ESG is a now-familiar term – yet beyond publicly listed companies and large organisations, many businesses are yet to embrace it. But the reality is ESG isn’t going anywhere and, as we advance into 2023, it will continue to gain ground.
To some, ESG – Environmental, Social and Governance – is mystifying; another item to add to the ever-growing list of legislative and regulatory changes and upheavals facing businesses in recent years.
But rather than viewing ESG as another box-ticking exercise – a strategy that would fail to achieve the desired outcome – it’s important to assess the (not inconsiderable) benefits.
Why report on ESG if it isn’t mandatory?
ESG reporting offers a host of advantages for businesses of all sizes, whatever the industry; gaining competitive advantage, helping to attract the best talent, securing investment and new capital and giving confidence to potential partners to list just a few.
So, choosing to report on ESG could add notable value – provided the company in question isn’t failing miserably on the key criteria, that is (in which case there’s work to be done in mitigating reputational risk). However, even where a business finds that there is work to be done to meet expectations, having visibility on the issues to be tackled is a positive starting point from which to make improvements.
ESG is about doing the right thing. For brands that are flying the flag for responsible business, it’s a chance to launch modesty out of the nearest window. For those with a more nuanced relationship with ethics, good governance and environmental stewardship, it will naturally prove a trickier task to tackle.
Less ‘saintly’ brands, companies working within more challenging industries, or with exposure to more problematic markets, should think about their ESG performance sooner rather than later. And while it’s tempting to polish the facts and paint a rosier picture of performance, greenwashing is to be avoided.
While it’s true that ESG is not (yet) a requirement for most companies, whether large businesses or SMEs, its elements – particularly social purpose and the environment – are often now major operational priorities. So, really, ESG is about taking a more holistic view and working out which elements need more attention. It is not a new concept; businesses have been working hard on its key pillars for many years.
ESG reporting doesn’t have to be a huge undertaking but reliable data is vital.
Reliable data is key
Measurement is the cornerstone of ESG reporting; each annual report should be able to demonstrate performance across key indices. It should be able to build upon the successes of the previous year and demonstrate the improvements that have been made.
It’s the job of PR professionals to bring the data to life; telling the company’s story in a creative, engaging way. We don’t need reams of information; pages of charts and tables that result in a finished product more akin to an annual report. Often, the most effective ESG reports are very simple.
What will 2023 hold for ESG?
2023 will undoubtedly see ESG continue to embed itself within the annual reporting requirements for companies, with leaders embracing the opportunities it offers.
The next twelve months could also see the introduction of universal metrics for measuring ESG; the government has already indicated its intention to bring ESG ratings providers “within the regulatory perimeter”, supported by the FCA. Other countries are already further down the road with this thinking, such as Japan which introduced a code of conduct for ESG data providers in summer last year.
During 2023 companies should at the very least seek to form a reliable picture of how their organisation compares across the key elements of ESG, flagging any problematic elements that require improvement.
Falling behind is an outcome that management teams will be keen to avoid.