ESG: from euphemism to cacophemism - communication in the trade-off between internal and external expectations

A look at the public discourse on ESG (Environmental Social Governance) reveals a dramatic change in the debate originating in the USA and an associated increasingly negative connotation of the term. This is also spilling over into Europe.

Gone are the days when Al Gore got on a pallet truck to illustrate the rise in CO2 and Blackrock founder Larry Fink told the world's CEOs to do more to protect the climate. While this accelerated a global movement around sustainability, President Trump's recent slogan “Drill, baby, drill” represents the current peak of the ESG backlash.

This development is very complex for companies, and some tend to limit communication on sustainability issues to what is absolutely necessary and required by regulations. However, this fails to recognize that evidence-based sustainability communication driven by data from internationally proven regulations offers an excellent basis for enhancing the corporate strategy and story.

This is important, among other things, because, although the financial sector is ostensibly making a strategic shift, it is still dependent on investing in “sustainable” companies. Ambitions in terms of climate neutrality may have been scaled back somewhat, but they have not been halted. This certainly follows the logic that a US presidential term lasts only four years (at least according to current legislation), but concerns about the climate will stay. Accordingly, many ESG issues continue to influence the risk profile of companies.

“Sustainability reporting is definitely more than just regulatory compliance.”

The regulatory perspective: a starting point for more

The EU's Corporate Sustainability Reporting Directive (CSRD) has revolutionized sustainability reporting in Europe. The adjustments made as part of the Omnibus Package have not changed this. Switzerland also intends to follow the EU guidelines, which means that Swiss companies will have to meet similar requirements in the future. However, these regulatory requirements are not a burden, but an opportunity to strengthen the quality of corporate communication.

The catalytic process: transformation through communication

Strategically aligned sustainability communication can trigger a catalytic process of transformation within the company.
By communicating sustainability goals and their progress, employees and managers can be motivated and involved in the transformation process. Optimization potential can be tackled with differentiated motivation so that processes can be optimized specifically with regard to the use or waste of resources (Lean/Six Sigma) and expectations can be “targeted” accordingly in management appraisals.

Evidence-based communication: the power of data

Sustainability reporting based on standardized frameworks such as the Global Reporting Initiative (GRI) or the CSRD plays an important role here. By using such standards, companies can make their progress measurable and become capable of speaking on the basis of comprehensible and, if necessary, audited data without falling into the trap of greenwashing. This source of information provides an excellent basis for strengthening the brand image both externally and internally in an authentic, strategic and target group-oriented manner.

Integration into the corporate strategy and equity story

The integration of relevant sustainability aspects into the corporate strategy and equity story is crucial in order to underpin and promote long-term value creation. Strategic sustainability communication can then derive corresponding goals and topics from the corporate strategy. Ambitious goals such as climate neutrality must therefore be carefully thought through and checked for feasibility, to make a measurable contribution to increasing the company's value. Targets irrelevant to value creation or the risk profile should be eliminated from presentations and explanations. This increases the relevance of communication for all stakeholders.

Conclusion

Sustainability reporting is definitely more than just fulfilling a regulatory obligation. After the euphemism of days gone by, which led to a loss of trust on the part of many stakeholders, we urgently need to develop meaningful, value-creating communication strategies in the current cacophemism with a lot of opinion and little knowledge that appeal to both head and heart.