With global fund assets of $2.56 trillion and annual net new deposits of $68 billion as of November 30, 2023, funds classified as ‘responsible investing’ continue to outpace other fund categories in attracting capital, LSEG Lipper data showed. There is no denying that a compelling sustainability program has become a critical component of investor relations programs and overall communications for corporations of all sizes. Investors, proxy advisory firms and debt rating agencies are demanding it. And, other stakeholders including employees, customers, strategic M&A suitors and suppliers are increasingly considering sustainability practices in deciding where to work and with whom to conduct business.
Sustainability can fundamentally make an organization stronger, more resilient and more attractive to key stakeholders, while helping to mitigate long-term risks. At the same time, the lack of a sustainability strategy and narrative can leave a company exposed and at risk on several fronts.
The events of recent months — including the COVID-19 pandemic, Russia’s invasion of Ukraine, the biggest bank failure in more than 15 years, and an increase in natural disasters around the world — have further amplified the need for greater corporate focus on a range of sustainability initiatives, including risk management, supply chain security, IT infrastructure, employee safety, talent management and diversity and inclusion.
While doing nothing on the sustainability front is clearly no longer a viable option, implementing a sustainability program can seem overwhelming — particularly if publishing a full-scale sustainability report that complies with regulations, such as the IFRS Sustainability Disclosure Standards and includes established frameworks like the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-Related Financial Disclosures (TCFD) and the Sustainable Development Goals would not be feasible for your company right now.
The good news is that sustainability is a journey, not a sprint. By taking a few strategic first steps to put a stake in the ground, you can establish a strong foundation to build upon over time and earn tremendous credit from investors, employees, customers and the society at large. We’ve guided many companies through this “walk before you run” approach. Here is where we suggest you start:
1. Identify key sustainability material issues, opportunities and program gaps – starting with the SASB materiality map
An effective and scalable sustainability program should begin with a thoughtful analysis that identifies the key material risks for your industry and company, validates where your strengths lie and uncovers where there may be gaps in your existing sustainability communications, disclosures and practices.
This analysis can include:
- Leveraging SASB’s materiality map to identify material issues and disclosures for your company’s industry and classification. While there are several disclosure standards to consider benchmarking your sustainability program against, we recommend SASB as a starting point for public companies given its focus on financial materiality and the investment community.
- Reviewing existing sustainability scorecards on your company from the likes of ISS, Glass Lewis, MSCI and/or Sustainalytics to identify commonly cited areas for improvement, strengths to highlight and/or misperceptions.
- Assessing peer practices and communications to benchmark how your existing policies and practices stack up to your peers.
- Taking an internal audit to identify existing sustainability initiatives within your organization. Often companies discover that there actually are value-driving programs underway internally that are just not being viewed or communicated externally as such.
- Conducting Materiality Assessment & Stakeholder Interviews. For a more extensive analysis you can seek input directly from key stakeholders such as investors, employees, customers, partners and the community. To learn more about this approach, check out our five-step guide to conducting materiality assessments.
2. Start to develop a compelling sustainability strategy and narrative
The foundation of a successful program is a compelling sustainability strategy and narrative that considers where your vision, mission and purpose overlap with your sustainability strengths and the material focus areas identified through your analysis. A sustainability strategy, narrative and priorities give investors and other stakeholders a clear understanding of your sustainability strengths and aspirations.
3. Bring your recommendations to the executive team, board and cross-functional sustainability team
Effective implementation of initiatives requires integrating sustainability into your existing processes and practices, which requires board-level engagement and oversight, executive sponsorship and cross-functional participation. For this reason, presenting findings from your analysis and a proposed narrative to your executive team and board is an important step. At this stage, if your company does not already have a core cross-functional sustainability team in place, your leadership will want to form one with representation from different parts of your organization — including investor relations, communications, legal, HR, finance and each of your business segments.
4. Bring your sustainability narrative to life — starting with your corporate website
Building toward a sustainability report that complies with regulation and meets standards is an excellent goal, but it is not always feasible or required in year one. In most cases, an effective place to “put a stake in the ground” with your sustainability communications is with a sustainability section on your website.
Whether you have an existing sustainability site that you can improve or are starting anew, you will want to be strategic in thinking about the messaging, content and organization to ensure you are making it easy for investors and other stakeholders to gain a clear understanding of your company’s program and find supporting data.
Some tips to consider:
- Leverage the sustainability landing page to establish your narrative. Sustainability content can be dense, which is why it is important to maximize the impact of your landing page by clearly establishing your narrative and featuring key sustainability metrics.
- Use an ‘outside-in’ sustainability website architecture. Organizing data, policies and content within well-defined sections allows investors and ratings agencies to easily drill down into the information they are looking for and give you full credit for your work.
- Start with the relevant content you have available now and build from there. To immediately enhance your standing in the eyes of investors, proxy advisors and rating agencies, you should publish or highlight existing content uncovered during your analysis that addresses “red flags” and standards’ guidelines. This may include reorganizing content currently on your website or repurposing internal-facing data, policies or other content for external audiences.
- Incorporate video to make your message compelling. Short videos can clearly set the tone for your sustainability program, draw attention to metrics that matter most for your company and humanize your mission. Videos also can be leveraged across your social media platforms as well as in internal and external presentations.
- Make sustainability content easily digestible with a downloadable fact sheet and/or highlight report. Investors are looking to easily understand the heart of your sustainability program. A fact sheet or highlight report that captures your program components, goals and measurable metrics is an extremely effective vehicle for succinctly communicating your sustainability program.
- Take a holistic approach to communications and leverage your website messaging across your investor materials. For the companies that are doing it right, sustainability is an integral part of their long-term strategy, not an afterthought — and this becomes apparent when you see a seamlessly integrated narrative across all communication platforms. An effective way to achieve this is to repurpose your website content in other investor communications like your standing investor decks and annual or integrated reports.
- Engage your employees. Now that you have begun the work of defining your company’s sustainability program, you should integrate your messaging into internal communications to educate and motivate your employees. This may include announcing your new sustainability website through an internal employee email from your CEO, featuring employees in stories on your website or beginning to share metrics and ‘wins’ in ongoing employee touchpoints such as All Hands Meetings.
5. Drive Stakeholder Engagement. Begin to proactively market your sustainability story to investors
This may include holding sustainability Investor Briefing Calls, organizing virtual sustainability non-deal roadshows and conducting targeted outreach to responsible funds.
6. Set your sites on what’s next
A best-in-class sustainability program is built over time and having a clear roadmap in place that identifies your near-, mid- and long-term priorities and goals will ensure you are aligned across the organization and positioned for success. The roadmap should include data collection, reporting and communications milestones – and clearly identify ownership within the organization.
With responsible investing here to stay, the urgency for companies to develop a sustainability strategy and communications plan has never been greater. By taking these first 6 steps to put a strategic, informed foundation in place that you can build upon over time, you can launch a sustainability program that delivers value for your company and key stakeholders for years to come.
Sharon Merrill employs a proprietary and systematic approach to build a strategic sustainability program for you. Please visit the Sustainability section of our website for more information.
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