By Michael Diegelmann - cometis AG | November 8 2024
The European Union is getting serious about sustainability communication and reporting. And while some people and organizations are spending all their energy complaining, others are looking for solutions and relishing the challenge. I was more than happy to share my thoughts on this episode of PRGN Presents about the current challenges and opportunities that the new European regulation on sustainability reporting brings to the (always exciting) field of corporate communications.
Let’s start at the beginning: First and foremost is the Corporate Sustainability Reporting Directive (CSRD), a directive the European Union (EU) is using to commit hundreds of thousands of companies to account for their sustainability progress in terms of environmental, social and governance (ESG) aspects over the long term.
There has been an incredible amount of attention on sustainability issues, especially in Europe. Almost every company is trying to distinguish itself or at least appear to be making an effort in sustainability communication.
But now regulatory pressure is increasing and what companies boast about in their sustainability communication will be verifiable across the board.
For example, a company that markets itself as a leader in diversity may face accusations of greenwashing if its internal diversity KPIs do not match this image. Similarly, a company that claims to use renewable energy could face backlash if its actual energy consumption mix contradicts these claims. These things will need to be disclosed under the European Sustainability Reporting Standard (ESRS).
In extreme cases, misleading sustainability communication can lead to legal action, as in the case of Swedish dairy-alternative company Oatly, which paid €9.3 million to settle a lawsuit with an investor. This investor had accused the company of greenwashing because it used a vague “climate neutral” label without clear definitions.
Corporate communicators must ensure that their messages are not only accurate but also meet legal requirements to avoid costly mistakes.
Corporate communicators need to familiarize themselves with the complex data behind sustainability claims. Under standards such as the ESRS, companies are required to disclose a wide range of metrics, from carbon emissions to workforce diversity. The ability to accurately interpret and communicate this data is critical.
For example, if a company claims to be reducing its carbon footprint, communicators need to put that change into context – explaining how business practices (broadly, emissions in relation to revenue) have evolved over the reporting period and clearly explaining any reductions. Only by deeply understanding the data can corporate communicators help their organizations present an honest and compelling sustainability story.
The role of corporate communications extends beyond reporting raw data. It involves providing context that makes the data meaningful. If a company reports a reduction in CO2 emissions but does not explain the business changes behind that performance, stakeholders will have a hard time understanding the bigger picture. This lack of contextualization is a phenomenon we frequently encounter with the Global ESG Monitor, in which we analyze hundreds of sustainability reports every year.
And here the expertise of professional communicators can really shine by helping stakeholders see the connections between corporate strategy, objective, science-based sustainability goals and actual performance.
Companies also need to ensure that data is not presented in isolation. If, for example, a company promotes its commitment to diversity in its advertising campaigns, the reported diversity metrics within the workforce must support these claims.
A disconnect between marketing and official reporting can lead to accusations of hypocrisy and damage the company’s credibility.
It is also becoming apparent here that the demand for IT specialists, both in-house and externally, will continue to grow in order to collect and make available the data in a secure, compact and equally usable way for all value-added processes in the company.
To meet the increasing demands of sustainability communication and reporting, corporate communicators need to work closely with legal, compliance, and finance teams. Finance teams, in particular, are often adept at handling numbers, but they may lack the expertise to present those numbers in a way that aligns with the company’s overall narrative and can be properly contextualized by the various stakeholder groups.
As sustainability reporting regulations become more complicated, the lines between corporate communications, legal compliance, and ESG reporting continue to blur. By fostering cross-functional collaboration, corporate communicators can ensure that all disclosures align with company values, legal standards, and stakeholder expectations.
As sustainability reporting continues to evolve, corporate communicators must stay ahead of emerging standards and terminologies. ESG-related topics, from carbon pricing to climate governance, are becoming increasingly complex. As these terms enter the mainstream, communicators must understand them thoroughly to ensure that the company’s sustainability strategy is clearly and effectively communicated to the public.
In this context, it is crucial for communicators to continuously educate themselves on the latest developments in ESG reporting.
The next generation of corporate communicators will need to master an entirely new vocabulary that extends well beyond the traditional corporate communications skill set.
The role of corporate communicators is changing. As sustainability becomes a central focus of business strategy and public discourse, communicators must adapt to a new reality in which data accuracy, regulatory compliance, and clear contextualization are paramount. By preparing for this shift and understanding the complexities of ESG reporting, corporate communicators can help protect their organizations’ reputations, build trust with stakeholders, and ensure long-term success in a more transparent world.
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