ESG: the journey from finance to communications
Committing to ESG means striking a balance between numbers and narrative
Finance and storytelling haven’t always been natural bedfellows.
But the explosion of environmental, social and governance (ESG) has put finance in a different light. More than ever, the ‘numbers people’ also need to be good storytellers too.
While telling the story has always been part of the job, there is now a greater impetus to communicate what a transaction says about their organisation, report against a set of ‘non-financial’ metrics, and reflect what it means in the context of the group’s operations and wider strategy.
Doing it well and in a concise way is trickier than it first seems. In fact, it was a central driver for launching Social Invest last autumn, our communications consultancy dedicated to purpose, environmental, social and governance (ESG) and impact comms, primarily in the UK placemaking and built environments.
Our work to-date has put us in prime position to see how this convergence has panned out so far across some of our core sectors such as housing, regeneration, property and infrastructure.
We recently shared a snapshot of what we’ve been up to since setting up Social Invest, delivering 15 projects (so far) across ESG, investor and broader strategic communications, and have been busy on the webinar and conference circuit too.
One thing that’s become clear from the many discussions we’ve had with finance leaders, is that a lot of people are still finding their way with ESG. So here are a few observations from the team at Social Invest:
1. ESG’s ‘value proposition’
Primarily, ESG is driven by a desire (or need) to communicate more holistically with investors and lenders. But holding yourself to account on ESG commitments has broader value and potential as a form of communication with staff, customers, peers and partners. Put simply, ESG provides focus. It’s a channel through which you can combine performance with vision, bringing together your achievements and commitments in areas like sustainability, human capital and social value.
That said, we all need to be honest about its limitations, and its imperfections. Until we see it bound by standardised regulation – which is only a matter of time in our view – it will remain open to a level of interpretation.
That places the ball in the court of business and investors to use it wisely, or risk undermining its credibility. There is no reason why our sectors shouldn’t help to shape where ESG goes, and what it means. After all, it’s in everyone’s interests to do just that.
2. Taking a step back
Notwithstanding the groundwork that goes into the discovery and data stage, it is ultimately quite straightforward to report ESG criteria, should your main objective be getting a report over the line or ticking a box.
That serves a purpose of sorts. But you need to be prepared to go deeper when investors and other stakeholders come knocking.
If you want ESG reporting to be credible and meaningful, then you’ll need to think about how and where it sits with your business strategy; what you’re measuring and why; where you are trying to get to; and, importantly, how you engage people and get buy-in across your business.
We are seeing more organisations that enter into the ESG reporting process take a step back from the metrics and measures during the process to ask: what are we really trying to achieve, and does this tell our story in a way that not only speaks to our key audiences, but serves our best interests.
3. Bridging the finance and communications gap
We’re also seeing where ESG can bridge that gap between finance and communications.
ESG is at its best when treated as a ‘merger of equals’ between finance and communications.
It requires a meeting of minds between the specialists in these areas. Finance people need to be thinking strategically about communications, and have to be wiling to recognise the value beyond the bottom line.
And communications people need to be prepared to get to grips with finance, and consider it in the context of everyday PR issues.
There is a natural intersection between finance and comms: in how it is deployed to serve the organisation and its customers. This connection is now being made explicit via ESG and sustainable finance transactions.
It makes the message clear that finance is not being done for finance’s sake. It’s there to serve the business plan and the wider corporate strategy. This is where the finance story becomes much bigger than a transaction; it’s about the wider value it delivers, and how it helps an organisation meet its objective and core purpose.
You can have the clearest vision in the world, but no business will achieve its purpose or its objectives without financial strength.
We continue to share the view that ESG is a bare minimum for any business. It places what businesses should be doing anyway into a framework, with the intention to deliver measurability and accountability. But it can also set organisations on a path to a greater end-goal: a commitment to positive environmental and social impact.
The real value here isn’t a marginal saving on a funding transaction with an ESG label on it.
It’s about demonstrating a commitment to key values and principles; behaviours and performance of the business; and a step towards a fairer, better society and a greener, more sustainable environment.
It also happens to be a significant opportunity for organisations to demonstrate their values, how they are managing material risks that have traditionally sat outside a P&L, to tell their story and set out what they stand for and where they’re heading as a purpose-driven business.
This combination of finance and communications is actually the best of both worlds. A narrative that can be evidenced gives your story the credibility it needs.