It’s been a tumultuous year rocked by severe natural disasters, radical social injustice, and a pandemic that sent the global economy into a nosedive and brought life as we knew it to a screeching halt. Under these conditions, it’s no surprise that environmental, social, and corporate governance criteria are more important than ever in the business world.

Take BlackRock Inc., the largest asset manager in the world. In July, it issued a report that called out 244 companies for failing to prepare their operations for climate change or inform their investors of the risks. The firm voted against directors at 53 of those companies and warned that it would take similar action if the remaining companies fail to make significant progress by next year. This is more than just the usual lip service we’ve come to expect: BlackRock is taking action.

Being selfless is great, but ESG initiatives can also improve your business. More than 70% of consumers would change what they buy to reduce their environmental impact, and 90% of employees would trade a percentage of their lifetime earnings for meaning at work. That’s why it’s important to conduct an ESG sentiment analysis (i.e., how people think you are doing in terms of ESG). Stakeholders — consumers, investors, employees, etc. — increasingly prioritize companies committed to the welfare of their employees, community, and planet. It’s not enough to offer quality products; you have to communicate what you’re doing to help.

 

The Reason ESG Is Important

In 2020, companies such as Chevron Corp. and Dollar Tree passed five different environmental proposals, and the average support for employment diversity proposals increased from 38.5% in 2019 to 55.1%. ESG has been important for a while, but it was mainly a priority for corporate responsibility departments. Now, its significance is trickling down. Investor Relations is going to Communications and asking, “What are we going to do about this?”

For companies targeting Millennials, ESG is particularly critical. Millennials care three times more about ESG criteria than other generations when making purchases, and 90% are looking for opportunities to match their investments to their values. All these statistics point to the importance of ESG, but it may not be your company’s main priority based on its goals or targets.

For example, let’s say your organization hopes to increase its sales. ESG ranks ninth among the factors that influence consumers’ buying behavior. However, if your company is trying to accumulate more customers, ESG ranks fifth in people’s decisions to recommend your company. As you can see, the importance of ESG depends on the business outcome your company is trying to reach. Regardless, it’s critical for your organization to make sure it’s successfully communicating about such a high-ranking factor that influences consumers’ decisions.

The Relationship Between ESG Sentiment and Corporate Reputation

Unfortunately, there’s a gap between perception and reality in business when it comes to public perception and ESG. At RepTrak, we’ve found through our ESG sentiment analysis that how people perceive a company’s environmental, social, and corporate governance efforts can differ from what it’s actually doing. Companies don’t have a way to find this out on their own; they can’t do it with brand tracking or by measuring social media analytics. It takes a well-crafted narrative to positively influence consumers’ ESG sentiment. Only when you communicate to people what you’re doing will your company’s efforts impact its bottom line.

By analyzing perception and reality in business communication, we can help your company capitalize on the good it’s doing by defining the connection between your ESG rating, ESG sentiment, corporate reputation, and business goals. Through our holistic reputation management approach, we can measure and improve your communications programs with our near real-time data.

It’s important for your company to invest in ESG, but that effort will achieve a desirable ROI only if your audience is aware of your initiatives. As Lee Atwater said, “Perception is reality.” Your public perception is important, which is why RepTrak’s here to help. To learn more about how our platform can inform your corporate reputation management efforts, request a demo today.