For decades, companies have communicated with broad and general ‘feel good’ messages regarding climate and industry impact, such as “We care about the environment”, “We are dedicated to sustainability”, and “We strive to be green”. These types of statements once offered comfort and support, however, they now lack value or credibility.

Today, investors, regulators and the general public are more distrustful of climate promises and other ESG words without documented and clear evidence, detailed strategies and measurable of progress. The age of generic ESG communication is over. In its place we see the development of a new and honest approach to communicating business practices based on confirmed data, truthful transparency and storytelling through real data.

This change in baseline is more than just a passing trend, it requires businesses to radically change how they connect with the public and the environment in order to succeed.

The Age of Skepticism: Why Vague Climate Statements Don’t Work

Climate risk has gone from being a “theory” to an actual financial risk with the way investors treat it today. Examples of this include:

• Wildfires causing disrupted supply chains
• Floods delaying production
• Extreme heat decreasing labor efficiency
• Droughts threatening agriculture and energy

Climate risk now plays an integral role in how companies are evaluated, rather than simply being a part of their Corporate Social Responsibility (CSR) program.

When companies provide vague statements about their commitment to the environment, such as:

• “We are decreasing our greenhouse gas emissions”
• “Our commitment to the environment is important to us”
• “We champion the green cause”

The only question that investors have in mind is: What proof do you have?

The three primary reasons that generic climate claims do not provide adequate evidence are as follows:

1. There is no formal metric to measure the success of environmental activity taking place in the world today.
2. Recently, several large companies have been caught in scandal over ESG claims that were in large part false or exaggerated and have prompted distrust in their credibility and increased the demand for proof.

• The regulations surrounding ESG are growing in number and complexity, such as the TCFD (Taskforce on Climate related Financial Disclosures), CSRD (Corporate Sustainability Reporting Directive), SASB (Sustainable Accounting Standards Board), and ISSB (International Sustainability Standards Board).

Corporations can no longer make general claims about their ESG activities without being required by law to provide specific disclosures about those claims.

Given the changing landscape of ESG business communications, it is clear that the industry will be forced into more rigorous, credible, and data driven methods of communicating ESG topics to investors and stakeholders in the months and years to come.

How to Communicate with Impact Through Goals and Metrics in the Context of ESG (Environmental, Social, Governance)

1. Measuring Your Impact Through Data and Reporting Will Produce Value

When attached to ESG, the combination of data plus storytelling can create an authentic communication of the overall company’s commitment to sustainability, while also creating an image within the marketplace of a responsible organization that is committed to meeting their ESG obligations. The key to achieving this goal is:

To Provide Measurable Progress Over Time Not Just An Opinion For Example:

“We have completed our target of reducing Scope 2 emissions by 34% this year, which was achieved by converting 70% of our facilities to renewable energy.”

Through numerical information, you turn your claims into a credible source of proof.

2.   Links actions to impacts.

Investors are interested in how things matter. A firm establishing a forest is positive. However, a firm working on improving or restoring environmentally degraded ecosystems to mitigate and/or decrease climate vulnerability goes much further toward accomplishing transformation.

3.   Discloses the facts.

Transparency regarding a firm’s failures (e.g. Lack of progress made, missed deadlines, unfulfilled milestones) builds trust, albeit counterintuitively. A firm’s willingness to admit that it did not make as much progress toward its goal as expected is seen as both an honest and mature action by investors or banks…Both characteristics are viewed by banks and investors as assets.

4.   Demonstrates the long term goal or strategy and not just a quick fix.

Authenticity is demonstrated by articulating how a firm’s efforts related to climate change support the firm’s Business Model and Growth Strategy (i.e. What the future of the business looks like).

5.   Uses a reliable source of data when communicating.

All reliable sources, including satellite tracking, internet of things sensor data, life cycle analysis, and independent audit reports, help build the credibility of the communication.

The main point is the message is clear, concise, and credible.

Why Investors Prefer Authentic ESG Messaging

1.   Helps Limit Perceived Risk

As they are looking for predictability, investors feel secure when companies present data driven climate strategies that project their stability in today’s volatile business environment.

2.   Displays an Understanding of Future Direction and Market Opportunities

The companies that take the climate risk seriously, and have long term strategies based on these risks, show their understanding of the direction of future markets and position themselves for success.

3.   Enhances Corporate Reputation

Corporations that communicate transparently enhance their corporate reputation, which has an impact on their value, customer loyalty, and potential for partnerships.

4. Access to Capital Improvements:

ESG investing increasingly uses climate-related investment criteria. Genuine ESG communication increases eligibility for climate financing through green bonds, transition investments and sustainable private equity.

5. Stakeholder Confidence Improvement:

Investors are just one audience. Employees, regulators, local communities and customers all expect honesty. Authentic, responsible ESG reporting puts everyone on the same page.

Consequences of Poor ESG / Sustainability Communication

A business that uses generic climate statements runs the risk of the following:

• Greenwashing Charge
• Investors Selling Their Shares
• Shareholder Lawsuits
• Regulatory Penalties
• Damage to Their Reputation
• An Increase Chance of Losing Market Share to Competitors

In a climate focused world, being silent about ESG issues is no longer a strategy; it is keeping you at risk!

The Future: ESG Communication as a Leader

The future is for businesses that convey their plans to mitigate climate change clearly, humbly and with factual information.

They are not trying to seem flawless. They want to appear authentic.

In the next wave of ESG communication, a leader will be defined by three attributes:

• Clarity, Clear communication that avoids technical language.
• Evidence, Clearly described quantitative metrics based on reputable sources.
• Authenticity, Recognizing that the effort continues and is not complete.

By communicating in this manner, a business will establish trust with potential investors, enhance its reputation, and take on a leadership role during the global transition to environmentally sustainable businesses.

Conclusion

Investors are disillusioned with broad climate messaging. Effective communication regarding these issues demands an understanding of how to adapt to the current environment. The best performing companies will be those that effectively communicate ESGs in the same manner that scientists confidently share their research findings: clearly, honestly, and with verifiable evidence.

It is now imperative that all data backed storytelling be authentic and credible. This new language represents an opportunity for establishing a high level of trust among all parties involved.