What Are ESG Communications? Tips for Effective ESG Strategies
In today’s operating environment, an organisation’s ESG (environment, social and governance) practices are more critical – and heavily scrutinised – than ever.
Expectations about how businesses should conduct themselves have evolved – and it’s not just consumers who are hyper-aware of ethical and sustainability considerations. Employees, contractors, suppliers, investors, distributors, professional services firms, government agencies, local community groups and the public are some of the many stakeholder groups that decide who they work with based on ESG criteria.
In 2024, proactive identification, management and communication about the environmental, social and governance issues relevant to an organisation’s sector isn’t a “nice-to-have” – it’s a business imperative. PwC’s 2021 Global Investor ESG Survey found that an organisation’s performance against ESG metrics has become a critical consideration for investors globally, with companies that fail to act on ESG issues at genuine risk of losing investors.
An overwhelming 79 per cent of survey respondents said the way a company manages environmental, social and governance risks and opportunities is an essential factor in their investment decisions, while almost half expressed they were willing to divest from companies that aren’t taking sufficient action on ESG factors.
But what are ESG communications and why should communication professionals know about them? Let’s dive in.
What are ESG communications?
ESG stands for Environment, Social and Governance. This term encompasses three main areas (besides finance) that can impact a company’s long-term performance.
ESG was originally a framework for investors who wanted to make informed decisions about investments. However, as expectations for businesses have continued to evolve, more consumers are paying attention to the corporate social responsibility (CSR) of organisations and whether the company uses their profits for more than just gain.
As a result, companies are increasingly adopting ESG as a framework for illustrating their corporate responsibility and goals. Effective ESG communications can help stakeholders understand why your organisation is investing in environmental, social and governance performance, as well as what areas you are choosing to focus on.
So what do the three factors of ESG relate to?
ESG environmental factors
The “E” in ESG refers to environmental impacts - which are among the most prominent ESG criteria in Australia and are often a focus in ESG communications.
Environmental factors for an organisation may include strengthening energy efficiency and adopting renewable energy, conserving natural resources, managing waste responsibly, reducing carbon emissions and ensuring a sustainable supply chain are common metrics for businesses reporting on environmental sustainability.
ESG social factors
An organisation’s social responsibility encompasses a wide range of impacts the company has on people and society.
Communicating on ESG social issues might encompass reporting on ethical labour practices (including human rights, workplace safety and wage equality), strategies in place to support diversity and inclusion, and community engagement and philanthropy.
ESG governance factors
The “G” in ESG refers to a company’s governance and encompasses everything from its board and management structure to corporate policies, compliance with internal and external standards, and its approach to auditing. Governance-focused communications can highlight that a company acts ethically, is transparent, pursues diversity at all levels and is accountable to its shareholders.
Regular ESG communications give organisations an opportunity to share their progress toward environmental, sustainability and corporate governance goals. While ESG reporting isn’t yet mandatory, the Australian Government has flagged intentions to make climate-related financial disclosures a non-negotiable for major companies and financial institutions.
Why are ESG communications important?
Effective communication is critical in driving ESG engagement by demonstrating an organisation’s commitment to and progress against key environmental, social and governance measures.
Enhance a company’s reputation
Today, consumers want the companies we support to operate ethically and demonstrate a genuine commitment to continually improving their environmental, social and governance credentials. A strong ESG profile and record can strengthen a company’s brand, solidifying its position in the market as a responsible and trustworthy business.
Attract investors
Investors are increasingly considering organisations’ ESG performance when making investment decisions. While traditional financial analysis doesn’t necessarily capture ESG data, today’s investors are looking to a company’s environmental, social and governance metrics as an indicator that a business is less risky, better prepared for uncertainty and ultimately advantageously positioned for the future.
Drive employee attraction, engagement and retention
People, particularly Millennials and Gen Zers, increasingly want to work for companies whose values resonate with their own. Recent research by global professional services firm Marsh McLennan demonstrated that top employers, as measured by employee satisfaction and attractiveness to talent, have significantly higher ESG scores than their peers.
Build customer loyalty
Companies that effectively communicate their ESG commitment can drive customer loyalty by demonstrating value alignment, making customers feel good about who they’re giving their business to. A strong ESG strategy and supporting communications plan give existing customers a reason to stay and attract new like-minded customers.
Challenges in ESG communications
While ESG is certainly on the radar, many organisations still don’t fully understand exactly what it is or what it means for their company. With consumers, employees, shareholders and the public looking to businesses to show leadership in their ESG efforts and communications, ESG teams are facing common challenges, particularly in the area of sustainability.
Greenwashing
Greenwashing involves an organisation’s communications giving investors or the public misleading or false information about the environmental impacts of their products and operations. Using nature-based imagery and vague buzzwords like “natural”, “green”, or “eco-friendly” are standard greenwashing strategies.
The Australian Securities and Investments Commission has flagged that taking action on greenwashing is an ongoing enforcement priority for the agency.
Greenhushing
Greenhushing refers to companies that actively avoid communicating about their environmental performance. There are a number of factors driving this reluctance, including fear of scrutiny from investors, customers and the media, particularly in the face of changing regulations.
Stakeholder scepticism
Bombarded with claims about environmental and social credentials, consumers are cautious and often downright mistrusting of ESG claims. The Consumer Policy Research Centre (CPRC) found that at least 50 per cent of people surveyed said they were worried about green claim truthfulness. Interestingly, nearly half of respondents said they would stop buying from a business if they discovered the company had engaged in greenwashing.
Tips for better ESG communications
For communications professionals, knowing how to effectively communicate about environmental, social and governance (ESG) performance is essential in today’s operating environment.
Tips for elevating your organisation’s ESG communications include:
Create an ESG messaging strategy
Define a clear ESG communications strategy that sits alongside your overall corporate communications strategy. An ESG communications plan should include key audiences, communication channels, frequency and who’s responsible for executing these communications.
Tell a compelling ESG narrative
Great ESG messaging goes beyond data-driven reporting on important metrics – to cut through, your environmental, social and governance communications should tell a story. Share with your audience why these issues are important to your organisation, how your ESG focus benefits the world you operate within and how it ultimately drives business performance.
Be transparent
Transparency in ESG communications is crucial. Being upfront about your company’s environmental, social and governance commitments and performance – including recognising where you’ve fallen short of targets – is essential to building trust with all stakeholder groups. Likewise, if your organisation is at the start of its ESG journey, your communications should reflect this.
Educate stakeholders
Educate your stakeholders – including internal audiences – on your ESG commitment and why it’s important. This includes articulating the “why” behind your ESG efforts and making environmental, social and governance considerations part of decision-making across your organisation. External stakeholders like investors need to understand how the ESG steps you’re taking create value and contribute to a stronger financial future.
How can I improve my ESG communication skills with ECU Online?
ECU Online’s Master of Communication helps you learn to harness the power of communication and apply it to various contexts. Students develop technical and strategic communication skills that enable them to design and implement solutions that address current organisational challenges, including environmental, social and governance communications.
Delivered 100% online, ECU’s accelerated Master of Communication includes a module on Ethical and Responsible Communication, where you can explore the critical environmental, social and governance issues facing organisations today and learn how to respond to these issues with best practice ethical and responsible communication.
You will develop an understanding of the UN Sustainable Development Goals and how these relate to organisations and build the key skills required to incorporate ESG factors into communication frameworks.
With a focus on real-world applications and hands-on experience, the ECU Online Master of Communication equips professionals with skills to benefit their careers in a range of contexts.
Speak to an ECU Online Student Enrolment Advisor on 1300 707 760, or email future.student@studyonline.ecu.edu.au to request a course brochure.
