When it comes to ESG, often the obvious action is not the one that will deliver the greatest change.
Using recycled paper and long-life cups is easy. Coming to terms with a pattern of persistently high energy use, wasteful water habits or soil degradation is hard.
It’s simple to wear a ribbon in support of women. It’s challenging to rebalance genders on your board.
It is an effort of moments to sign a petition on fair wages but requires painstaking, complex consideration to secure your supply chain against the risk of modern slavery.
But as the pressing challenges that ESG measures seek to address continue to grow, so does the pressure on companies to demonstrably take actions that make a lasting difference.
Your stakeholders appreciate all your efforts — but they also want to see real change.
And so-called “warm fuzzy words” ring hollow unless you can measure, monitor and report on the genuine action you have taken to back them up.
It’s a key finding of a new report by RepTrak, in its retrospective look at the ESG behaviour of companies listed in 2022 on the NASDAQ , home to some of the most valuable corporations in the world.
It looked at 70 of the top 100 listed companies, ruling out any that were too obscure to register in the public sphere, and examined not the actual ESG performance of these mega businesses but how that performance was perceived.
Across the board, scores were down.
People thought companies were dragging the chain on environmental performance, failing to meet expectations on social measures, and performing poorly on corporate governance.
But the most interesting finding was the reason why.
Unlike 2020 and 2021, when corporates in the midst of the pandemic recognised it was critical to back their ESG stories with action, RepTrak reports that once the immediate threat receded so did their commitment — at least in the public eye.
“When there was so much ESG-related material to discuss, companies leaned into their communications strategies,” the report says, pointing to slogans like, “We’ll get through COVID together.”
“But 2022 was the time to fulfil those promises and those same companies came up short.”
In other words, “once the warm fuzzies wore off,” and stakeholders failed to detect change, reputations began to slide.
While this is a report focused on a relatively small section of very large multinational and US companies, it’s a sobering point for all of us who have seen corporate enthusiasm for ESG wax and wane.
But as the RepTrak report finds, your stakeholders, employees and customers are watching, and marking you down for the gap between your performance and their expectations.
So what does it take to get beyond the warm fuzzies?
Our belief is that you have to identify the room for change and then demonstrate you can follow through.
In our world, that means helping clients meet the goals they set for their people and the planet, whether that is making workplaces safer and more accessible, or supporting clients in tracking, measuring and improving environmental performance.
For your world, it might be identifying the metrics that matter to your stakeholders, figuring out how to measure and monitor them, and holding yourself accountable and transparent about the results.
None of us will find real change easy, but if we want to keep and grow the trust of our stakeholders, it’s time to act.
