What is ESG? and Why Should You Care as an Internal Communicator?
— April 25th, 2023
You've probably heard the term 'ESG' thrown around a lot recently.
You might even be wondering what it means and why Internal Communication professionals should care about it. In this blog, I'd like to bring some clarity to this and explain exactly how ESG impacts IC’s role in embedding social, environmental, and governance factors into workplace culture.
And I will include a very practical example of how IC drove real and beneficial change, and in doing so demonstrated how innovative communication can deliver very tangible results.
ESG is the acronym for environmental, social, and governance. The term is mainly used by investors who consider ESG reports ahead of investing in companies.
ESG Investing is a strategy that considers the environmental and societal implications of investment decisions. ESG investing—also known as responsible investing—has been around for decades but now that concept has evolved into something broader than just being environmentally friendly.
It covers a wide range of areas: from protecting natural resources to ensuring businesses treat their employees fairly and create positive social change in the world through their actions.
In 2021 Edelman study found that employees are considered companies’ most important stakeholders for long-term success – three times more important than shareholders. Almost four out of every five employees (79%) expect their employer to act on important societal issues.
The 2022 Edelman research found that, when considering a job, 60% of employees want their CEO to speak out on controversial issues they care about.
This sentiment is in line with the general population—80% of whom want CEOs to be personally visible when discussing public policy with external stakeholders, and the work their company has done to benefit society.
In particular, CEOs are expected to shape conversation and policy on jobs and the economy (76%), wage inequity (73%), technology and automation (74%)—and global warming/climate change (68%).
However, a gap is growing between ESG rules from European regulators and those in the United States. The differences come not only from the volume of new regulations emanating from EU authorities, but also from a more measured, less prescriptive approach from US agencies. The latter is due to the more starkly divided political landscape in the US.
So, what does ESG entail?
The E in ESG stands for environmental impact. Environmental investing can include renewable energy, carbon emission reduction, clean water and air, waste management and recycling, sustainable forestry practices, and many other factors.
The S in ESG stands for social impact. It includes diversity in hiring policies and socially responsible employee benefits like paid family leave or health care coverage for all employees regardless of their marital status or gender identity.
It can also address workplace safety concerns such as eliminating childhood exposure to lead paint on the factory floor or ensuring that workers earn a living wage—that is, enough money to live above the poverty line with basic food needs met—nobody starving—without having to work more than 40 hours per week at full-time employment status.
The G stands for governance—does the company or organization have good governance? Good corporate governance means that a company has an effective system of checks and balances so that its executives are not allowed to run wild with no oversight from shareholders or consumers (in the case of consumer goods companies).
So, what role does Internal Communication play in embedding ESG within the company?
For the first time, IC can have a seat on the table and can be the driver of ESG and the culture change that comes with it. Why? Because for the first time in history, there is an increasingly prevalent view that companies should not be focused solely on profit but rather on their people and our planet.
In a landmark 2019 statement, the highly influential Business Roundtable—which includes the CEOs of major US companies—redefined the purpose of a corporation, advocating for companies "to move beyond the shareholder primacy model to lead their businesses to the benefit of all stakeholders—workers, customers, communities, suppliers, the environment, and shareholders."
This means ESG is not a financial/profit agenda issue, but instead links directly to the company’s reputation, talent acquisition, employee engagement, and corporate culture.
Currently, businesses face immediate criticism, negative publicity, and reputational damage if they do not clearly demonstrate their ESG commitments clearly.
More than ever workforce retention and employee morale are linked to ESG.
Put simply, research shows a clear link between companies’ ESG performance and its workforce retention and morale.
Employees expect their employers to act on key issues relating to ESG. And those that do so will have a competitive edge in attracting and retaining talent.
This is where IC can make a difference. ESG is a mindset and behavior change that requires storytelling due to its complicated nature.
And who is better equipped to deliver nuanced and impactful storytelling than internal communication professionals? We can build brand equity with our employees, customers, and stakeholders through storytelling techniques and create a culture that aligns with our company’s values, ESG strategy, and vision.
After all,… we are the eyes and ears of a company. We are able to ask the difficult questions that no one else would ask—and we can test the messages internally to avoid greenwashing claims.
Through our storytelling and behavior change nudges we can also play a key role in ensuring our ESG reporting is as accurate and transparent as possible.
For example, for one of our clients, we designed an app whereby employees can input their travel journeys, their consumed meals, and grocery items. Any time they input a set of data, a recommendation on how they can reduce their carbon footprint is presented to them. If the employee acts on this information and shows they have reduced their footprint they are given a monetary reward.
This action by employees, prompted by their company's proactive measures to help them reduce their carbon footprint, can then be collated to the overall efforts by the company to reduce it's ESG Scope 3 reduction. ESG Scope 3 is the largest portion of any company's emissions—for example, for a transport company it would be fuel and energy-related emissions.
This example above of the employee app not only demonstrated that the company cares about saving our people and planet but also showcases how the employees are one of the key drivers on the client’s carbon footprint reduction agenda.
This resulted in our client—an Internal Communications team—being seen to act as one of the most critical departments in driving the company's ESG success.
Not only that, as a result of this initiative, IC became the go-to department for all other sections of the company (Marketing, PR, Investor Relations, and HR) in relation to ESG.
It's a great example of how Internal Communications can bring ESG to life for an organization, with clear and highly tangible results.
It's my strong belief that it's crucial for us internal communicators to understand what ESG is and why it matters to our work.
But if you're still not convinced, consider this: the more engaged your employees are, the better their performance will be. And engagement is something every company wants!
Gihan Hyde Bio:
Gihan is the award-winning CEO & Founder of CommUnique, one of the UK’s fastest-growing ESG Strategy and Communications Advisory Firms. CommUnique is B.Corp certified making it the first Black, Arab, female-founded organization to be certified.
She is the recipient of the UK’s “CEO of the Year” award; one of the most influential “40 over 40” communications professionals in the world according to Campaign Magazine, and LinkedIn Top ESG Voice 2023.
Prior to founding Communique Gihan led some of the largest ESG diversity and employee change communications departments including BP Workplace Sustainability, Barclays Internal audit, HSBC Asset Management, M&S HR, and the Riyadh Metro Project.
Her work impacted more than 150,000 employees, and 200,000 customers and closed $300m worth of sales deals. She is a board advisor, an avid investor, and is the Chartered Institute of Public Relations Director of ESG Communications Training