By Vivian Lines

Executive Director, Paradigm Consulting

The focus on sustainability has never been higher. For example, ReThink HK, Hong Kong’s largest sustainability expo and conference, taking place in mid-September, is expected to attract more than 6,000 attendees, looking to learn about or demonstrate the latest trends.

Yet, the focus comes at a time when communications in this area is becoming more and more complicated and less unified globally.    

It has never been easy communicating about sustainability goals and achievements. Authenticity and tonality can be easily undone by actions taken without consideration of consequences. However, at the moment companies face more and more stakeholder concerns ranging from consumers wanting to align their purchases with their personal values, to governments and regulators enacting differing rules and regulations.

For example, ESG disclosures in the EU are set to tighten dramatically next year with suppliers across supply chains globally, many of them based in Asia, required to report ESG performance. The EU’s Sustainability Reporting Directive will require all large companies and listed small- and medium-sized companies to disclose how sustainability issues impact their business and how their operations affect communities and the planet.  

Elsewhere, the Hong Kong Exchange has proposed mandatory disclosure of climate-related risks in listed companies’ ESG reports from 1 January 2024, albeit with a two-year transition period.

Meanwhile, anti-ESG sentiment has risen in the U.S. with a backlash led by Republican-controlled States against fund managers making ESG-based investments at the expense of maximising profits.

And if this wasn’t complicated enough, surveys in the U.S. and Europe show that consumers believe that businesses should prioritize both environmental sustainability and profitability.

For companies operating internationally, these seemingly divergent stakeholder perspectives are making it increasingly difficult for company executives, their Boards and their communication teams to navigate this delicate tightrope of competing interests, particularly when sustainability goals ought to address long-term objectives rather than knee-jerk short-term priorities.

Spare a thought for company Boards of Directors. They have never been busier; their traditional remit in overseeing finance, managing risk, and advising on strategy is being steadily expanded into more and more areas as was recently highlighted in a global survey, ‘The Role of the Board in an Era of Sustainability’, by BCG, Heidrick & Struggles and the INSEAD Corporate Governance Centre.

While some ‘leading-edge’ companies saw sustainability as having a “very or entirely large financial impact on the business today,” this was not common. The majority of directors said that sustainability had “little financial impact on the business.” However, without that pressure, there is little need for Boards to prioritise sustainability over other topics.

At times this could place Board Directors on a collision course with other stakeholders, especially when customers look to business to lead on societal changes, regardless of the cost of doing so.

This is where effective communications becomes so important. Given the increasing complexity of sustainability communication, here are six recommendations we at Paradigm Consulting believe every communications director should bear in mind:

• Ensure transparent reporting of ESG initiatives. Sustainability is a long-term issue and deserves clear and accurate reporting of initiatives, their progress and also the challenges. This helps to demonstrate accountability and serves as a catalyst for further improvement over time. Even though your company may not be a public company it is becoming increasingly clear that your customers are likely to be asking questions about steps you are taking around aspects of sustainability and ESG, and if you are a supplier to a European company then the EU’s Sustainability Directive will impact you.

• Be accountable for the information you release. Accuracy has always been important, but challenges around greenwashing make this even more important now. Where practical, double-check information you have been given, while also adding a ‘sniff-test’ to see if something just doesn’t seem right. Be bold in challenging information; communicators are guardians of a company’s reputation and shouldn’t assume that everything they are told is accurate.

• Be mindful of competing perspectives among stakeholders. Investors in Europe may have a very different perspective on sustainability than those in the U.S. or Asia. Likewise, not all customers have the view that sustainability is critical. And, internally, there may be positive and negative views about the importance of sustainability. Communicators shouldn’t try to satisfy everyone, but aim to set out and explain the company’s clear strategy.

• Ensure consistent messaging. This may appear to be obvious, but there are still many organisations that believe that different stakeholders can be given slightly different messages. This doesn’t work and will likely cause issues at some point.

• 360-degree preparation is critical. Risk assessment and scenario planning are all part of a communication team’s priorities for being ready for the unexpected. Historically, this might have been done around event crisis planning. Today, it needs to include a comprehensive review of potential issues and stakeholder responses, the development of different scenarios and the preparation of responses to Frequently Asked Questions which are continuously updated. Online social media monitoring, tracking and assessment will provide an additional layer of understanding of how stakeholders view your organization. Combining all this with regular response testing, and training for executives around stakeholder response is critical for maintaining 360-degree preparation for issues as they evolve.   

• Integrate communications throughout the organisation.  Communications should not be considered a standalone function. Used effectively, it is the connective tissue that works throughout an organisation to support, defend and repair it. Integrating communications from top to bottom, from external to internal will ensure communication is consistent and make tackling the complexities of sustainability communications easier.

Every situation is different. While we hope these recommendations will prove useful, Paradigm Consulting’s team of advisers, ESG specialists and content developers is always available to help clients communicate their sustainability goals and commitments, and navigate the minefield of stakeholder communications in this critically important area.

Reading:

“The Role of the Board in the Sustainability Era” https://www.heidrick.com/-/media/heidrickcom/publications-and-reports/the-role-of-the-board-in-the-sustainability-era.pdf

“Do Consumers See Your Business as a Force for Good” https://sloanreview.mit.edu/article/do-consumers-see-your-business-as-a-force-for-good/#:~:text=The%20vast%20majority%20of%20respondents,somewhat%20effective%20at%20doing%20so.

“Empowered Chief Sustainability Officers” https://www.strategyand.pwc.com/de/en/cso2022.html

“The Future of ESG after the Bear Market” https://download.dws.com/download?elib-assetguid=d12bb36175c54d748e411f32bc11eb7d#:~:text=%E2%80%93%20Three%20in%20every%20five%20survey,over%20the%20next%203%20years.

“Anti-ESG sentiment in the US weakens ESG markets” https://www.eiu.com/n/anti-esg-sentiment-in-the-us-weakens-esg-markets/

“ESG backlash in the US: what implications for corporations and investors” https://www.ft.com/content/3f064321-138c-4c65-bbb9-6abcc92adead