Communication for Sustainable Development

CEOs should have crucial conversations on sustainability

Created in Photoshop, based on Image via Wikipedia
Corporate CEOs are busy people. Their time is at a premium. They have to focus on the most important things. When it comes to ensuring that sustainability and responsibility are becoming embedded in their business, one of the most important things they can do, is to have some "crucial conversations."
Conversations that can help to ensure that key people and functions across the company are working together. Among these "crucial conversations" is calling heads of investor relations and asking whether they have the information and the data they need to explain credibly to institutional investors how sustainability is critical to the strategy and future success of the business.

An important study last year by the global consultancy firm, Accenture for the UN Global Compact (UNGC) asked CEOs of Compact signatory companies across the world, for their views on embedding sustainability. The study built on a similar one in 2007 by McKinsey & Co, also for UNGC.
Accenture found that "many CEOs believe that the investment community is not supporting corporate efforts to create value through sustainable products and services by failing to factor performance on sustainability issues into valuation models." 86% of CEOs see "accurate valuation by investors of sustainability in long-term investments" as important to reaching a tipping point.
Leading the creation of an investment environment more favourable to sustainable business by being more proactive with investors, was one of the top five things that CEOs thought would contribute to this "tipping point" to mass corporate adoption of sustainability in the decade ahead.
72% of CEOs surveyed agreed that companies should incorporate these issues into discussions with financial analysts – up from just 51% in 2007. However, when asked the follow-up question – whether their company does incorporate these issues into discussions with financial analysts – just 48% said yes – (up from 31%) in 2007.
Why this performance gap? In part, it is a general issue of CEOs seeing what needs to be done – whether on embedding the issues through the global supply chain or getting effective board oversight of the commitment to sustainability – but managing the time-lag as these things start to happen. But the performance gap may also have something to do with the people responsible inside companies for investor relations not yet feeling they have the data to provide a compelling explanation of how better management of environmental and social impacts and sustainability is a crucial part of long-term value-creation.
On some issues, institutional investors themselves have started asking for information. The Carbon Disclosure Project has done an excellent job of mobilising the investment community to probe businesses about their carbon reduction strategies. Overall, however, as a study by Cranfield, Bocconi and Vlerick business schools found, companies need to be able to explain better how improving different aspects of environmental and social performance impacts long-term value-creation such as innovation, employee engagement, and cost and availability of capital.
Hence, the crucial conversation between the CEO and his or her head of investor relations: "Do you have the data and the narrative to explain to our investors how sustainability is integral to our corporate strategy? And if you don't, what information is missing?" Very often, companies are sitting on data or failing to collect the data to back the progress they are making on sustainability.

Enhanced by Zemanta

Solutions for Small Business