The ESG Index is Here to Stay: What That Means for Communicators

The ESG Index is Here to Stay

The concept of ESG metrics has been around for a few years now; those of us who follow reputation are seeing a convergence of various frameworks, methodologies and indices that all seek to measure an entity’s impact on its community in the broadest sense.

Several months ago I wrote about BlackRock CEO Larry Fink’s letter to investors and his directive to CEOs everywhere to mind the evolving triple bottom line. Recently, Fink expanded on the topic at the New York Times Dealbook Conference which shone a brighter spotlight on the issue and raised additional questions about how companies will choose to communicate with stakeholders given the evolving conversation around the environment, society and government (ESG) index.

It used to be that financial performance was judged by investors and financial influencers; an environmental footprint was critiqued by NGOs. Today, stakeholders increasingly evaluate companies using an aggregate measure of how it operates in the business community, how it impacts the environment and what type of imprint it leaves upon the legislators, elected officials and regulators in their sphere of influence. No doubt social media has made it that much easier for the concept of ESG to spread and for institutional and individual investors alike to respond to the idea.

Fink posits that by 2023 all investors will be using an ESG metric on which to base decisions. ESG is not a formal designation – yet. But independent ESG ratings agencies and data providers exist and they sell services to companies eager to boost their ratings or perform better. ESG is on the agenda at one of the most coveted investor conferences. It may be a sign of things to come. It appears ESG is a long-term part of the conversation, but aside from the letter itself and following Fink as an influence; the PR community has been unusually quiet on this topic.

What does ESG really mean for the function of communications inside a company?

First, as the one person who enhances, protects & defends reputation almost more than the CEO, communicators should be the champion of ESG and similar frameworks because it gives us accountability, measurement and criteria by which to judge our work. ESG and its sibling ratings can help our profession continue to enhance its credibility as a data-driven, objective, measurable function.

Next, speaking of measurement, take this inflection point as an opportunity to give your measurement programs a critical review. Take a hard look at what you’re measuring, and how. If Fink’s projections are true, we could all be held to a higher standard in the future. Are you ready? At Pierpont, we have developed in conjunction with our clients a Quality Assessment Scorecard (QAS) that provides a qualitative measure of how a piece of media coverage supports business objectives. We review it by quarter, aggregating all coverage, and use the data and trends we identify to adjust our strategies moving forward.

Finally, if we operate as if ESG is already a governing principle, it should by definition bring us closer to our colleagues, business partners and other stakeholders because we have to forge those connections and perform better together.

ESG may add another layer of complexity to what we do. It’s one more thing to remember when building plans and one more way connect issues and stakeholders. It could necessitate us to stretch a bit and add rigor to our measurement processes. But it could also mean progress in helping our non-PR counterparts across organizations understand the importance of reputation management.