Strong corporate ESG performance has become a non-negotiable. Pressure is rising for transparent progress from a variety of stakeholders, be them employees, customers, investors or regulators. Failure to deliver may result in unfavourable consequences, as the latest developments around Tesla showcase well.

At the time of writing, Tesla (NasdaqGS:TSLA), one of the world’s largest electric automobile and clean energy companies, is in the news because they were recently removed from the S&P 500 ESG Index for labour, pollution and governance issues.

Despite Tesla’s mission to “accelerate the world’s transition to sustainable energy”, the company’s ESG performance (particularly in the social and governance areas) was deemed insufficient to remain in the index while firms such as oil and gas giant ExxonMobil made the top 10. On the surface, this may seem strange. But it’s important to note that, in the context of ESG, concrete progress is more important than the industry a company is in or the stated mission they have.

This story highlights two important aspects of ESG. First, environmental performance isn’t enough. Although the “E” often gets the most attention, the social and governance aspects matter just as much. Second, reporting goes to the heart of how the public sees corporate ESG progress. Although Tesla CEO Elon Musk has indicated his distaste for ESG metrics, ignoring them comes at a price.

We see growing demand among corporates for effective ESG storytelling. Helping firms align who they are with what they are doing across the ESG spectrum, and then amplifying this activity through strategic communications, has become an imperative.

Clear communications are crucial

It was reported that Tesla did not have a concerted public relations strategy to tell their side of things, bringing into view the importance of ESG communications. Below are key areas to think about:

Building trust – Trust is established based on how an organisation’s ESG initiatives are being communicated to its internal and external stakeholders. Regular and transparent reporting has a higher chance of shaping a positive perception.
Being clear – As data disclosure has become increasingly important, so too has the need to communicate this information in a clear and accessible manner. Doing so will help companies control the narrative among their audiences.
Engaging early – The media’s coverage of an organisation is reliant on the sources they have available. Having a thoughtful media relations strategy not only ensures the media is provided accurate information, but it also hedges against unfavourable interpretations of a company’s progress based on limited information.

ESG is challenging companies to look at how they operate. While there is a clear peril for those who may not take these areas seriously, the possibilities for those who do seem endless.

If you would like help in your ESG communications, please contact us.

The perils and possibilities of ESG performance