It is clear that the pandemic has crystallised a focus across the spectrum on the importance of sustainability for issuers, investors and regulators alike, and from now on it is likely to be a core guiding principle for a variety of stakeholders either by choice or through external and regulatory constraints.
Despite this drastic change, many issuers find formulating a clear sustainability mission within the traditional ESG framework challenging, given the broad difference in approaches, definitions and concepts across industries and countries. Whilst the mantra of maximising shareholder value at all costs has evolved in recent years to focus more on stakeholder value, in recent months this has further conceptualised into shared values. Issuers that ignore this change will invariably be penalised by consumers, governments, regulators, and investors.
Historically, many issuers have had difficulty in incorporating their corporate responsibility into the Company’s strategic framework. This has been largely driven by attention being given to only governance or environmental matters, or in detailed ESG reporting to answer specific surveys, but all developed in isolation allowing no reflection on how sustainability as a whole could benefit the business and its environment. Whilst companies of all sizes have fallen foul to this dynamic, there have been notable exceptions, with some large cap companies playing a pioneering role on this front and establishing many of the best practices aspired to today.
For the majority though, the focus has largely been on ensuring regulatory compliance and the lack of direct accountability internally has resulted in too many interlocutors, leading to weak outcomes. Against this backdrop, Investor Relations has often been a contributor but there was not necessarily a clear rationale as to why IR should be one of the corporate functions best positioned to help drive an integrated approach.
However, in today’s environment and the varying expectations of a diverse stakeholder base, only an integrated approach will bear fruit in devising, and successfully implementing, a credible sustainability strategy in a timely manner.
It is clear now that the sustainability agenda sits directly with the Board and Management and there is pressure on them to deliver tangible results in an efficient and timely manner. To ensure this, it is critical that the function tasked with coordinating this internally integrates several variables against which this strategy and its outcome are regularly stress tested. Whilst it is important to funnel the input of the various teams and contributors, it will also be critical to assess the impact of these actions within a broader framework that considers the needs of all its stakeholders.