What are ESG communications?

Dr Kaushik Sridhar cuts through the confusion and explains what ESG communications are and points to some of the trends unfolding in this space.

When it comes to talking about “sustainability,” different people use multiple names and terms to mean many different things, which is a bit confusing. 

So to be clear, when we use the terms “environmental, social and governance,” or  “ESG,” and “corporate social responsibility,” or “CSR,” we essentially mean communications that are intended to tell the public about a company’s behaviour processes and other aspects of its operations related to its environmental compliance, social performance and corporate governance.

As the sustainability “mega-trend” has developed over the past 10 years or so, there has been an increased focus by multiple stakeholders on the environmental and social performance of both public and private companies. Stakeholders are also requesting more detailed information to be provided by companies about their ESG performance. The stakeholders asking for this information include consumers, non-governmental organisations (NGOs), local communities, investors, shareholders, and government agencies – particularly with respect to public companies that must disclose certain risks associated with climate change or usage of “conflict minerals.”

Companies globally have been sharing sustainability information for at least a decade, in various ways, without a comprehensive mandatory requirement. But many ESG professionals are predicting that some form of mandatory reporting will be required in the next decade, similar to what the European Union is doing now. Companies will need to keep an eye on governmental discussions and, in particular, efforts by NGOs, environmental groups and community activists who are seeking to standardise this type of reporting.

While stakeholders push for more transparency, another trend is that companies are trying to find a standardised system focused on disclosing only material ESG items that impact the financial performance of the company. So instead of issuing a 100-page annual sustainability report, which details every single one of the company’s ESG initiatives with lots of engaging pictures, there is a movement towards focusing only on the major issues that could impact the company’s bottom line. 

There is also a focus on supply chain due diligence and sustainability. One example of this in the mandatory reporting context is the conflict minerals rule. There is a push for sustainability due diligence into other supply chains, which may increase the volume of ESG data shared by companies as their customers demand the information.

Another trend is digital, real-time data flow in sustainability reporting. For many years, as companies began to wrap their arms around their ESG performance, the primary way they would communicate their sustainability performance was through the sustainability report posted on the company’s website or mailed in hard copy to shareholders, consumers and others. Over time, with the advent of social media and the internet, companies have gradually moved toward releasing ESG information to the public in real time. For example, companies often have a dedicated website focused solely on their environmental and social performance. Companies are very active on social media as well. So, a lot of experts in the field are pointing to the fact that it is not so much about the annual report anymore – it is about companies conveying ESG information digitally, in a real-time manner.

In addition to companies being able to share this information with just a click of a button, government agencies also have similar abilities to easily release information about companies’ environmental performances. There are now many online databases where you can look up a specific company’s environmental compliance record or other environmental performance metrics and compare that data with the information that companies are stating in their reports, websites and social media feeds.