Consumers are becoming increasingly aware of sustainability and ethical issues linked to the products and brands they interact with on a daily basis. The recent COP26 summit highlighted the scale of the environmental crisis, and people are now firmly looking towards their leaders to make impactful changes.
With Gen-Z leading the charge, inspired by the work of prominent activists such as Greta Thunberg, brands are being held accountable for their environmental impact, their commitment to diversity and how consistently they act out their values.
In an Accenture report, 62% of survey participants attached higher value to purpose-led brands, with issues such as social, environmental and cultural values being the main talking points. And, for over a decade, Environmental, Social and Governance (ESG) topics have been a significant part of the sustainability conversations that lead to investment decisions. These have their roots in the CSI (Corporate Social Investment) campaigns that started in the 1950s.
However one could argue that corporate social responsibility was often for publicity, and not linked to the very roots of brands. So how valuable is a modern ESG strategy – where authenticity is key and words must translate into action in order to be truly effective?
The times, they are a-changin’
In order to answer this question we need to take a step back to fully grasp what ESG entails. Companies report on how they add value to each of the three areas – environmental, social and governance. This information is viewed together with financial factors, which aids investment decision-making and helps to understand brand impact on a broader scale. Plus, for consumers, it helps them choose where to spend their money.
Environmental factors include how a business’s activities impact the environment and how it’s managing them, eg pollution, sustainability, greenhouse emissions and waste management.
Social criteria focus on the business’s relationships, inclusion and composition, eg human rights, labour practices, working conditions and diversity.
Governance dwells on management responsibilities, eg gender equity, bribery, corruption, executive pay and board diversity.
Why is ESG so important?
Focusing on ESG factors is good for business. In 2020, higher ESG-rated stocks had better returns than lower-rated ones. The fact is, any ESG risks translate into investment risk. With credit-linked carbon taxes in most developed economies, companies have no option but to have proper ESG strategies to make it easier to borrow.
Having better ESG ratings also means more customers, attracting great employees, boosting staff morale, increased access to subsidies, and better investment relations. If customers are unhappy about what a brand is saying on certain social issues, they may voice their dissatisfaction, which could damage the brand’s reputation and ultimately lead to customer churn.
As a business, you need to have the right tools that enable you to track your ESG metrics and report them – this is over and above the benefits of ethical business practices and positively contributing to a new era of social advocacy.
Selecting the right tools
By ranking higher in ESG ratings, you’re declaring your good intentions to the world, as well as demonstrating that you have minimal risk and can create greater value. You need to start by selecting an ESG framework that’s appropriate for you and your business goals.
There are a number of ESG frameworks available, depending on your targets and objectives. You should know how and why you’ve decided on your goals and, realistically, how they link to your other business objectives.
Most businesses will not be able to track every single metric, so focus on those elements that matter the most to you. Some popular elements include your stance on climate change, raw material sourcing, supply chain standards, and board diversity.
Equally important is to make sure that your business avoids greenwashing. This is when companies communicate that the business itself, and/or its products or services, are sustainable and environmentally friendly, when in fact they aren’t. If you’re in the B2C space, it’s critical to understand the perception of your brand from a consumer point of view.
Meltwater enables organisations to make more informed decisions through monitoring news and social media data, helping over 30,000 clients across six different continents, including 70% of Fortune 500 companies.
“We’ve analysed the growing interest in ESG practices, and seen businesses prioritising positive change,” said Zubair Timol, EMEA vice-president at Meltwater. “It made sense to provide more value to our stakeholders and invest in tools that will help them measure their ESG efforts.
“This will also enable brands to take part in important conversations happening worldwide, which are so relevant to the growing demand for conscientiousness, inclusion and development. Our hope is that this will foster sustainable communities and create more shared, inclusive spaces for exchanging ideas and inspiration”.
Meltwater has invested heavily in R&D to aid its ESG reporting, including acquiring Wrapidity and Linkfluence – which allows it to provide deeper and more accurate online insights.
Its SDG monitor is an interactive dashboard tracking social engagements concerning several major global companies that are meeting the UN’s sustainable development goals. It also ranks them. Why? Because, having looked at the data over time, Meltwater believes that the next era of branding and business will be built on the foundations of ESG impact.
Be it through knowledge sharing or the provision of online tools, Meltwater aims to equip comms and PR professionals with the necessary requirements to navigate this increasingly important realm – today and tomorrow.
To learn more about the importance of ESG for brands, listen to Meltwater’s webinar featuring Edelman UK’s former director of ESG, Chuka Umunna. Find out all about Meltwater at meltwater.com/en.
