Corporate sustainability communication just became strategic

By January 10, 2019 No Comments

In the recently announced Swiss Annual Report Ratings 2018, Clariant, a chemicals company, was recognised with the top award for their Integrated Report 2017*, based on standards, communicating financial and non-financial value creation to stakeholders and shareholders. But what might the future hold for corporate sustainability commuication beyond what has already been achieved?

Discussion regarding corporate communication of sustainability strategy has largely focused on the implementation of sustainability frameworks (e.g. GRE, Integrated Reporting) within non-financial company reporting. However, a silent but dramatic revolution in financial asset management markets has occurred, as the assessment of sustainability risk factors issues has become mainstream, and analysis is more broadly communicated – and aligned with internal strategy and operations. In future, both external (shareholders, stakeholders and financial analysts) and internal (managers and staff) recipients of communication will need to be addressed in a robust manner that aligns the information to both groups.

To navigate these changes, companies must develop and align two integrated process loops. First, it´s time to accept that for the financial markets, sustainability has become mainstream. The increasingly demanding information requirements of rating and ranking organisations, as well as the asset managers themselves, must be addressed in a systematic fashion that aligns conclusions with corporate strategy. As increasingly sophisticated techniques, such as “smart beta” or “factor investment” are used to isolate specific ESG-related risk or opportunity factors, the demands placed on companies to steer, manage, and align information flows will increase. This will require a more active process than the current one-way information flow, which only satisfies rating and ranking data requirements. More active engagement of capital market actors in a dynamic dialogue is required, to better communicate the sources of value creation within corporate strategy, based on transparent, data-based analysis. 

Second, articulating sustainability as a foundation of corporate purpose to employees remain essential, but walking through talk in operationalising these high level-statements will become a source of competitive advantage. So, those sustainability factors identified by the financial markets, need to be aligned with the drivers of corporate strategy. This implies the development and implementation of an equally important and challenging process loop which will integrate external analysis with internal financial and non-financial objectives in a common, operational framework. Facilitating the creation and cascading of multiple objectives throughout the organisation, driving alignment, robust reporting and feedback to highlight enterprise-wide value creation, will become a leadership role. But ensuring that an integrated approach to sustainable strategy becomes everyone´s everyday job will be the key to preventing it from being another communication exercise, which drives cynicism more than it creates engagement.

Leadership for sustainable strategy is more than articulating purpose. These twin process loops briefly outlined above require the attention of company leaders at all levels to ensure effective external communication and integrated management of strategy design and delivery. 

* Clariant is a client of Sustainserv GmbH / Inc, and its Managing Partners are co-authors of the publication cited below. 

This blog is based on the forthcoming book chapter “Integrated Management for Capital Markets and Strategy: The Challenges of “Value” vs. “Values” Sustainability Investment, Smart Beta and Their Consequences for Corporate Leadership” (Mountfield, A., Gardner, M., Kasemir, B., Lienin, S.), in “Rethinking Strategic Management”, (ed. Wunder, T.), Springer, to be published in Spring 2019.

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