by Dr Rory Sullivan

A huge industry has grown up on how companies can integrate sustainability into their communications with their investors.

Many consulting firms and other organisations now offer advice on how to demonstrate organisational commitment to sustainability, on how to report, and on how to communicate effectively with investors. The specific recommendations being offered include:

• Adopting clear corporate statements and policies on sustainability.
• Adopting integrated reporting.
• Integrating sustainability-related factors into corporate communications and reporting.
• Moving away from providing quarterly earnings guidance.

Yet, for all the advice that is being dispensed and the fees being paid, sustainability-related communications looks like an industry that focuses on how to execute ‘process’ rather than on how to deliver ‘results’. It is striking how little empirical evidence there is on how sustainability-related communications influence the quality of companies’ dialogue with their investors. Nor is there much information on whether these communications actually enable companies to attract more long-term investors to their shareholder base.

This reflects a variety of factors:

• In part, it is because this is a relatively new area and, in many cases, it is simply too early draw any conclusions as to the effectiveness of the communications practices
• In part, it is because companies are concerned that talking about short-termism will affect their relationship with their investors.
• In part, it is because companies and their advisers are not focused on the outcomes they wish to achieve. This, in turn, means there is a general lack of systematic evaluation of the impacts and effectiveness of sustainability-related communications.

These factors point to three important recommendations.

The first is that companies need to be much clearer about what they are trying to achieve when they communicate on their sustainability performance to investors. If their aim is to attract more longer-term investors, then they should say so. If their aim is to encourage their existing investors to think more holistically, they should say so.

The second is that companies should monitor and critically review the effectiveness of the actions taken, and they should revise their communications strategies in light of the outcomes being achieved. If their consultants and advisers cannot deliver, companies should be prepared to go elsewhere for advice.

The third is that companies should share their experiences and lessons learned with others. It is critical that we properly understand how the business value of sustainability-related communications can be maximised.

As for communications consultants and advisers? While it may sound self-evident, they need to:

• Be clear about the target audience for the companies they are working for.
• Recognise that communicating on sustainability is most definitely not the same as communicating effectively with investors.
• Base their advice on evidence, not on rhetorical assertions about what ‘should work’.
• Be clear about the outcomes they want to deliver, not just the processes that will be adopted.
• Be prepared to be held accountable for achieving those outcomes.

This article first appeared on www.SRI-CONNECT.com

Dr Rory Sullivan is a Senior Research Fellow at the University of Leeds, and was previously Head of Responsible Investment at Insight Investment. He has written/edited seven books on finance, climate change, and development issues, including Valuing Corporate Responsibility (2011) and Responsible Investment (2006).

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