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 businesses and leaders to make impactful changes.
With Gen Z leading the charge, inspired by the work of prominent activists such as Greta Thunberg, consumers are holding brands 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 some displays of corporate social responsibility have been for publicity, rather than linked to the roots of a brand’s ethos. So, how valuable is a modern ESG strategy – where authenticity is crucial and words must translate into action to be truly effective?
The times, they are a-changin’
To answer this question, we need to take a step back to fully grasp what ESG entails. Essentially, 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 explain 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 – for example, pollution, sustainability, greenhouse emissions and waste management.
Social criteria focuses on the business’s relationships, inclusion and composition – for example, human rights, labour practices, working conditions and diversity.
Governance relates to management responsibilities – for example, 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 risk translates into investment risk. With credit-linked carbon taxes in most developed economies, companies have no option but to have robust ESG strategies to make it easier to borrow.
Having better ESG ratings also means attracting more customers, better employees, boosting staff morale, increased access to subsidies, and improved investment relations. If customers are unhappy about a brand’s stance on specific 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 tools that enable you to track your ESG metrics and report on them – over and above prioritising ethical business practices and positively contributing to a new era of social advocacy.
Selecting the right tools
Over the last 15 years, since first being introduced by the UN's Principles for Responsible Investment (PRI) report in 2006, ESG ratings have gained prevalence as a way to measure a company's exposure to long-term environmental, social, and governance risks, with leading global financial institutions developing their own ranking systems.
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. So where do you 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.
One of the most prominent frameworks is the United Nations’ 2030 Agenda for Sustainable Development, which was created by the UN to provide countries and organisations with a shared blueprint that encourages peace and prosperity for people and the planet. At the heart of this blueprint are 17 Sustainable Development Goals (SDGs), which businesses across the globe have begun to align their ESG strategy with. The SDGs most commonly prioritised by leading companies are Climate Action, Decent Work & Economic Growth and Good Health & Wellbeing.
Most companies will not be contributing towards all 17 SDGs, so you can start by reviewing the SDGs and prioritising the ones that most align with your business and ESG goals. Once you’ve identified your goals and targets, you’ll need to track and communicate progress with your stakeholders. Communicating your actions towards the SDGs publicly strengthens trust in your brand and is critically important to build bridges and enable other organisations to learn from your efforts.
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 more critical to understand consumer concerns and genuinely share in those passions than it is to position your brand as a fake advocate. This starts with learning about the values your audience shares.
Analysing the landscape
Meltwater enables organisations to make more informed decisions through monitoring news and social media data, helping over 27,000 clients across six different continents, including 70% of Fortune 500 companies.
Meltwater’s SDG Monitor is an interactive dashboard that visualises the online visibility of the United Nations’ 17 SDGs across multiple industries and more than 700 companies. 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.
PR, Communications, Marketing, Strategy and CSR teams can use the dashboard to:
- Measure visibility and communication performance
- Inform content strategies
- Benchmark impact against leading companies
- Optimise reporting and stakeholder relations
- Mitigate risk
“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.
Forward-thinking teams can use our tools to inform their content strategies by discovering which SDGs are driving conversations online, measure communication performance against the UN’s 17 SDGs and understanding which companies are at the forefront of certain goals. We hope that this will foster connections between sustainably-minded organisations to exchange ideas and inspiration”.
Meltwater has invested heavily in R&D to strengthen its ESG reporting capabilities, including acquiring Oxford University spin-off, DeepReason.ai and leading social media intelligence company, Linkfluence – which allows them to provide deeper and more accurate online insights.
By sharing knowledge and providing online monitoring and measurement solutions, Meltwater aims to equip PR, comms and marketing professionals with the necessary tools to navigate the changing ESG landscape – today, and tomorrow.
To learn more about the importance of ESG for companies, listen to Meltwater’s webinar featuring Edelman UK’s former director of ESG, Chuka Umunna. Find out all about Meltwater at meltwater.com/en.
