Yesterday’s guest blog was on materiality considerations – and I will expand on the thoughts. Regardless of whether your company uses a single or double materiality approach for ESG, stakeholders are a key component of the results. Communities, regulators and customers are typical external audiences that play a role in ESG materiality determinations. Executives, boards and employees can also be important audiences. But does what you learn about stakeholders/audience(s) guide your ESG communication approach/style?
Communicating ESG information is generally unregulated, especially in the U.S. Relevant regulations concern greenwashing and business impacts. Product labels intended to inform consumers at the point of sale about a variety of matters (such as product safety and nutrition) are subject to regulation in the US, while ESG information is generally not. Likewise, there are no ESG/sustainability disclosure regulations in the US (except as those matters may intersect and trigger SEC reporting mandates). Limited federal guidance is available but voluntary initiatives such as the ISSB/SASB, GRI and industry-specific frameworks exist of fill the gap. These frameworks – and to the extent regulations apply – help companies assess what to report/communicate but are less helpful in evaluating how to communicate in light of different audiences.
As mentioned above, ESG communications have at least five different consumers – regulators, investors/raters, customers/consumers, employees and the general public. Especially where executive compensation packages include sustainability metrics, boards could also be added to the list. Most of these are the same groups consulted during corporate ESG materiality stakeholder outreach. Companies use that information to inform topical materiality determinations, but I think few take things a step further to improve the messaging. Connect the dots: in looking at which stakeholders identified your most material matters, does your communication style (language, tone, etc) align with the most effective approach for those specific stakeholders? For instance, how a company conveys its message to impacted communities should be different than how the same issues are communicated to investors.
This isn’t a new idea. I’ve written previously about Robert Eccles and Tim Youmans 2015 “Statement of Significant Audiences and Materiality” to specifically clarify the primary intended audiences for ESG reporting and context for materiality determinations. In 2019, the pair changed direction on this concept, but the original remains perhaps more valid now than ever. You can either guess at how to convey what ESG information to which audience in what manner, or you can get more out of your stakeholder outreach and materiality determinations – and effectively communicate in an appropriate, targeted way.
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