Text | CAI Muzi (Visiting scholar, School of Journalism, University of Missouri, USA, researching strategic communication and ESG communication of multinational companies)
Don't easily "speak" on controversial social issues or say things that have nothing to do with the company's business – PR managers in most companies in China practice caution. In addition to speaking out on events that are clearly good for their business landscape, companies try to avoid getting caught up in irrelevant topics.
The corporate communications strategy of the United States is somewhat "unobtrusive". From private bosses to Silicon Valley's richest people, they love to communicate their values on social issues, even the most controversial ones.
"Engaging in discussions on highly controversial issues has become part of corporate ESG communications in the U.S. right now, and it's one of the most interesting changes in corporate strategic communications over the past 15 years." In two conversations with Dr. Luke Capizzo and Kathryn Lucchesi, assistant professors of strategic communications and public relations at the University of Missouri School of Journalism, they shared their insights on ESG communication trends in U.S. companies.
There is no doubt that in the post-pandemic era, environmental and social justice issues dominate the news cycle, and ESG has become the "center stage". ESG communication has also become the area where US companies have the most room for PR (public relations) and IR (investor relations).
ESG influences investment decisions, and companies link them to executive performance
Investors "voting with their feet" is the most direct reason why US companies are increasingly paying attention to ESG communication.
According to a new report from Bloomberg Intelligence (BI), global ESG assets could exceed $41 trillion by the end of 2022 and more than $50 trillion by 2025, accounting for one-third of the world's total assets expected to come under management.
And according to a report by Ernst & Young, 39% of investors are now investing in ESG products in 2021 – up from 33% in 2020; One in five investors decided not to invest, citing insufficient ESG integration on the project side.
"Rising public expectations are also a big reason why companies take ESG seriously," Luke said, especially multinational consumer goods companies, whose actions in one country can cause an uproar in another, with social influences circulating around the world, prompting them to adopt higher ESG standards.
Secondly, the requirements of the regulatory layer make the spread of ESG in US companies inevitable. In March 2022, the U.S. Securities and Exchange Commission (SEC) proposed new rules for climate change disclosure. While they have not yet been finalized and publicly solicited public comment, the SEC has proposed that companies must disclose the potential risks and significant impacts of climate change on their operations, strategies, and prospects, greenhouse gas emissions, additional qualitative and quantitative climate risks, and more.
According to PwC, the SEC's requirements mean that all U.S.-listed companies must quickly transition to investor-level climate change reporting. All businesses, without exception, are at different stages of their ESG journey.
At present, ESG reports in the United States have become the "standard" for most listed companies. According to S&P's 2021 Global Sustainability Yearbook, 7,032 companies published ESG data in 2021. As of May 2021, 4,030 organizations worldwide have joined the UN PRI; KPMG's Global CEO Outlook 2020 report shows that corporate responsibility has topped the list of global CEO concerns in the post-COVID crisis, with 63% of leaders turning their attention to ESG.
To highlight the importance of attention, more and more U.S. companies are incorporating ESG performance into executive incentive and compensation plans.
At the end of April 2022, Todd A. Penegor announced that it will link executive compensation to environmental, social and governance performance. According to statistics, 15% of the S&P 500 companies have ESG-related executive incentive plans; About 45% of companies in the FTSE Russell 100 index link executive incentive plans to ESG goals. Large multinational companies such as Apple have clearly announced that ESG indicators will be included in the calculation of bonuses for management.
From CSR to ESG, from people's expectations
From CSR to ESG, U.S. businesses have led the way in social responsibility practices.
Luke introduced that the concept of corporate social responsibility (CSR) can be traced back to the seventies of the last century; The integration of environmental, social and corporate governance concepts into ESG can be traced back to 2005. Unlike corporate financial performance, ESG is a company's performance system in the above three aspects. ESG provides a new framework for the public and investors to evaluate whether a company is sustainable.
At present, most US listed companies have a complete ESG communication "standard action". They form cross-functional teams to establish accountability for ESG performance; Clearly define the company's ESG metrics and ensure that sufficient supporting data is collected; Develop an overall strategic approach to ESG that is relevant to the overall business of the enterprise; Enhance the ESG skills of company directors: introduce third-party assessments and produce sound ESG reports.
"Traditionally, CSR has been conducted more with a problem-and-management mindset. It's about being aware of the problems our business can be creating and then proactively addressing them. But what's happened in the U.S. over the past decade or so is that consumers expect more and more from companies, especially for multinational corporations. For example, global warming and climate change, to which almost all companies can make their contribution. Many U.S. companies are also realizing that given the global nature of this discussion, they must raise the bar for action and communication, and think holistically and do something sustainable and long-term that contributes to global health, which comes to what we now call ESG. Luke analyzed.
In addition to the improvement of standards, another major shift in ESG communication for US companies is that more and more companies are investing in social advocacy.
"The company is willing to participate in many polarizing discussions on social issues that are beyond the company's traditional business. For example, on LGBTQ legal marriage, women's right to abortion, etc., many companies have jumped out to publicly support it, but the company's business has nothing to do with this issue. Luke introduced that it was a very interesting change. Fifteen years ago, American companies would not have touched these highly controversial social issues that had nothing to do with their business.
Why should U.S. businesses do this? Luke analyzed that many companies believe that this social issue will affect the rights of their employees, investors, and consumers; Some companies have seen that there is now a higher level of popular expectation that companies want to be in; The other is from an employment perspective, where companies want to hire the best employees, and they assume and align with those top employees on these social issues.
A new study by academics at the University of Florida's Warrington School of Business also suggests that more posts on social media after a negative ESG event can help companies recover from reputational damage more quickly and can also help mitigate the negative impact of the event on company value. This refreshes the communication strategy concept of "less talk and less mistake" of many traditional corporate public relations.
How should TikTok use ESG bridges?
However, ESG is a "voluntary action" for companies, and Catherine believes that companies should be more cautious.
"Different countries, and even different regions of the same country, have different public opinion environments. Whether it is environmental protection and climate, or gender equality, diversity, inclusion and other issues, enterprises need to gain insight into the mainstream ESG public opinion and values at home and abroad, and inject their own brand genes in order to carry out ESG projects in a targeted manner. Catherine said to me in a conversation.
Adapting measures to local conditions is a key point of cross-border ESG communication, and it is also an area for Chinese overseas enterprises to improve.
"Even though TikTok is so popular in the U.S., I think if you were to do a survey at the University of Missouri, less than half of the students probably knew that it was a Chinese company." Luke said.
Catherine pointed out that in the eyes of American consumers, Chinese companies such as TikTok and SHEIN, although their products are very popular, their companies themselves are very mysterious and make people feel very far away.
"In multinational markets, ESG communication is a very important bridge. If you're going to build brand identity, you need to be more open, more transparent, more engaged with consumers, and explain what benefits you can bring to the community and residents. Microsoft, for example, not only has an ESG policy blog section on its website, but also showcases stories on Facebook and Instgram about how companies help communities and individuals, rather than their business successes. She gave an example.
Luke cited the success of Japanese and Korean car brands in the United States. In the 80s, it was still the world of American car brands. Since then, Japanese and Korean car brands have been cultivating the US market for more than 40 years. They built factories in the United States, established political relationships in the United States, did community work, and gradually established the image of a responsible business citizen.
"Remember, ESG is a long-term game, and it takes very, very much patience and effort." Luke believes that for companies that want to carry out ESG communication in overseas markets, they must first learn to listen and understand what overseas consumers expect from corporate citizenship. Then, under the legal and regulatory framework, look for the greatest common divisor expected by enterprises and the public.
"Most problems or mistakes start when companies put their own interests above the interests of the country or community trying to do business." He stressed that MNCs are not just about selling a product to other countries, but about being a beneficial member of which country and community. This is also the most important mission of strategic communication and ESG communication of enterprises.