Why You Need an ESG Story — and Who Wants to Hear it
Today’s post is authored by Julie Bogas, partner, ESG Advisory at PwC. Bogas most recently collaborated with Consumer Brands to host a virtual event on how to provide the “investment grade” ESG metrics and performance data that investors and leadership expect.
Disruptive, structural trends are reshaping our world. A growing wealth gap, a planet in peril and technological advancements (among other factors) are exposing the need for a more sustainable and equitable future. Stakeholders — investors, customers, employees, regulators and the community at large — are underscoring daily the importance of immediate action.
And we have clear evidence that environmental, social and corporate governance (ESG) criteria, which are factors that define a company’s environmental and social impact, influence consumer purchasing decisions.
Consider the following we learned about consumer preferences from PwC’s March 2021 Global Consumer Insights Survey:
- 54% seek out products with eco-friendly packaging or less packaging.
- 56% choose products with a traceable, transparent origin.
- 50% are eating more plant-based foods due to sustainability principles.
- 55% buy from companies that protect the environment.
- 53% are buying more biodegradable, eco-friendly products.
ESG criteria, which long predated the current global pandemic, were further underscored during this past year of economic, political and social change. For consumer-facing companies, ESG is now an urgent business imperative, which requires adopting and deploying practices that reflect corporate values.
All companies have an ESG story to tell about how they are managing the risks and leveraging the opportunities associated with a wide range of issues — from value chains to carbon footprint, supplier labor practices, the public health of customers and even tax transparency.
In fact, ESG touches every part of the business. And every level of the C-suite has specific questions:
- CEO: How can we serve our customers in a way that delivers positive environmental and social change?
- CMO: How can we connect our customers and our brand through our ESG story and differentiate ourselves in the marketplace?
- CRO: How can we build resilience to climate change and resource scarcity disruptions?
- COO: How can we use a focus on ESG risks to increase operating efficiency?
- CFO: How should we report our ESG data to meet the needs of investors?
- Boards: What is our long-term commitment to stakeholders?
ESG Is All for One
Carefully crafting your ESG story can transform your business when the entire organization participates. You need clarity about what’s at stake and insight into where you stand in terms of performance on significant risks and opportunities. What needs to be reported? And when?
Organize around strategic ESG priorities and provide the skills, resources and data to drive employee adoption of ESG companywide. Only then can you tell a compelling story.
Don’t rely on written guidance alone. It is critical to reinforce ESG principles and practices with ongoing upskilling. Deploy the concept of drip-feed learning. Provide unique opportunities for employees to build knowledge on ESG and their role in ESG reporting incrementally. Use the same approach to tell your story to your stakeholders. Your ESG story is not a one-time event. Rather, it’s an ongoing conversation that with the right program, controls and systems in place you can confidently take to a variety of engagement channels including those which allow you and your stakeholders to learn and grow together.
The Essence of ESG Reporting
To capture the entire breadth of your ESG story, you need the right data. Here are the steps you can take to extract it:
1. Start with your ESG strategy.
Align your company and your stakeholders on an ESG strategy that clearly articulates the most significant ESG risks and opportunities. Leverage existing frameworks and standards, using a sector lens to narrow in on what’s most important.
2. Identify the statistics that matter.
Determine the statistics that stakeholders want to see to tell your story in a way that aligns with your company’s purpose and values. Be open to a variety of metrics that tell your ESG story to stakeholders but focus on making sure they are material, comparable and reliable.
3. Impose rigor.
Treat ESG data and information with the same rigor as you do financial reporting data. Develop a comprehensive approach and program-level standards to define, collect and process data across all ESG metrics, accompanied by metric-level guidance and process and controls documentation. Leverage existing internal controls programs where appropriate.
4. Assign responsibilities.
Create clear documentation of roles and responsibilities as well as expectations for the data necessary to tell your ESG story: Lean on a cross-functional team to bring out the details of your story, making sure everyone understands the importance of the processes and controls that should exist for data collection and validation activities.
5. Enable ESG reporting with technology.
Technology can automate and standardize ESG reporting from a variety of sources. Identify the data foundation and architecture required to achieve your desired goals, then leverage existing tools and technology where possible. Develop a data and analytics roadmap that supports the aspirations for your ESG story over the long term. To do so, you need to have a vision for what you want stakeholders to know about your company’s ESG priorities.
ESG requires an updated approach to your business, championed by leadership and supported with resources and skills companywide. Once your vision is in place, create information governance controls to impose ESG data collection and disclosure rigor. Then, use those newfound insights to confidently tell a compelling story that reflects your company’s purpose and differentiates your brand.
Want more insights? Watch the event recording here.
Published on June 1, 2021
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