topics in a clear and precise manner can definitely help brands differentiate themselves in the market. For example, PwC has accentuated its communication on Diversity and Inclusion in its recruitment campaigns because the new workforce is looking for more interactions with different mindsets and ways of doing things.
However, the key learning here is ESG is not a PR stunt. It requires a seamless interaction between every players in an organisation’s ecosystem; from the new joiner to the Board.
For CMOs, this represent an opportunity to redefine communication and marketing strategies to align both to what investors and consumers want and at the same time, create value that will benefit the company.