Take control of SRI/ESG investor communications

The emergence of the business sustainability / corporate responsibility agenda forced companies to develop and articulate a new set of priorities that expanded beyond their profit-motive driven business objectives.  In order to give these newly adopted social and environmental responsibilities sufficient prominence and focus, they were often developed with a degree of independence from mainstream business priorities – according to newly constructed norms and frameworks of best practice.

The ‘mainstreaming’ of this agenda now requires companies to re-integrate their sustainability practice within their core business practices and processes and to demonstrate that this can be done in a way that enhances not only business effectiveness but also share price performance.

To do this, companies will need to look beyond the easiest measures (e.g. that reducing resource consumption and waste reduces cost) to a wide range of performance areas including customer demand, asset valuation, employee turnover etc.

While this will not be straightforward, it is made easier by the fact that in many areas the business environment has consistently evolved to place ever higher importance on the environmental, social and economic performance of companies.

Identifying ‘mainstream’ overlap

For progressive companies that want to advance this integration agenda, the following process may help them to identify suitable themes for communicating to investors:

• Make a list of the five issues that are of greatest current interest to ‘mainstream’ analysts and investors.  While the investor relations department will already have a good idea of this, it can be reinforced by asking for a sample of recent and comprehensive sell-side reports on the company and sector
• Make a list of the five principal sustainability issues facing the company and the company’s response
• Identify the overlap (or point of closest connection) between the two
• Make these overlap issues the focus of any communication to SRI investors

Operating environment / context

To complete their analysis, SRI investors need to understand not only how a company is responding to the broad challenge of sustainable development but also how it is reacting to the specific tangible manifestations of this challenge such as regulation, changing customer preferences, developing employee expectations, emerging (and receding) product opportunities etc.  They will also need to set this within the operating context of business and sectors.  While investors should do much of this background work themselves, in practice they often are not able to keep up with regulatory developments and consumer trends etc.  Companies should actively grasp this opportunity to improve investors’ awareness of the operating environment for sustainability programmes.

Dodge the data monkeys

Some argue that investors’ awakened interest in sustainability factors will require the collection (by companies) and distribution of vast sets of environmental and social data.  This is nonsense and is based on the knee-jerk assumption that because ‘mainstream’ investors use data, all data must be good.

Although some data will always be required to validate and communicate company strategy and sustainability response, it is far more important that companies consider carefully their business strategy, the constraints and opportunities that sustainability will present to them and communicate this.  For most companies, it will be more important to present better context for existing data than ever more granular data.

• Companies should not ask: What sustainability data can we collect?
• Rather they should ask: How must we respond to the challenge of sustainable development? What data will most accurately monitor that response?