There are many definitions of ESG, there are different ways of measuring progress towards ESG goals and there are multiple ways of understanding what ESG factors most impact reputation, and why. According to Steve Earl, a Partner at corporate communications and strategy consultancy BOLDT, those multiple versions of the truth are unavoidable, but expect consolidation as companies begin to require more objective data.
At a time when nations around the world are relying on data to unmask the facts about how we emerge from the grip of a pandemic, the whole truth has rarely been at such a premium.
But if you look at the media reports around ESG investing and big business commitments to sustainable change over past weeks, you could be forgiven for thinking that the whole truth was still out of reach.
That’s because defining what ESG is, agreeing a frame of reference for business performance against it, and then taking an evidence-based approach to tracking and demonstrating progress over time is still open to interpretation. Even the word ‘sustainable’ can be taken many ways.
The result has been that there is no single version of the truth around ESG, despite a fairly common consensus that achieving one will better hold businesses to account, and support fair and transparent reporting on achievements.
From a reputation management perspective, this poses several challenges. Firstly, not having standardisation creates unwelcome wiggle room that can deflect from the reputational gains that can be made from demonstratable progress against ESG goals.
Secondly, coming up with incisive strategy for pursuing an ESG change agenda and getting stakeholders on board with it is harder when different data sets present different insights.
And thirdly, being able to identify what matters most to a business is tricky – or more importantly, subjective – if analytical approaches aren’t rooted in standard definitions. If they’re not, the understanding of reputation risks and strengths related to ESG factors will lack objectivity.
Things are changing, and standard definitions are beginning to take hold. SASB – the Sustainability Accounting Standards Board – is now probably the most comprehensive and widely-accepted. With definitive ESG frameworks in place, we can begin to really get to grips with where a business’s many different stakeholders, not least investors, really stand on the many different ESG issues, and even probe why that’s the case.
This ‘multiple versions of the truth’ challenge has given rise to multiple approaches to assessing ESG-related risks and opportunities too. Whereas some analysis relies on market research, for example mass polling, to gauge opinion and cross-index that with ESG factors, others take a more objective view by scanning everything in the public domain. The advantage of the latter approach is that insights can be interrogated to understand how that picture has changed over time, rather than relying on the more cyclical, ring-fenced and ultimately subjective data from surveys.
What does this all mean for a business trying to get a clear and unequivocal view of the ESG factors that matter most to them, and how to approach them strategically? For now, it means sifting through the multiple versions of the truth available to find the most objective one for them, based on the most standard definitions. In time, the more standardised definitions become, the more straightforward – and unequivocal – it will be to prove impact.
The truth will be out there, but for now we’re often dealing with truths.