The Verdict on “ESG”: Should it Stay or Should it Go when it Comes to Report Titles?
Ongoing debates on the use of “ESG” vs. “Sustainability” can leave many IR professionals feeling uncertain about how to best communicate corporate social responsibility strategy and efforts. Here’s how to choose language that works.
Each week, it seems yet another news outlet posts some version of the trending anti-ESG headline: “Companies avoid using ‘ESG’ at all costs” or “The new corporate dirty word: ESG.” While the variations are many, these clickbait-y articles all have the same goal, namely, to capitalize on the politicization of the term ESG by simply rehashing an ongoing debate that ultimately comes down to semantics. Which term is the most acceptable and impactful for describing a company’s strategy, efforts, and impacts related to environmental and social issues: ESG? Corporate Responsibility? Sustainability? Responsible Business? Are these terms interchangeable? Perhaps most importantly, does it matter to the people reading the report?
The short answer is – it is what you make of it. All companies engage with environmental, social, and governance issues at some level. Activities such as establishing board-level oversight of key initiatives, evaluating natural resources required to create a product, or conducting an employee engagement survey are present in companies’ operations regardless of whether the efforts are expressly called ESG or something else.
Choose the words wisely
That said, words do matter, and report titles can help set the tone and send the right message about the company’s unique environmental, social, and governance approach.
It is well worth taking a step back and thinking critically about the organization’s ESG programs, goals, and objectives and what the company would like to communicate to stakeholders before arriving at the best possible title for a report. Here are five steps to guide this process.
1. Consider what matters most to the company and its stakeholders
Love it or hate it, the ESG acronym covers a lot of ground given its three-pronged nature. ESG, as a term, speaks to large, high-level environmental, social, and governance buckets that each encompass a wide range of topics. Companies can dive deeply (or not) into each of those subtopics depending on industry and individual organization factors.
It is important to understand which topics and subtopics are relevant and to determine topic priority. Whether formal or informal, this consideration of materiality can help guide decisions on how to externally speak about ESG. Aligning strategy with the top priorities of stakeholders is key to long-term success, so a formal materiality assessment is always worth the effort. The results of this analysis will provide a valuable understanding of stakeholder expectations around overarching ESG strategy and specific activities and issues.
Once materiality is established, it becomes much easier to use specific language that describes the business’s priorities, allowing companies to move away from broad, umbrella terms. For instance, rather than discussing that “the business is addressing its ‘ESG’ priorities,” companies can give greater definition to the language and say that “the business is addressing its climate risks and minimizing its environmental impacts.”
2. Know who’s reading the ESG report
As with any corporate communication, know the audience. While every company has multiple stakeholders to consider, B2C and B2B companies often have different communication priorities.
For consumer-facing brands, it is more effective to communicate strategy through a consistent branding lens to ensure progress reporting resonates with all stakeholders. For example, the Allbirds sustainability report is named “Allbirds Flight Status.” The brand-focused and informative document presents all the necessary ESG reporting information couched in brand language and a design that appeals to the audience.
For B2B organizations, it might make more sense to communicate in a more direct, fact-based manner. The goal should be to clearly convey the impact of ESG programs through the lens of a business partnership and the value add for clients. For example, McKinsey & Company simply presents its “2022 ESG Report.”
3. Keep the focus on the details and data
Common titles for ESG-themed reports include Corporate Social Responsibility, ESG, Impact, Sustainability, Corporate Citizenship, Responsible Business, and more. Typically, progress matters more to stakeholders than the words on the cover. Whatever the piece is titled, the report should serve as a record of progress on ESG management presented in an accessible and transparent format.
Specifically, interested stakeholders will expect to see a company’s ESG strategy, how it aligns to the business, and what progress has been made toward reaching stated goals within the report’s pages. Reported data could include GHG emissions, safety statistics, and employee training hours, to name just a few examples. Companies should consider which data points to share in the report as these metrics will need to be collected, updated, and reported annually to help keep continuous stock of the company’s progress.
4. Feel free to change up the name
While it is important for the types of reported data to remain consistent, it is perfectly acceptable to change the report name. Coca-Cola recently updated its annual sustainability report title, going from the “2021 Business and ESG Report” to the“2022 Business and Sustainability Report.” Although the report title changed, the level of detail, data disclosures, goals, and targets remained consistent between the two publications.
Sometimes, the report title shifts as the ESG strategy and programs become more mature. For example, as companies begin to approach ESG topics more intentionally, making conscious efforts to create long-term value by responsibly managing impact on people, the planet, and profits, titling the report the “Corporate Sustainability Report” can make sense and feel more appropriate than “ESG Report.” For some companies, it is simply a title shift. For others, it is a change to internal definitions that will be applied throughout the report and to the organization’s discussions on the topic.
5. Set an ESG reporting strategy and continuously work toward it
Regardless of what label it is given, ESG principles tie to risk mitigation and ESG reporting helps communicate awareness of risks and opportunities related to the business. Identifying strategic ESG priorities is merely the beginning of an ongoing ESG journey. Ideally, companies will take a continuous improvement approach to ESG. This should be reflected in reporting that provides stakeholders with regular updates on progress. It may also be reflected in how report titles and language choices change and evolve over time.
Need help managing your ESG reporting?
Whether it’s an ESG, Sustainability, or Responsible Business Report, it can be helpful to work with an advisor to navigate the ESG reporting landscape. Riveron’s ESG and Strategic Communications consultants are available to conduct materiality assessments and help you shape consistent, effective ESG communications for your company website and formal reporting processes. Give us a call to start the conversation.