“ESG is a threat to the American economy” – Florida Governor Ron DeSantis

No Elon, ESG is not the devil. And I’m sorry Governor DeSantis, ESG is not a threat to the American economy. However, just like the devil, ESG is in the details.

The anti-ESG movement seems to come in waves. Anytime an article appears with a slandering view of ESG, the community rallies around it, shares their disbelief, decries the woke left, then the murmuring fades until the next piece of misguided information emerges.

The most recent wave of criticism was ignited by an article that pointed out that some tobacco companies had better ESG scores than Tesla. This seemed to summon all of the ESG haters to their quarterly meeting. “How can Big Tobacco be more ethical than Tesla?” “There’s no way that Tesla is worse for the environment than smoking.” “ESG is a scam.” “ESG is what’s wrong with America.”

If ESG was a measure of the most ethical companies, or the most environmentally friendly companies, or even the most diverse companies, then I’d jump right on board with those arguments and be shouting from the rooftops that ESG is a scam.

But that’s not what ESG is, and that’s where almost everyone in the anti-ESG movement has it all wrong. It’s a complex topic so I don’t blame anyone for not understanding, but decrying something that you don’t understand — that’s blameworthy.

“So, Andrew, if ESG isn’t about being environmentally friendly, ethical, woke, or whatever other phrase you want to give it, what is it about?”

When you boil it all down, ESG is about investment risk. That’s it. A company’s ESG score signals to investors how safe from environmental, social, and governance (ESG) risks a company is.

“Okay. So it is about the environment then. I thought you said it wasn’t about being environmentally friendly.”

True, it is about the environment, but not in the way that you’re thinking. It’s not about how many trees a company hugs, it’s about how well a company is managing its material environmental risks. Like it or not, legislation is changing and regulations are coming that will mandate companies to lower their greenhouse gas (GHG) emissions. If a company is not prepared for this reality, they run the risk of incurring fines, disruptions in production, or even foreclosure. Those are things that investors want to know about before sinking their money into a company. ESG analyzes how well a company is managing their exposure to environmental risks like the changing regulatory landscape.

“Alright, but Tesla is a good environmental company. Their cars have no emissions. How could they score less than a tobacco company?”

That’s a good question. Now we’re having a real ESG conversation. Tesla cars might not produce any emissions when you drive them, but producing the steel, aluminum, and other materials that make the parts of a Tesla car does create emissions. As well, you have to factor in where the electricity comes from that charges the electric vehicles — are there any emissions involved in that?

To keep things simple, however, let’s say that Tesla produces zero emissions, or negligible emissions. (Side note: there are more factors that make up the “E” part of ESG than just GHG emissions, but let’s keep it simple for now.) There are also the social and governance risks to factor in, and that’s where Tesla typically doesn’t score well on the ESG ratings.

“What are social and governance risks?”

They come in different forms and admittedly are less straight-forward to measure than the environmental risks. However, under the “S” they typically measure things like employee satisfaction and working conditions, community relations, and supply chain issues like human rights abuses.

The “G” concerns itself with corporate governance. Are there conflicts of interest on the board of directors? Does the company conduct itself professionally and abide by the laws in the countries where it operates? Do they have a history of giving or receiving bribes? Do they have internal processes to ensure that they are responsibly managing their ESG risks?

Everything about ESG is really designed to protect the investor from unforeseen risks.

“So tobacco companies have less risks than Tesla?”

It’s not necessarily that they have less risks, but rather that the ratings company decided that the tobacco company is managing its risks better than Tesla. That’s what the better ESG score means.

“Okay, I think I get it. But I still have all this built-up ESG hate.”

Haha that’s fine. You don’t have to like it. But if you’re going to invest in a company, it might be worthwhile to find out how they are managing their ESG risks.

And you know what? Since you stuck with me until the end, I’ll give you some better guided criticism if you still want to be in the anti-ESG group. Don’t just call it the devil, or a scam, or evil, because that’s laughable to those of us who work in and understand ESG. However, each ESG rating company has a slightly different formula for how they determine ESG scores and what factors into the E, S, and G. This lack of standardization is actually one of the major critiques of ESG and the main thing that companies dislike about it. So next time you want to talk about what you don’t like about ESG, talk about the lack of standardization and how it takes companies a lot of time and resources to understand what they’re supposed to submit to the different rating agencies, rather than just saying ESG is what’s wrong with America.

I hope this helped. Have a great day.

Image by Mohamed Hassan from Pixabay

The post Let’s Clear Up the ESG Confusion Once and For All first appeared on Copywriting | ESG | Sustainability.

Companies that have good ESG scores are sometimes grouped into an ESG fund offered by different financial services companies. However, many people confuse this to mean that every company listed in the fund is an environmentally and socially responsible company. That isn’t always the case. While ESG impacts are a consideration, remember that ESG is all about informing investors how well a company is managing its ESG risks.

Let’s take a closer look at ESG risks vs ESG impacts.

First, there are the ESG impacts that business activities have related to people and the planet. How many tons of carbon does a business emit each year? What is a company’s relationship like with the community it serves? How much water does it use? What is employee satisfaction like? Some areas are easy to measure with numbers (like carbon emissions), whereas others require a more qualitative approach. A business’ ESG impacts help to determine their ESG risks, which is the ultimate goal of ESG.

ESG risks are the main driver behind ESG reporting. Investors want a clear understanding of how businesses are managing risks related to our changing natural environment, the regulations associated with the energy transition, the evolution of societal norms and laws, the management of supply chain disruptions and human rights issues, and the corporate governance structure that makes it all happen.

Let’s break down the E’s, S’s, and G’s to take a closer look at ESG risks.

There are two main parts to environmental risk: physical and transition.

Physical climate risks consider business assets that are at risk of significant damage due to extreme weather events, rising sea levels, and changes in climate. Dry conditions leading to a forest fire is a physical risk to a logging company or to a business that has an office close to a wildfire-prone area.

Transition climate risks consider the world’s transition to a low-carbon economy. Laws, regulations, and reporting requirements all create transition risks. Can a mining company adapt when the government imposes a strict emissions cap? Does a bank have a robust net-zero strategy complete with science-based targets? (Because governments around the world are mandating that they do.) These are examples of transition risks.

Failure to be prepared for physical climate risks can cause damage to company infrastructure, forcing disruptions and incurring repair costs. Failure to comply with transition risks can bring hefty fines or temporary shutdowns. These risks can affect the bottom line of a company and are important for investors to know about.

Under the social category are things like labour rights, working conditions, supply chain issues, and community relationships. When we trace materials through the supply chain to its original source, sometimes you find things you wish you didn’t. Forced labour, child labour, and other human rights abuses are unfortunately a reality in the supply chains of some raw materials. How do companies manage these issues? Germany has a law requiring its large companies to examine their supply chains for human rights abuses. A similar EU law is incoming. Are companies ready for that?

The discovery of human rights abuses in a company’s supply chain would not only be a horrific finding for humanity, but it would shatter that brand’s reputation. Companies that have conducted supply chain due diligence and can assure the responsible sourcing of materials are properly managing this component of their social ESG risks.

The ’G’ considers corporate governance and checks that structures are in place to manage the ‘E’ and ‘S’ factors. This includes things like goal setting, science-based targets, strategies to reach those targets, as well as methods in place to measure, track, and report on progress. The ‘G’ also looks at the board of directors of companies for conflicts of interest, corruption or bribing concerns, and the diversity of the board and executives.

All of these factors make up what we call ESG and are a way to ensure investors that their money is safe from environment, social, and governance risks.

Photo: Scott Webb via Pexels

The post What is ESG? Making It Easy To Understand first appeared on Copywriting | ESG | Sustainability.

These messages are everywhere because that’s what consumers and investors want to hear — they want to support a company with a purpose. The overflow of messaging though tends to drown each other out. You see the messages but how much do you really pay attention? Most of these messages fall flat, in one ear and out the other – or the words are read but not even a trace of a thought is given to them.

How do you stand out when people are becoming numb to the sustainability overload? Let’s look at 5 ways you can connect with your consumers that will get them to stop and think even for just a second, hmm, that business really does care about the planet and its people.

1. With no strategy, there is nothing to communicate

Too many companies are quick to make sustainability claims without actually developing strategies. This is how companies get into trouble with calls of greenwashing, and once labelled a greenwasher it takes A LOT of work to relinquish that tag.

To avoid greenwashing you want to be communicating successes that you’ve been working towards, not just things that fell into your lap. If your company is based in a region that has emission-free electricity, don’t get on the rooftops to shout out how sustainable your company is. It can be part of your messaging, but because this is a matter of location over effort, don’t make it your focal point.

Develop a strategy that engages internal and external stakeholder priorities, conduct an assessment to identify the areas of your business that could be improved, benchmark against your competitors, develop goals and targets along with metrics to measure your progress, and once everyone is agreed on your sustainability strategy, then we’ll climb up onto that rooftop to share your story.

2. Transparency is everything

This is the golden ticket. Be open, be honest, and be transparent. There’s not much worse than finding out that someone you trusted had been lying to you, or unfaithful, or obscuring the truth. Consumers and businesses work the same way — if you lose trust with your consumers, that’s a hellish road back I wouldn’t wish on many people.

Don’t run that risk. If you’ve discovered a part of your business that emits more greenhouse gases than originally thought, don’t ignore it or cover it up, own it. Finding extra emissions is all part of the sustainability journey. Acknowledge the emissions and develop a plan to lower them. You might be the dirtiest company in the world, but if you make open and honest commitments about where you stand today, where you want to be in one, five, ten years, and how you plan to get there — that’s what people want to hear.

Even if you miss your targets, tell people that you missed your targets. But investigate into why that happened and what steps you’re taking to correct it. Honesty and transparency are what consumers, and people, respect.

3. Commit to your communication

It sounds easy and everyone will be on board at the start, but sometimes that spark fades. Pressure from shareholders about hitting sales targets, or unforeseen bumps in the road can test your commitment to the cause. Stay determined and continue communicating.

Public communications act as an accountability mechanism as well. If your sustainability targets are out there publicly, it’ll drive your team to do everything they can to hit those targets. Don’t underestimate the motivating power of public sustainability targets.

4. Go where the people go

Know your customer demographics and know through what medium you can reach them. Is it television commercials, Facebook ads, TikTok videos, product packaging, news coverage, or somewhere else? Like any advertisements, sustainability messaging is only successful if it finds the right people.

Do you want to know the top 3 locations where consumers prefer to learn about a company or brand’s sustainability programs? I have demographic data by age, gender, income, and geographic location. Send me an email, introduce yourself, and I’ll let you in on some industry secrets.

5. Words have more value than numbers

When filing reports or mandatory disclosures you’ll have to break things down by numbers. How many tons of carbon did you emit, directly and indirectly? How many litres of water did you use? How much did your inorganic waste weigh? The problem is that numbers don’t resonate with people.

Saying that you’ve reduced deforestation by 25% is significant, but it doesn’t connect with people as much as a story of how a single person has been impacted. Instead of just posting the numbers, talk about Maria, the Colombian woman from a small town in the southern Amazonas region, and how her life has been impacted.

Make Maria’s story the focal point. Numbers are important but they have a difficult time eliciting an emotional response from people. Put a face in front of the numbers and your messaging will be exponentially more effective.

6. Find someone who knows how to tell your story

I said five secrets but if you’ve come this far, I’m giving you a bonus.

It’s a tricky balancing act. You’ve likely got people who know how to sell, and who know how to write great copy, but how much do they know about ESG, DEI, net-zero strategies, and sustainability reports? If you’ve got someone in your organization that fits that bill, hold on to that person tight and pay them right, they don’t come around often.

It might serve you to look externally to find the right storyteller. External hires have experience in sustainability communications and have likely worked with many other companies, amassing a wide range of knowledge, perspectives, ideas, and expertise. However, these pros aren’t always easy to find, and they can be in high demand.

Luckily, I know just the right person for the job. And if they’re already booked, I can refer you to other trusted sustainability copywriters. Make sure you stay ahead of your competitors. It’s not the most sustainable company that consumers will flock to, it’s the company that communicates their sustainability the best. Send us an email and we’ll find the right person to tell your story.  

The post Top 5 Sustainability Messaging Secrets You Must Know first appeared on Copywriting | ESG | Sustainability.