What Is An ESG Story? (And Why You Should Invest In It Now)
What Is An ESG Story? (And Why You Should Invest In It Now)
ESG-related marketing communication is a way of amplifying your company’s sustainability efforts, and the research shows there is good reason to do so.McKinsey found that“over 70 per cent of consumers surveyed on purchases in multiple industries, including the automotive, building, electronics, and packaging categories, said they would pay an additional 5 per cent for a green product if it met the same performance standards as a nongreen alternative.”
You cannot just be satisfied with having good intentions in terms of theenvironmental, social and governance issues(ESG) you are facing. You have to take action as well. And when you do take action, you should communicate that in your ESG story, which is where your marketing department comes into play.
This article explores what an ESG story is, why you should embrace one, as well as the challenges and the best practices for using this tool to its full potential.
Your ESG story is about communicating your environmental and social performance as well as your governance credentials to your investors and potential investors. It emphasises your commitment andsustainability efforts,as well as the strategies and processes that you have in place to achieve them.
When you concentrate on the sustainability of your business in the messaging to your investors and other stakeholders, you create an ESG story for the organisation that links to your corporate mission. You can then use this narrative to drive interest from those engaged in responsible investing.
With so much interest in the sustainability of issuers, ESG storytelling helps to promote the responsible investment opportunities in a particular company, directly focusing on a key area of interest for investors. A strong ESG marketing strategy helps promote this message and set the company aside from the competition. It provides a point of difference in the market that we already know is an area of interest for ever-increasing numbers of shareholders and funds.
Your ESG story also creates brand loyalty for customers. TheGlobal Sustainability Study 2021found that 85% of consumers worldwide had made efforts to buy more sustainably over the past five years and sustainability is an important purchase criterion for 60 per cent of global consumers. More than a third would pay more to buy from a brand they felt extolled positive ESG principles, showing how important it is to not only make a difference but to tell people that you are making a difference as well.
Challenges to ESG-related communication
ESG-related storytelling is not straightforward, and communications teams face a range of challenges as they go about their work, conveying a company’s ESG message. Here are some of the obstacles they will face.
How it manifests
Turning the ideological into the material
ESG is ideologically driven, but it must also be backed with a compelling case for pursuing a specific strategy. Operational teams within organisations are already working to understand which areas of sustainability, equity, transparency and inclusivity are particularly pertinent to their organisation. The work, location, sector and nature of their business determine how to make material changes that add value to the lives of internal and external stakeholders, as well asdriving improved performance. Marketing teams must do the same. It is the job of communications experts to show the link between this strategy and the business value to those investors for whom ESG-related investments are the priority.
Avoiding greenwashing perceptions
Connected to the above, your ESG story cannot appear disingenuous. Yes, you need to accentuate your sustainable credentials, but you can only do so if your company is truly making positive changes in the areas of the environment, social or governance factors. Being seen to have jumped on the ESG bandwagon without making material changes in the way you operate is sometimes seen as worse than not attempting to become more sustainable at all. Do not make claims that you cannot back up and use specific terminology related to ESG factors rather than vague statements about something being “eco-friendly”. Where possible, useESG-specific KPIs and metricsto justify your communications. This will become more common asESG reportingbecomes mandatory.
This is another area you must address to ensure your ESG communications read as authentic and trustworthy. Making unprovable, bold claims will not fool responsible investors. They want to know that they can trust the story that an issuer tells them. Hard facts and figurestrump extravagant announcements that lack any substance. Be consistent in your messaging and methodical with how you present it to ensure that those who seek to dive deeper into your claims can easily find that the truth correlates with the story.
Minimising the S and G
Perhaps given the preeminence of the climate crisis in the news cycle, much of ESG marketing relates to environmental matters, such as the reduction of a company’s carbon footprint. Whilst this is a material step in the right direction, the S and the G of ESG are of equal importance and should not be underestimated in your sustainability strategy. Depending on your sector of activity, social issues might be of extreme importance to shareholders too. Diversity and inclusion topics are particularly high in the minds of responsible investors. Many of them are millennials who have driven the rise in ESG and for whomleaving a positive mark in the worldis a key element of their investment strategy. Governance factors, too, are important to those investors who are wary of returning to the seemingly lawless days of rampant misconduct leading to the financial crash of the late 2000s. The€45 billion dollars in sanctions paid by EU banksfor their conduct is a continual reminder of the importance of the G in ESG.
ESG Marketing best practices
Review your values and mission in light of the positive impacts you seek
The organisation must shift its culture to be able to authentically position itself as a true ESG advocate. This means aligning the brand values and mission statement with sustainable values.
Having leaders publicly endorse these values for the business speaks to employees. It shows them that the company is serious about embracing ESG factors and integrating them into all aspects of its operations.
If the company lives and breathes ESG, it is easier to present a coherent and believable ESG story.
Know how to measure your ESG success
To be able to measure ESG performance, you need relevant and meaningful KPIs. This provides the hard data that shareholders require to assess the authenticity of the company’s ESG programme.
These KPIs should include the actions that you feel will bring the most value to the business and its stakeholders. You can also investigate the current and future ESG reporting legislation for the European Union to gain an understanding of what constitutes a successful ESG strategy that is also compliant.
Once you know this, you can choose the most appropriate comparable KPIs to align your company with that ideal.
Highlight the material aspect of ESG initiatives
You need to sell your ESG success to your investors. Tell them exactly how the business benefits from positive ESG initiatives. It might be that you lower your operating costs because of your commitment togoing paperless, i.e., you spend less on paper, ink, printer repair and so on.
One of the key elements here is to show your ESG story’s tangible benefits in a way that makes the recipient of the message feel that they cannot afford not to buy into whatever you are offering. In this case, you are not only showing an issuer that is reducing risk by implementing an equitable and sustainable business model, but you are also demonstrating that the model is cutting expenses and positively affecting the bottom line.
Use investor feedback
You need to live every aspect of your ESG commitment in order to truly persuade investors of its benefits. Engage them, excite them and let them know how your ESG efforts are futureproofing the business and driving it forwards.
Approach investor feedback and questions with a thoughtful, robust response and outreach strategy. Concentrate on their pain points, the aspects of what an ESG strategy does for your business and how that improves their position.
Create consistent, differentiated messaging
What makes your business and its ESG journey different from another? When analysing what you need to highlight to investors, you have to think about your unique circumstances. You should give them reasons why they should invest in yoursustainable businessrather than one of your competitors.
Once you understand your USP, make this a consistent theme of your messaging. Lean into making that the thing you communicate about the most. It will be what you become famous for, and you can own that corner of the market.
Marketing is not always external and gaining that internal brand buy-in for your ESG efforts is important, too. Gaining the support of your employees helps to create loyalty and makes it easier to implement ESG strategies that work.
When your staff understand the reasons and the vision, they can help make it a reality. Suddenly, this internal focus creates positive and attractive external optics.
How is ESG different from sustainability?
Although it is common to use sustainability to relate to the aims of ESG, they are not quite the same thing. ESG is a framework for measuring the environmental and social performance of a company’s policies. Sustainability is the general term for how the actions of a business affect the outside world.
What is an ESG framework?
The ESG framework is the set of rules, procedures and guidelines a company uses to deliver on their ESG commitments and to report its ESG progress.
What is an ESG rating?
ESG ratings are scores given to issuers by a variety of agencies which mark them on their achievements in a range of areas relating to the environment, social issues and corporate governance.
ESG-related communication needs to be honest, authentic and consistent if it is to cut through in a crowded marketplace. A unique take on sustainability will help to deliver the required message to stakeholders. It is important to gain buy-in from leadership as that filters down to employees and encourages them to integrate ESG practices into their work life. Marketing teams must work hard to share a coherent and compelling message with potential investors and accentuate the value and benefits of the programme that the company has implemented.
Euronext Corporate Services’ ESG Advisory helps issuers reduce risks, attract new investors and grow profitably with a tailor-made ESG strategy. You can request a demo today to find out how you can amplify your ESG story and attract the investors you want.