News and Insights
The power of purpose: Why communicating your ESG goals matters
April 30, 2024
In the evolving realm of corporate dynamics, a notable transformation has unfolded. Beyond mere financial metrics, organisations are scrutinized through the lens of Environmental, Social, and Governance (ESG) criteria in today’s increasingly socially aware world. In fact, a study conducted in 2022 found that majority of institutional investors (88%) treat ESG issues with the same degree of care and attention as other operational and financial matters. Furthermore, 64% of the respondents base their investment decisions on the beliefs and values of the company.
Today’s workforce, especially millennials and Gen Z, also seek purpose and meaning in their employment.1 They aspire to feel a sense of pride in their workplace and regard employers as an integral part of their personal brand identity. In fact, nearly 43% believe that a company’s purpose and mission are essential for a conducive work environment.2 Another study found that 60% take corporate beliefs into account when selecting a place of employment. Therefore, investors, consumers, and employees demand that businesses take responsibility. Hence, ESG communications has emerged as a powerful tool for businesses to drive positive change, engage stakeholders, and build resilient, sustainable organizations.
Why ESG communications matter?
ESG encompasses a wide range of factors, from reducing carbon emissions and promoting diversity to ethical governance practices. The rise of ESG as a critical component of corporate strategy is driven by an evolving understanding of business’s role in society. Therefore, it is imperative for a company to have an ESG communications strategy so that it excites all stakeholders. Here are a few reasons why:
- Transparency and accountability: When ESG communications are clear, it signals a commitment to transparency and accountability. This is vital for maintaining the trust of stakeholders, including investors, customers, and employees. An excellent example is Tesla’s 2020 Impact Report, which not only detailed the company’s ESG goals but also its progress in achieving them, fostering credibility and trust.3
- Attracting talent: Companies that emphasize ESG communications attract top talent by demonstrating a commitment to positive societal change. For instance, in the recent years, Godrej increased its renewable portfolio to 30%, significantly reduced its greenhouse gas emissions by 37% and diverted 99.5% of waste from landfills.4 This has made Godrej an attractive company for employment.
- Competitive advantage: Effective ESG communication can set a company apart in a crowded market. By showcasing their commitment to sustainability and ethical governance, businesses can appeal to conscientious consumers. For example, Unilever’s “Sustainable Living Plan” aimed to improve the health and well-being of over one billion people and also reduce environmental impact. With this, they have not only positioned themselves as a leader in responsible consumer goods but have also driven brand loyalty.5
- Risk mitigation: Proactive ESG communication can help companies identify and address risks more effectively. By acknowledging areas that need improvement and outlining a plan for rectification, companies can mitigate potential harm to their reputation and finances.
- Regulatory compliance: Many governments and regulatory bodies are introducing ESG reporting requirements. By actively communicating ESG goals and performance, companies can ensure they comply with these evolving regulations. For example, the European Union’s Sustainable Finance Disclosure Regulation (SFDR) mandates increased transparency regarding sustainability-related information for financial products.6
The power of purpose in businesses, as exemplified through the communication of ESG goals, cannot be understated. As the global community grapples with complex challenges, from climate change to social inequities, corporations play a pivotal role in driving positive change. Effective communication of ESG goals not only helps companies align with these pressing global issues but also enhances their reputation, engages stakeholders, and ensures long-term sustainability. Companies that embrace the power of purpose through ESG communication are not only more likely to thrive in this evolving business landscape but also contribute to a more sustainable and equitable world.
1.https://fortune.com/2023/07/06/millennial-gen-z-employees-are-rejecting-assignments-turning-down-offers-and-seeking-purpose-they-expect
2.https://www.metlife.com/employee-benefit-trends/ebts-gen-z-2019/
3.https://www.tesla.com/ns_videos/2020-tesla-impact-report.pdf
4.https://www.godrej.com/greener-india
5.https://www.unilever.com/files/92ui5egz/production/16cb778e4d31b81509dc5937001559f1f5c863ab.pdf
6.https://www.eurosif.org/policies/sfdr/