As you gear up to add ESG reporting to your investor relations strategy, you have a challenging time ahead. It isn’t always easy highlighting actionable ESG goals, especially if this is your first time sharing these insights.
Many corporations before you have made mistakes and suffered the consequences. From fines levied by the FTC to unclear value propositions that turn investors away — this guide can help you avoid the worst of them.
Mistake #1: Failure to Understand Your ESG Goals
With ESG driving capital markets, most investors will want to know your answer to this important question: what does ESG stand for, according to your corporation?
It’s easy to jump on the bandwagon of sustainability before you’ve answered this question. In your haste to share your data, you might forget to set long-term goals that coincide with your more immediate concerns about disclosing on-trend data.
By setting these overarching targets, you deliver a clear value proposition. You also show an elevated level of accountability to your investors as you slowly achieve these bigger goals.
Mistake #2: Excluding ESG Initiatives in Your IR Site
Those investors asking questions about your ESG initiatives? They’re looking for the answers on your IR site. This is one of the most trusted sources of information regarding your corporation for both institutional and retail investors.
Your IR site is the best platform for you to share your sustainability message to the world, but it’s not always easy knowing how to highlight your data in the best possible way.
ESG accountability is still a relatively new trend in the financial world, so there’s no singular regulatory body standardizing the way you communicate this data. It doesn’t help that the vast amount of ESG information is soft data.
If you aren’t sure what you need to share when talking about your ESG initiatives, reach out to an investor relations service specializing in ESG sites. These experts can help you understand the ESG best practices so that you can share your methods in a structured, impactful way.
Mistake #3: Greenwashing Your Data
Greenwashing is an emerging problem within the corporate world. It happens when an organization makes big claims about their ESG policies that don’t match the realities of its environmental or ethical impact. It’s a way of tapping into this eco-trend without making an effort to change anything about your processes.
The worst examples of greenwashing include outright lies or exaggerations about how environmentally friendly their products or services are, like when Volkswagen falsely claimed their diesel cars emitted lower carbon emissions.
This so-called diesel gate occurred when VW equipped some of their models with software that could fudge the numbers during emission tests, improving their performance without doing anything to make a cleaner diesel.
VW’s bad ESG behavior didn’t go unpunished. By 2017, the Federal Trade Commission(FTC) ordered Volkswagen to buy back these models from drivers at favourable costs.
While this might be an egregious example of greenwashing, any corporation can easily fall into this trap by making general claims about being organic or sustainable without backing it up with substantiated data.
You can look at the FTC Green Guides to understand how you can talk about your ESG initiatives safely. It’s also a good idea to speak with your investor relations service provider for their advice.
Everyone makes mistakes, but there are bigger consequences when it comes to ESG errors. Thankfully, this guide serves as a learning opportunity. It reminds you that you need an actionable, substantiated approach to your ESG initiatives.