Communicating with Social Responsibility Investors

Corporations need to devise different approaches and strategies to accurately and efficiently communicate their Environmental Social Governance (ESG) information to social responsibility investors (SRIs), an ACCSR roundtable has been told.

Professor Stephen Gates from Audencia Nantes School of Management in France presented findings to an ACCSR roundtable in Melbourne from his research into how corporations respond to pressures from social responsibility investors.

His research covered 20 companies in the USA and Europe and through semi-structured interviews for the forthcoming book he will publish with co-editor Suzanne Young, Associate Professor at La Trobe University titled Institutional Investors and Corporate Responses: Actors, Power and Responses.

His research showed the increasing influence of social responsibility investors on mainstream investors. Corporations had to devise new strategies to accurately and efficiently communicate their ESG and CSR information to social responsibility investors, which proved challenging for some corporations he evaluated in his research.

Investor relations officers educate top management about investor sentiment regarding corporate responsibility.

Gates told the ACCSR round table that there are three different levels for a corporate to communicate ESG information:

Level one: traditional communication

Gates said that identifying potential Social Responsibility Investors is not straightforward as few shareholder identification services have a clear labeling system and new categories and styles of Social Responsibility investment are emerging often.

Level two: communicate CSP with focus on ESG risk issues

Gates said that some corporations like Nestle needed to integrate measurable sustainability objectives into strategy rather than tell stories about sustainability activities.

“Metrics are standardised and need to be able to be measured year by year,” he said.

According to Gates, Nestle provided quantified results on sustainability programs including energy efficiency, greenhouse gas emissions, water usage and packaging. In addition, they highlighted the links between sustainability goals and business results.

Level three: Proactively market CSP information and construct two-way information flow to educate top management and board about SRI analysts and investors concerns

Gates used Cadbury as a case study and said that the company had problems explaining to its investors the complicated processes of its sustainability programs.

Further, SRIs do not fully appreciate the operating challenges in achieving sustainability objectives.

The solution to this, Gates said, was to involve the CEO to strengthen the message that sustainability is critical to business strategy as well as organising events for SRIs where operating managers could explain the key sustainability programs.