Activist investors demand measurable progress on ESG

Failing to show progress on ESG commitments subjects your brand to new threats from activist investors with an axe to grind.

Purpose communications—the new industry byword for corporate social responsibility messages—are getting a closer look from stakeholders.

From diversity, equity and inclusion (DE&I) to environmental impact, companies are supposed to show how they have taken action on a range of issues consumers consider important. Industry research on brands taking a stand on social issues is now firmly entrenched.

And, the real risk for organizations and their communications teams lies with investors.

Activist investors—deep-pocketed individuals who use their dollars to drive change—are increasingly pressuring organizations to follow through on their purpose commitments. Whether it’s a fund pushing fossil fuel companies to increase decarbonization efforts or a single investor looking to force fast-food chains to adopt new animal treatment standards, the threats to companies are changing.

The ESG connection

It should be no surprise for business leaders that environmental, social and governance issues (ESG) really matter on investor relations. The term was coined in 2005 for investors to understand the wider impact and liability associated with their investments.

And increasingly, business leaders are seeing themselves as the most adept operators in creating social change—from equity and diverse representation to other global goals. Edelman, the giant PR firm behind the annual Trust Barometer, found that businesses hold more audience trust than government or the media.

It wrote in a recent blog post:

In the face of these persistent challenges, 2021 saw business solidify its position (for the fourth straight year, at 61 percent) as the world’s most trusted of the four collective institutions of government, business, NGOs and the media, with “My Employer” beating them all at 77 percent. With government failing to lead on society’s biggest challenges, from climate change and reskilling to racial justice and trustworthy information, business has a unique opportunity to emerge as a critical stabilizing force. But the time to do so is fleeting, and this year’s study underscores the urgent need for business to step into the breach.

Underscoring Edelman’s point about the fleeting window of time for business leaders to preserve audience trust, some are starting to question the tenets of brand purpose.

Fossil fuel companies have been found to largely overstate their actual commitment to the environment and other social causes. Edelman itself has even faced criticism for its ongoing work with fossil fuel companies that use PR agencies to muddy the waters on climate science and stall progress on sustainability goals.

Showing your work

The best defense against activist investors is the ability to demonstrate real progress on ESG issues, which should be a top priority for comms teams across all organizations.

The good news is that measuring your ESG work and message performance is no different from other PR measurement. As measurement expert Nicole Moreo shared with PR Daily:

When creating a measurement program and framework, you always start with the business goal and the communications objective—making sure to put the audience at the center. I would define a quantifiable goal and objective for “purpose” the same way I would for any other area of communication. What may change would be the types of data needed—which is dependent on the touchpoints the audience that you defined in your goals and objective will have.

The issues involved in ESG are large, complex problems and no organization is likely to solve them overnight. Instead, an ESG comms strategy must be shared as an ongoing journey where regular progress benchmarks are reported out to internal and external stakeholders. Advocates must be identified who can amplify the message and an omnichannel approach should attempt to reach as many audiences as possible.

And mistakes should not be omitted.

That was one of the big takeaways from a recent DEI report published by Clyde Group, which shared both how it has succeeded and how it missed with its attempt to support diversity and equality within the agency. It can be scary to admit your mistakes—but it’s the only way forward with authentic purpose messages.

Without accountability, ESG messages are just empty words.

Learn more about how you can craft and deliver purpose and CSR messages with PR Daily’s Purpose and Corporate Social Responsibility Summit on March 1.

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