What is ESG and what does it mean for brands?

Whether or not you’re familiar with the term ‘ESG’, it’s fair to say these three little letters have big implications for businesses, and brands.

by Rich Fishlock | Environmental | 6 October 2021

ESG as a measure for responsible business 

ESG – or Environmental Social Governance – gives businesses an important framework to measure and report on their responsible business practices and it’s become an increasingly hot topic in recent years. 

The Environmental aspect includes the response to climate change and the wish to protect our natural world. Social elements relate to people and relationships, such as gender diversity, employee health and safety requirements and other metrics of ethical business practices. And Governance refers to setting the highest possible standards for running a company from a risk-management perspective, including board composition, protection against fraud and corruption and other issues material to stakeholders.  

Banks and investors (not to mention prospective employees) are increasingly assessing the potential of a business, not only by analysing its financial performance and potential, but by considering its ESG performance as well. With regulators mandating ever-higher standards in relation to ESG, a well-thought-out approach to ESG is quickly becoming a ‘license to operate’ for businesses. 

And whatever has an impact on businesses, has an effect on brands and the way they communicate. 

ESG and brand purpose 

Whilst many brands can talk a good game, strong ESG credentials can lay the foundation for brands to talk about their purpose in an authentic way. 

According to a recent global study, 94% of consumers said they felt it’s important for the companies they engage with to have a strong purpose (Zeno Group). That said, consumers are also becoming increasingly astute at detecting insincere attempts to land purpose messages that don’t actually measure up against business practice in real life.  

It might not be every brand’s job to save the world, but by building on ESG commitments, organisations can have a much better platform to weave a sustainability narrative that truly reflects the brand’s DNA and paves the way forward for positive interactions with consumers and key stakeholders. In turn, this can help to build long-term, sustainable value, whilst having a positive impact on the environment and society. It’s this starting point that makes way for authentic communications that will stand up to scrutiny and have real impact.  

“You can’t reverse into a mission and values through marketing… the role of marketing is to authentically elevate that mission and purpose and engage people in it, but the purpose needs to be the business.”  

Alex Weller, Patagonia 

The next question to ask, then, is how can brands leverage their ESG credentials to help tell an authentic and compelling brand story? We’ve come up with 3 golden rules to get you started. 

The 3 Golden Rules 

1. Be true to the brand  

To grow you have to stand out. But in an authentic way. Many brands have fallen into the trap of jumping on the latest bandwagon and the result is often seen as seem inauthentic, contrived, or even ‘greenwashing’. 

Brands must go back to basics, to their enduring values and original purpose.  

2. Action speaks louder than words  

Walk the talk. Real value comes through demonstrating purpose, not just claiming it. All comms in this regard must be backed up by verifiable ESG data and metrics, or risk being dismissed as mere ‘storytelling’. Adidas and PayPal are brands that have set a great example, by focusing on relevant areas at the core of their business, to drive positive change, inside and out.  

Brands must find unique opportunities to act that epitomise their ESG commitments and chime closely with their core values.  

3. Compelling communications  

Different is not enough. The majority of consumers agree that purpose-led campaigns ‘all look the same, or very similar’ (YouGov 2021). Compelling communications, creatively executed, are key if you’re telling a story worth listening to, but if you want to create truly effective communication, you need to show you’re ‘meaningfully different’: that you understand your customers’ needs. 

When thinking about communicating purpose, brands must first think about what makes their approach unique… and then seek to communicate it in a way that cuts through the sea of same. If they’re looking for effective, lasting cut-through, they should be considering how they substantiate their communications with real, measurable commitments, over and above blanket statements.  

This combination of relevance (building connection with the audience), differentiation (cut-through and talkability), and authenticity (building trust through measurable claims) is key to making your brand-purpose story come alive.  

For more, read our report co-authored with Key ESG, The ABCs of ESG.