5 Steps to Communicating Sustainability to your Investors

Executives are often caught between two conflicting needs.  On one hand they need to plan for the future.  They need to do the very real work of charting a financially responsible course forward, judging in advance if the seas ahead are rough or calm and how best to steer an organization so it's properly repaired for the long term future.  On the other hand there are demands of the board and the market that require the constant quarterly drumbeat of profits be maintained or (often more importantly) that wasteful activities be minimized.  In the push and pull of long-term vs. short-term often sustainability and resilience programs are marginalized. Today we lay out steps an executive can use to talk about his long term goals in ways that comfort the short term demands of investors.

To start with here are a few statistics to give you ammunition for conversations about sustainability and it's role relative to creating investor value:

1/3 of Public Company CEOs believe that their share price includes value directly attributable to their sustainability initiatives and performance. (via. TheGuardian)

40% of shareholder resolutions (2013 & 2012) focus on environmental and social issues (via. E&Y)

2/3 of public company CEOs believe that the business community isn't doing enough to support sustainability and resilience (via the UN Global Compact & Accenture)

5 Steps - Why they're important and work

You'd think that statistics like those would be enough to motivate any executive but often they aren't.  So let's talk tactically on how to introduce your sustainability program to your board and/or shareholders.

Step 1 - No Surprises

This should be common sense but it's so critical that it makes the list.  If you want to launch a sustainability effort internally next year you should start talking about it now.  The biggest mistake you can make is to throw everyone into the deep end of the pool and expect that they won't have a reaction.  Talk in advance about where you plan on starting the process.  How your finding the right people and what kind of budget your looking at. Talk in advance about the importance of the effort and how you see it playing into the company's long term strategy.  Be as transparent as possible.

Step 2 - Framing everything around RISK

Once you've made the choice to invest in a company all you really want to know is that the investment looks less risky every day and has a bright and profitable future.  Climate risks translate directly into business risks so you should be talking about them like you talk about any other area that presents an uncertainty to your company.  What this means is you should be able to articulate what risks you face, what's know and unknown about them and what your discovery plan will be to learning where you're vulnerable.  This is fertile ground for a conversation around climate band the future of the organization.
          (It's worth noting here that occasionally you'll have to deal with a person who hasn't fully accepted the facts on climate and warming.  In the political sphere this is a good argument for not taking any action.  Is the world of risk management this means uncertainty and uncertainty means that it's doubly important to take action.  Make sure you have the distinction clear in your head.)

Step 3 - Talk about the Competition

It doesn't matter if you're ahead of, behind or in the middle of the pack relative to your industry in how you're addressing sustainability, talking about the other guys is a necessary part of communicating the issue.  Consider what each of the following says and how it would make you react as an investor:

  • "By reading their annual reports it's clear that our competitors Company X Company Y have yet to truly grasp the ways that global climate change will impact our sector.  That concern has been on our minds for some time and here's what we're doing about it to stay ahead of them in the marketplace."
  • Many of our investors have been concerned that the industry is moving to a more sustainable footing and up to this point we have refrained from any large initiative in that arena.  This has been by design.  We are now prepared to exercise a 2nd mover advantage on the rest of the marketplace following a close analysis of what's worked and what hasn't for others.  You can expect these kinds of result from us:"
  • As you know this industry is more conscious every day of the risks posed by global warming and has been working assiduously to mitigate those risks.  Here's what we're planning to do to optimize our efforts relative to the rest of the pack.


Step 4 - Talk about the Capital Markets.

Putting aside the statistics at the top (for that matter putting aside the value of sustainable practices altogether) socially responsible investing is growing to a larger portion of the market every year.  Funds which label themselves as SRI or ESG (environmental, social & governance) conscious have ballooned to over $4Trillion in assets according to Forbes.  This is to say nothing for the likes of CERES and other investor groups who don't label themselves SRI or ESG but for whom climate and carbon issues impact the decision making of their $11Trillion in assets under management.  It's in the best interest of financially responsible executives to structure their operations in a way that's attractive to progressive capital managers as opposed to activist investors.

Step 5 - It's still about being profitable.

Most important of all is the need to be clear that the organization's goal is to expand and be profitable even in the short term.  Sustainability efforts are not an excuse to lose money in the short term.  They are a justification for why short term costs create long term value.  It's a mistake to lead with the idea that these are expenses or that there's some kind of trade off to rolling out a sustainability initiative.  There shouldn't be.

Start by running a profitable company.  From there remember that you don't have a right to be profitable forever.  Instead, build an organization which is sustainable over the long term because it considers the world it operates in to be as deserving of attention and care as any employee.  Care of the marketplace itself is not a liability. 

What do you think?  Please leave a comment.