If you are trying to reach millennials and Gen Z as consumers or employees, there’s a good chance ESG (environmental, social and governance) conversations are part of your day-to-day work.
In 2019, Business Roundtable redefined the purpose of a corporation to indicate all stakeholders—customers, employees, suppliers, communities and shareholders—are inseparable and therefore one cannot flourish unless all do. Coupled with these guiding principles, the pandemic and the racial reckoning of 2020 served to escalate the priority of ESG in business.
In fact, according to an Investopedia survey from 2021, the majority of millennials (64%) believe the principles of ESG will soon become standard for all businesses, and 72% want to invest in brands that align with their values.
What is ESG, Exactly?
Seems simple enough until you consider that ESG has become entangled in a political battlefield. Still, the majority of the public (57%) are entirely unfamiliar with the terminology, according to a recent APCO survey.
“ESG as a term has become problematic in the sense that it's rarely defined in a consistent way,” adds Julie Jack, senior director at APCO Impact and one of the authors of the report. “I've seen articles where it refers to corporate strategy, or sustainable investing, or climate or DEI.”
While conversations on social related to ESG communications increased 42% from Oct. 5-Dec. 31, 2022 to Jan. 1-March 29, 2023, it’s fairly evenly split among positive (39%) and negative sentiment (37%). Roughly one-quarter (24%) of the conversation volume has been neutral, according to social media analytics company Sprout Social. The data includes mentions on Twitter with search terms including: “ESG” or “#ESG” or “Environmental social governance” or “ESG efforts” or “ESG strategy.”
While ESG, by definition, stands for environmental, social and governance, the public’s explanation of the term as a concept also varies. While 31% of APCO survey respondents associate it with a company’s sustainable initiatives, 16% and 4% of respondents believe it is focused on business meddling and the ‘woke agenda,’ respectively.
Thus, as the APCO report advises, “companies should be cautious in their use of the term and assume it needs to be defined in ways that are relevant to business impact.”
Sticking to Your Values is Good for Business
The idea that ESG is good for business, at least, seems to have “bipartisan agreement,” says Megan Tuck, SVP at Bliss Group and leader of the Bliss Impact Specialty Group.
Companies can fall into a trap, though, by “responding to some of the political arguments around [ESG]…When you dig into it, you find that both sides of the aisle agree on some fundamentals about how ESG supports business and capitalism…you want your ESG communications, messaging and programs to outlast the swing and how people talk about it.”
APCO found that, despite partisan associations, most people do believe that businesses should focus on purpose and responsibility.
“We advise clients to take an audience-specific view to how they talk about ESG. It is still relevant and should be used while talking to an investment audience,” says Jack. “For consumers, [ESG is] not a term that was ever intended for use to broad consumer audiences.”
Instead, she advises, “build the business case and speak to how those issues directly impact business and society.”
The first step to an ESG communications strategy is a stakeholder evaluation and audit, says Laura Taylor, president of Silverline Communications. She advises that clients first determine which of the three pillars is most important to the business, rather than trying to accomplish everything at once.
“Businesses need to have values and…they need to build the case for why they're addressing these issues: what is the business benefit? What is the connection to the business?” agrees Jack.
Silverline connects with its clients’ external audiences, including investors and customers, to get candid feedback, which in turn informs the client’s narrative. Questions may include why an investor chose a particular organization, and how it views the company’s mission aligning in the future.
“A lot of times when we're talking to clients about ESG, it is about… have we defined what your corporate and social purposes are, how those things are linked, and how they impact your audiences,” says Tuck. “ESG, by itself, is not going to mean much to [the public]. It may mean things to analysts reading through quarterly earnings reports. But it is more about your social impact and your corporate purpose. Why do you exist as a company?”
She points to Ben and Jerry's as a prime example of a company who is doing it right. “I don't know that Ben and Jerry's uses the term ‘ESG’ very frequently, but they've made it very clear their feelings on uplifting society and throwing their weight behind movements and causes that they care about, and look how that resonates with their employees and customers.”
Transparency and Accountability for the Environment
With this increased consideration of ESG initiatives, more organizations are being called out for a lack of accountability, or worse.
On the environmental front, specifically, a 2022 Harris Poll survey highlighted that more than half (58%) of C-suite leaders globally have admitted to greenwashing.
And, in an effort to attract more employees and consumers, greenwashing has become more widespread and encompasses a wider array of tactics, according to a January 2023 report from financial think tank Planet Tracker, entitled “The Greenwashing Hydra.” These tactics include green crowding, green lighting, green shifting, green labeling, green rinsing and green hushing.
All sources for this story recommend transparency when it comes to communicating both a company’s initiatives as well as progress, even if that progress has been slow.
“We really encourage our clients to pull back the curtain on what they're doing. We're not saying everybody has to have it 100% right…The expectation is not perfection; the expectation is transparency,” says Melody Serafino, co-founder of No. 29 Communications.
No. 29 Communications was founded in 2013 to focus on sustainability and impact, years before these concepts became mainstream. The agency is also launching an advisory firm made of sustainability experts, scientists and journalists to ensure the right questions are being asked during onboarding.
A big red flag for Serafino is when a company makes a bold statement without explaining a process to achieve its ambitious goal. “It's like saying, ‘we're going to achieve carbon neutrality by 2030.’ Okay, sounds great. What does that mean? If you can't articulate the path to get there, then I'm a little skeptical that there's actually a clear path to get there,” she says. “The quick-fix narrative just does not work in this space.”
Instead, she advises, “bring the customer along for the journey.”
A client example is sustainable sneaker brand VEJA, which includes extensive information about the production chain on its website, as well as a video that provides an in-depth look at how and why the company came to be.
On the environmental front, a proposed SEC (Securities and Exchange Commission) rule is expected to be released by the end of April. The new rule, put forward in March 2022, is meant to standardize disclosures for investors of public companies.
The SEC’s proposal could pave the way for more transparency for all companies.
“That said, reporting is a not a proxy for progress,” writes Kenneth Tucker for HBR. “The focus on reporting may actually be an obstacle to progress—consuming bandwidth, exaggerating gains and distracting from the very real need for changes in mindsets, regulation and corporate behavior.”
“Regardless of what the SEC says about what the standardization or disclosure should look like, it's still meaningful for companies to do something by way of an authentic storytelling narrative. But it should be related to your corporate purpose,” argues Tuck. “You can't do good business without doing good for society in some way.”