Use storytelling appropriately in your reporting

– There is a mountain of inconsistency between companies that publicly report data and those that do not. In between, many companies are reporting a mix of partial data across different pillars of ESG.
– Smart companies will tell stories that truly help the markets assess their risk profile and appropriate capital allocation.

This article by Matthew Sekol entitled “ESG and Storytelling: Meaningful Impact Goes Through Data” is worth reading. Here’s an excerpt:

Companies already have one vehicle by which they communicate their ESG initiatives – their Corporate Social Responsibility (CSR) reports. If you look across several of these reports, you’ll find a wide range of information and quality. For those with low ESG maturity and early on their ESG journey, you will find philanthropic and non-material ESG efforts.

At this stage, companies are in the Hype Cycle. They will opt for marketing-based storytelling that aligns with aspirational values or the table stakes that every company should be doing. Philanthropy is important and inspiring, but it isn’t ESG if it doesn’t tie to your risk. Table stakes are important to meet the Paris Climate Accords’ goals, but they don’t necessarily provide meaning to your work.

Capital Markets firms will recognize the Hype Cycle’s low value and leverage alternate data sources like news feeds, social media sentiment, the company’s blog, and other sources to determine what the company might really be doing or what risks might be coming down the pike. In her book, Dare to Lead, Brené Brown explains what we do when faced with this challenge. “In the absence of data, we will always make up stories.”

During the Hype Cycle, Capital Markets firms will begin to shape their version of a company’s story, taking ownership through their interpretation. ESG data providers will use their IP to determine if those aspirational goals are material. If an experienced leader looks at their ESG ratings, they might recognize this problem and convince the board to change. When that pivot happens, employees will feel the change across the culture as priorities shift. Suddenly, aspiration begins to shift into materiality.